Coming off the back of his appearance at The Guardian’s Changing Media Summit, Zuora’s CEO Tien Tzuo explains to Technology Spectator his ideas on subscription economy, the intricacies of paywalls and his prediction on when all media companies will start charging for content.
Harrison Polites: Tien, thank you so much for talking to Technology Spectator. First question: What sort of companies - other than publications - are involved with subscriptions, and how far does your idea of a “subscription economy” actually extend?
Tien Tzuo: We’re pretty passionate in our belief that every company will be a subscription business in the next five, 10, 20 years. That's certainly what we’re seeing with digital companies, whether they are technology firms (software, hardware), media and publishing firms, or telecom companies. The ideas of content and access are starting to blend together and we are seeing more and more commerce companies dip their feet as well. So we’re really seeing this as an across the board phenomenon.
HP: How do you actually interact with companies when you engage with them? What level of involvement do you have in their subscription service? Do you simply provide a product and let them do what they want with it?
TT: I think what we’re doing is really new and our ideas on how you set up a successful billing and finance infrastructure, to survive in the subscription economy, are new. People are hungry for information like: how do I setup my pricing catalogue, what are my decisions that I need to make today?
So we made a decision a couple of years ago to go and implement all of our customers. We want to own our customer's success as if it’s our very own. We don’t offload the technology on our customers and say ‘good luck. We stay with them until they are live and using our system, and even afterwards, we have a whole customer success team that will continue to work with our customers to make sure they are successful with our technology.
HP: Do you ever have disagreements with your customers, where they want to follow one path, but you feel it would be better to go another way?
TT: At the end of the day, companies own their own decisions, right? It’s our job to give them the best advice, but they know their own business the best. If we’ve given them the right advice they ultimately make the right choices.
HP: Tien, you have been in the past hailed as an evangelist for paywalls. How do you feel about that?
TT: I think paywalls are just one massive addition to the subscription economy. As for the concept of a paywall and the way media companies talk about it, I don’t think the term ‘paywall’ is healthy. It’s a very non-customer-friendly term. It represents the idea that I’m going to set up a wall and prevent you from accessing my services.
Media is the only industry that uses that term. But given that they are using that term, we do want to be part of the conversation.
What kind of consumers will pay for news?
HP: Staying in the media space, what kind of people typically sign up for a publication? Is there a demographic that you could call a ‘super consumer’ of news?
TT: I think one of the big problems the industry and the way they think about the consumer, is that they only think about the article. So, they take their focus down to a micro-level. They have debates like: ‘are people going to pay for this article? And if they pay for it, what are they going to pay -10 cents, 25 cents?
I think this is the wrong view. The starting point needs to be the customer.
The customer has a relationship with a source of information, the brand, if you will. Having grown up in New York, I have a relationship with the New York Times that transcends the specific article that I read. It’s a point of view, it’s a collection of articles, and it's important for me to keep up with what The New York Times is writing about when they talk to fellow New Yorkers. And that’s what lies at the heart of the relationship between the customer and the publication.
That brand is important - and people will pay for the value that the brand gives them.
HP: So there isn’t any kind of particular demographic, like male, in their late 30s, educated that would be more likely to pay for content than say someone in their early 20s? Nothing like that?
TT: No, I don’t think so. I suspect that these brand loyalties develop fairly early on. I even suspect that to a certain extent they can be passed on from generation to generation, as children pick up what the parents read. There’s an allegiance to your local paper that’s hard to shake because that’s always been the place you go to for information.
So you know, the minute they [news companies] say I’m not going to charge for this, I’m going to let go of some of my journalists and reduce my staff, they kind of eat away at the value of that relationship. If anything, they should be going the opposite way to get customers to pay. They should be hiring more journalists and enhancing the brand. That’s the way to get out of their current economic situation, not cost cutting.
The idea of an ‘ultimate paywall’
HP: Should paywalls be unique for different media companies? Is there such a thing as a set formula for a paywall? Is there such a thing as an ‘ultimate paywall’?
TT: Of course not. That’s one of the problems with this term - it invokes an all or nothing mindset. One of the things that we like to do is we like to bring lessons from one industry into another. And the technology industry, not only do they not use the word paywall, but they see it as product and pricing issue.
Different technology companies don't produce and price their products in the same way. One company might use a freemium model, another company might use a seven-day trial model, while another might say that you have to pay in order to use my service at all.
So, there are different things, it’s not a one size fits all. It really depends on the brand, the publication that’s being authored.
What I love is the example of News International, where, if you look at their three papers in London - The Times, The Sunday Times and The Sun - they all have very different demographics.
The Times and The Sunday Times are dominated by home delivery, so the shift to digital actually makes a lot of sense. The consumer says that they’re used to access through home delivery, so they also want to have it on their tablet and on their browser.
But, The Sun, it's more about newsstand purchases, once off purchases. So they decided that they are going to take a much broader view and look at what they can do for their consumers in specific areas like entertainment or sports or gaming. And then actually introduce new services, like this Bingo game that they are launching. They’re trying to buy exclusive licenses to local soccer teams and build communities around that. So they’re really taking that brand relationship, going deep into it and seeing how it goes just beyond the article.
That’s what it’s all about. It’s about this relationship that you have with your customer and what your brand means to them.
Copying The New York Times and FT's example
HP: Is this one of the problems of the industry in that they take examples like The New York Times and the FT and look at what’s worked for them, and say that will work for us, without doing their own form of experimentation on their customer base?
TT: As an outsider, I would say the media has an occupational hazard in liking to observe and comment on the world. But, that’s sort of by definition what the business is about.
I think the businesses that are really successful are willing to take a step back and hire marketing execs from other industries. They say, what is it that we represent, what is the offering, who is our customer, what do they look like, what do they come to us for? And how do we expand on that relationship in a valuable way that we’ll pay for.
The Guardian's stance against paywalls
HP: While you guys seen an opportunity in introducing a digital subscription model into newspapers, there’s others that see an opportunity in doing the opposite. For instance, the Guardian, which arguably is coming to Australia on the basis that both News Ltd and Fairfax are going behind paywalls, is famously averse to the idea.
You reckon that publishers need some form of “collective courage”, with everyone needing to embrace this model for it to work. But how can that work, when some publishers still see value in having an advertising-only model?
TT: I spoke at the Guardian’s Media summit. And through that conference I had a chance to talk with Andrew [Miller], CEO of the Guardian. Just before it, we had competing dialogue in The Economist. Andrew would argue that paywalls are no good, and we would argue that they are on the way up.
The surprising thing is, when I had a chance to sit down with him, we found that we actually agreed more than we disagreed. We both agree that paywalls are not a one size fits all solution.
We both agree that the customer has to be at the heart of the experience.
I think the Guardian is just at a mode where expansion is really important to them. But, if you actually delve into what they do, they do have quite a few services that are “behind the paywall”. Premium services, paid for services that are actually really successful to them.
On whether all publications will end up behind a paywall
HP: Would you be willing to give a date as to when you would see all publications behind some form of paywall?
TT: I would be willing to say, that in the next two or three years, all publications will be charging something. Certainly, if you look at the success of the freemium model in the technology industry, there is space for free offerings.
I use, Evernote, I’m a very happy customer of Evernote, and I don’t pay. Because that’s sufficient for me.
I wouldn’t say that we’re going towards a world where all articles are behind a paywall, because I think there is room for a freemium model. But I also believe that a business strategy that depends 100 per cent on advertising in the digital world is not a sustainable strategy.
HP: Tien thank you so much for talking to Technology Spectator.
TT: Thank you.