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InContext / An inside look at the business of digital content

They revolutionized podcast advertising. Now they’re coming for subscriptions

July 22, 2022 | By Esther Kezia Thorpe – Independent Media Reporter @EstherKeziaT

Most media monetization models are reliant on two sources: advertising or consumers paying. With advertising rates tethered to a fluctuating economy, publishers have turned to memberships and subscriptions as the main way of getting revenue directly from readers. But not every reader wants to subscribe, but that doesn’t mean they are unwilling to pay. And, for Acast co-founders Måns Ulvestam and Karl Rosander, therein lies an opportunity. 

Before leaving Acast — which was founded to make advertising in podcasts easier — they oversaw the introduction of premium podcasts. But increasingly they began to realize there was a ceiling to subscriptions as a means to generate consumer revenue. “Subscriptions are great if you’re a heavy consumer,” Ulvestam tells DCN. For example, superfans of magazines or newspapers see subscriptions as a convenient way to have unlimited access to content. “But that’s not true for everything. People might want to have one or two newspaper subscriptions, maybe a podcast and a couple of streaming services. But eventually, all the subscriptions add up to too much.”

Ulvestam’s comments are a reflection of recent findings in studies. According to Deloitte’s 13th Digital Media Trends survey, 47% of U.S. adults are frustrated by the sheer number of subscriptions. “It’s not that people are not ready to pay for good content,” The Fix’s Dushyant Khare wrote. “Rather they don’t want to go through the process of adding yet another constant, month-in-month out financial stream.”

The alternative is pay-as-you-go or single purchase options. But digital products and services have struggled with this approach. Micropayment approaches have been tried time and again, with little success. And the reality is that subscribing to a publication may not be a worthwhile long term investment for a consumer. Yet a specific piece of content might be highly valuable at a given moment.

Open, Sesamy

Armed with the firm belief that a la carte is the way forward, Ulvestam and Rosander founded Sesamy in March 2021. The service began with single purchase audiobooks and eBooks. Just one month after launching, it attracted $5 million in new funding to expand the model across Europe.

Last month, they launched a single purchase option for podcast episodes and series. These can be bought via Sesamy and listened to with any podcast app. 

 “It’s been going really well so far,” Ulvestam says, although he didn’t divulge hard numbers. “We don’t want to tie people into consumption in just one platform. I believe podcasting should be an open ecosystem. You should be able to consume it wherever you want.”

Residents of the Nordics, where Sesamy launched, have a reputation for being more willing to pay for digital content than those in many other regions. So you have to wonder if the early success the company is seeing in Sweden and Denmark can be replicated in larger podcast markets like the U.S. From his experience at Acast, Ulvestam is optimistic.

“When Acast introduced dynamic advertising — targeted, interchangeable ads — it was slower to pick up in the U.S. because they were selling on the wrong numbers, and they liked the host-read model,” Ulvestam says. “But eventually, the buyers — the media agencies and advertisers — demanded real numbers, verified numbers. Then the U.S. market had to adapt to our model, and now it is the standard.”

“You have three stakeholders: the creators, the transaction layer/platform, and the consumer. Everyone has to be happy for it to stay the same. The only way to disrupt that model is if one stakeholder in the ecosystem is unhappy,” he explains And by the looks of it, consumers are nearing subscription saturation. 

Next up: content payments

But Sesamy doesn’t want to stop at audio. Ulvestam explained that they are looking at bringing the a la carte model to news and articles. The option to pay for single pieces of content has been raised on numerous occasions over the past decade, with many different start-ups dedicated to micropayment transactions. So why is he so convinced they will succeed where many others have yet to gain traction?

“The models that have been tried include driving people to an app to consume the content, or tried with too little money with micropayments,” Ulvestam says. “It’s also been the wrong timing. For the past 15 years, the newspapers have been putting more and more behind the paywall and optimizing their content for subscription revenue.”

Now, Ulvestam thinks that the market is ready for single content payments. Publishers are increasingly finding they’ve optimized what they can for subscribers. Growth is tailing off, and is at risk of declining with economic pressures. 

“For me, it’s quite obvious why the consumer would want to do it,” he says. “I subscribe to a few newspapers and magazines. But I also find articles that I would like to read where I don’t subscribe. They’re missing out on incremental revenue.”

The risk for publishers in introducing a pay-per-piece option is that it risks cannibalizing existing subscriptions. This is something Ulvestam and Rosander are factoring in as they expand Sesamy. “We’ll build the software around that to actually reduce the risk of that happening,” he explains. It’s something the duo have been working on for a number of years.

The machine learning algorithm works like a smart paywall in assessing the visitor’s propensity to pay either just for the article or to push towards a subscription. “We call the software SmartID. The software, which will begin rollout this fall,  will tell the publisher what to do do with you when you visit a website,” Ulvestam says.

Countering the skeptics

Micropayments and single payments are a touchy issue for the industry. Few issues seem to split opinion more among publishers and analysts. One accusation leveled at vendors who have tried in the past is that the revenue from single purchases can’t hope to be sustainable for publishers. But Ulvestam was emphatic that this is a complementary revenue stream, not a replacement for subscriber revenue.

“It’s not been tried at scale before,” he says. “If you read a magazine every day, you should be a subscriber. This should not replace subscriptions, it should be a compliment. Everyone can relate to having encountered a paywall where they don’t pay, because they don’t want to be a subscriber. It happens every day. Obviously, the consumer need is there.”

Sesamy is not a micropayment solution. When it rolls out, it won’t be charging pennies for content. With the audio pieces currently in its library, prices range from podcast episodes at $1.50 each to audiobooks at over $20. Instead, it could be an opportunity for publishers to put a fair price on features, investigations and other long-form content. 

There are already many alternatives to subscriptions. As digital wallets gain mainstream adoption, there is certainly hope for a tipjar-style micropayments model, although this may be more beneficial for creators than publishers. Between full subscriptions and pennies for pieces, there is a middle ground. Media analyst Mark Stenberg suggested Monthly Access Payments as a low-commitment digital equivalent of a newsstand purchase, but this has not gained traction either. 

Sesamy might be the Goldilocks solution. There are still hurdles the company has to overcome with both podcasting and article payments. But if Sesamy’s co-founders are right about the consumer appetite for single purchase payments, we could well be witnessing the start of a revolution.

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