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May 22, 2003
How To

RealNetworks Hits 1,000,000 Paid Subscribers: Top 10 Questions Potential Partners Should Ask

SUMMARY: The biggest trend in the online subscription sales arena is the number of aggregators, including RealNetworks, who are gearing up to help you market your subscriptions. However, before you sign on the dotted line for a partnership deal, print out our list of 10 Questions and get detailed answers to all of them.
After a deep trough, the subscription aggregation sales business is on the rise again. In fact, four different aggregators attended the Subscription Summit earlier this month, hoping to schmooze potential publisher partners.

Plus, on April 29th, RealNetworks announced reaching its first million in online subscribers, making it a major seller of e-subscriptions on the Net. (AmericanGreetings.com with 2.1 million is #1 at this time.)

Aggregators, such as RealNetworks and Zacks.com (see link to Case Study below), make their money by promoting subscriptions to their own lists. They are, in effect, marketing middlemen.

Unlike offline subscription and sweeps bureaus which have handed off accounts to print publishers for decades, online aggregators reach deeper into the relationship with each individual subscriber. Online aggregators may "own" the account, renewing it indefinitely, and generally fulfilling the content to the subscriber as well.

If you can create content, they can do everything else for you.

RealNetworks, this year's poster child for success in subscription aggregation, takes several clever steps to increase their profitability:

First of all, RealNetworks does not usually allow aggregated partners to sell subscriptions on their own separately. Currently you have only two options. Either you allow RealNetworks to sell, own and fulfill 100% of your subscription accounts, or you buy their back-end tech services to power your offering but they will not do any marketing on your behalf at all.

(Note: RealNetworks does share the postal mail address of the subscriber with publishers, but not credit card info and only the emails of subscribers who do not opt-out.)

To entice you to sign up for option #1, they wave the tempting carrot of 300 million RealPlayer users and one million paying subscribers in front of you. Your content offer could reach all these people in addition to the people your site would presumably sell on its own anyway.

The other way RealNetworks garners subscription sales is through the promotional offers placed on individual partner's sites; which we suspect is a more powerful marketing tool because the visitors are already presumably fans of that partner's content and more likely to convert.

The Company makes two offers on that partner promo page. The left-half of the screen features hard offers for the partner's subscription, the right-half of the screen features a no-cost trial upsale offer for a Real SuperPass.

David Eckoff, Senior Director of RealOne Subscription Network's Programming Acquisition Dept, has revealed in speeches in the past that the majority of people who convert to buyers at this point choose the SuperPass. Which makes sense, given they are getting your content plus a whole lot more for a 14-day no-cost-trial.

Who would pay hard cash for a single sub offer with that no-cost trial alternative in front of them?

In effect the Network leverages the passion your visitors already have for your product to upsell them to a full Network offer. It is smart marketing, and probably more effective than just about anything else we could name.

Although Eckoff cheerfully granted us an interview, he also cheerfully declined to reveal practically anything about what RealNetworks has learned about selling subscriptions. He did say, however, if you are considering partnering with them, he will answer anything you like; as long as it is off the journalistic record.

To make things easier for you, here are our Top 10 questions you should certainly ask Eckoff (or indeed the rep for any aggregator you are considering doing business with):

#1. How many of the 300 million registered RealPlayer users actually use it on a regular basis? Of these, how many are in your target demographic? Also what is the average click and conversion rate on similar subscription offers to these people?

#2. What percent of the million current subscribers are buying individual partner offerings versus audio or video network passes?

#3. What is the typical conversion rate of visitor-to-subscriber from people who arrive at your site's subscription sales page? Of these, what percent can you expect to convert to your own individual offering versus a SuperPass?

#4. How can changes in your own offer (i.e., a no-cost trial, an annual offer, a month-to-month offer, various pricing levels) affect your conversion rate based on RealNetwork's experience with similar publishers? Will RealNetworks even allow you to offer a no-cost trial to your own product (because it might compete with their own trial offer)?

#5. What specific steps is RealOne's email department taking to improve the newsletter it sends to paying subscribers so it functions as a high-impact sales tool for your offers?

(Currently all one million subscribers get the exact same content in their newsletter (link to sample below) which is a proven worst practice in the entertainment marketing industry.)

#6. When is the Email Dept going to start marketing efforts targeting the tens of thousands of people who bail part-way though the multi-page subscription process?

(The first page of the ordering process requests email, but per our repeated tests, nothing is sent to those collected addresses if they do not go on to enter credit card info on further pages. Given the high average abandonment rate at other multi-step sites, we suspect Real could be losing quite a few buyers this way.)

#7. What specific account save tactics is RealNetworks using to regain subscribers lost when they switch credit cards (according to AmericanGreetings.com, the average consumer switches cards about every six months)?

#8. What is the average account life-time for a subscription? How does that vary for publishers targeting different demographics, and/or with different price points?

#9. Is the Email Department planning any campaigns to support account lifetime, such as campaigns triggered when a user has not visited the service in a while (active users are obviously far more likely to continue paying)?

#10. What is the best way to influence the Editorial Department so that RealNetwork's editors pick your site as one to feature? (Link below to sample editorial pick.) Do these mentions have a significant affect on subscription sales?

Beyond these 10 questions, our biggest question for the future is how long will partners continue to accept RealNetwork's take-it-or-leave-it marketing proposition?

Eckoff says the main reason why so many partners grab the opportunity now is that they do not want to take the risk of investing time and cash into building their own subscription service. Signing on with RealNetworks is a quick and easy play.

However, as online subscription sales become more "proven," surely many partners will wake up to the fact that they could make even more money by owning the accounts themselves and using RealNetworks as just one of several marketing partners.

RealNetworks' hope that they will be the only "cable tv network of the Web" that many massive content companies sell through is a bit like Amazon saying "If you want to sell a book through us, you can't sell it through anyplace else."

That said, here are some useful links for you:

a. Samples of RealOne's online promos and email newsletter:
http://www.marketingsherpa.com/ro/ad.html

http://www.realone.com/partners/openpass/


b. Our Case Study on aggregated subscription seller Zacks.com:
http://library.marketingsherpa.com/barrier.cfm?CID=2313


c. Interview with New Line Cinema's Email Merchandising Expert, Lisa Cross:
http://www.marketingsherpa.com/sample.cfm?contentID=234
See Also:

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