From Publishing Perspectives:
In its second-quarter report today (August 6), Sweden’s Storytel–the international marketplace’s most aggressively expansive service in the audiobook field–has reported streaming sales up 19 percent over Q2 2020 and a deepening subscriber base that jumped 29 percent year-over-year.
An understandable point of pride leads the report from Jonas Tellander and his team in Stockholm, writing to shareholders, “On July 20, 2021, Storytel met yet another important milestone when the service surpassed 1 million paying subscribers in the Nordic region.” Always loyal base of operations to Storytel, the Nordic markets clearly have established themselves now as a secure, responsive foundation for the company’s growth.
That milestone of 1 million Nordic subscribers, the company writes, “indicates an average penetration level of the adult population in the Nordic countries of 5 percent. With an 18-percent subscriber growth and 16-percent revenue growth year-over-year in Q2 2021, the Nordic countries form a solid and profitable base for continuous growth.”
Outside the Nordic concentration, Storytel saw an average 643,300 paying subscribers in its second quarter. It’s interesting to watch the company make pricing adjustments in its 25 markets, some of them quite distinct in their challenges—especially during the coronavirus COVID-19 pandemic, and always watching average revenue per user as a guide.
. . . .
In its home market of Sweden, Storytel raised its price from 169 to 179 kroner (US$19.49 to $20.65). There were also 9-percent price hikes in the Netherlands (both on unlimited and family subscription models) and a 6-percent rise in price in Belgium. Even in hard-hit India—where prices of books and digital media products run far lower than in many other markets of the world–Storytel was able to make an 18-percent price raise on some products.
By contrast, “The price in Spain,” today’s report reads, “has been lowered from €12.99 to €10.99 (US$15.28 to $12.92) to better reflect the reduced purchasing power in the country.”
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On the broader scale, it’s still expected that we’ll see a rollout this year of the partnership with Spotify announced by Storytel on May 20. “We want everyone to have access to great stories,” Tellander said at the time, “and today Storytel offers more than 500,000 audiobooks on a global basis across 25 markets.
Link to the rest at Publishing Perspectives
PG noted the average Revenue per User metric that Storytel uses to guide its pricing decisions.
He regards this as a much smarter pricing approach than most of the book business uses. Rather than focusing on sales or revenues for a single book (typical of a lot of traditional publishers), the revenue per user applies a longer time horizon and is focused on overall long-term user satisfaction with the service.
He’s reminded of a conversation he had with a fellow employee at a large financial services firm during PG’s first job out of college. One day, during a casual not-particularly-work-related conversation with a work friend, PG opined that most successful businesses focused on maximizing their profits.
PG’s fellow worker, an economist, corrected him. “When pricing its goods or services, a successful business focuses on optimizing its profits.”
PG’s friend continued to explain that maximizing profit invariably evolved into a short-term mindset – what is the highest price we can get for this product right now – whereas focusing on profit optimization was a much more successful approach because it included factors like “How can we price the product to sell the most units?” and “How can we price the product so customers will purchase it over and over for a period of years?”
From focusing on profit optimization comes measurements like average revenue per user, the lifetime value of a customer, overall customer satisfaction and teaching the customer that it’s worth looking for future products from a business (including an author) because they offer good value at a reasonable price.
From an advertising and promotion standpoint, it often requires the most spending and effort to catch a customer’s attention and persuade hin/her to try out the product. This is one reason why offering a free book, a free first month of service, free candy bar, etc., is used so often.
Prospective customers, at least in most capitalist economies, have a lot of different choices about what they spend their money on. The reader can, of course, choose from a great many different books, but the reader can also choose to watch a streaming movie instead of reading a book (or see the movie instead of reading the book from which the movie originated), go out to lunch or dinner with friends, watch a sporting event, surf the web, etc., etc.
Even voracious readers do other things sometimes. A business can’t take its customers for granted. An author can’t take her readers for granted. Additionally, no author can write fast enough to keep up with the reading speed of her most enthusiastic fans. Unless they’re very strange, they’re certain to read other books by other authors.
Average revenue per user, optimizing sales and profits, attracting a loyal reader base and similar marketing strategies lead to the last metric PG will mention.
The lifetime value of a customer.
Unless you provide a product that a customer will age out of – clothes for teenagers pops into PG’s head – the longer you can keep a customer happy, the more money you will earn from their purchases, assuming you provide more quality products for them to purchase.
As mentioned above, it took time, effort and, quite possibly money, to acquire that customer in the first place. You may have provided the customer something of value – a free or underpriced book (AKA loss-leader) in order to gain them as a reader initially, but when they read that first book, enjoyed it and looked for another book you wrote, the cost of generating the second sale required only a fraction of the effort and money the first sale required.
You never “own” or “capture” a customer or reader. In an economy that offers more books to read than any single person could ever consume in a dozen lifetimes, you still need to please that reader with books that follow your first, second, third, etc., book. But the direct value to you of a customer who purchase 20, 30 or more books you have written is quite substantial. Unless that customer is a hermit, she/he will have told other people about your books and your reader’s recommendations will have sold additional books.
PG probably made his point several paragraphs ago, but it’s amazing how many authors, musicians, etc., end up being one-hit wonders.
You don’t need to walk around with a marching band and a megaphone, but never stop thinking about how you can delight your customers. AKA, never stop selling.
Excellent post PG and we writers/creatives cannot hear it enough.
Coming from the world of marketing, where the smarter types constantly stress LTV and all that entails — building multiple income streams, a large catalog of products at a range of price points to sell to existing customers, willingness to spend more to acquire new customers and be “omnipresent” through ads & publicity, and so forth — it’s strange to me to meet so many artists of all types who are uninterested, or outright hostile, to any whiff of business talk.
There are plenty of sleazy scammers involved in “churn and burn” tactics in the marketing world (that’s so obvious I don’t have to say it, do I?)
But while the “profit maximizers” can rake in impressive sums in the short term, they rarely last more than a few years. It’s the optimizers who stress long-term relationships, building audiences with patience and a methodical process, that end up building real businesses.
I find myself avoiding any of this talk when around groups of writers. A few are interested, but the great majority seem to work with the belief that any talk of numbers or profits will curse their blessed art and cripple any chance of writerly success — when it’s likely the opposite.
Writing itself is a great part of self-promotion, no doubt about that — King and Koontz and Patterson wouldn’t be where they are if they were not prolific — but my feeling is that while machine-like productivity is (perhaps) necessary, it is not by itself a sufficient condition.
(The sad irony here is that instead of focusing on systems and strategies to guide them toward long-term objectives, these same anti-business personalities end up chasing every new fad platform — ahem, Vella, Substack — and marketing tactic that gets popular on social media without any larger vision.)
Thanks, Matt, and thanks for your comments as well.
One does not wonder whether PG’s former employer in “legal publishing” had ever heard of, let alone practiced, “profit optimization” — there’s plenty of evidence to the contrary.
And more to the point from that film: Ya gotta know the territory… (I used to hold a “movie night” featuring that film for newly-arrived personnel under my command and their families; it’s an excellent demonstration of how many, many cons work. This was long-enough ago that it was a VHS cassette that wore out.)
They practiced “profit optimization” for the current fiscal year. They’d worry about next year when next year arrived. Besides, next year would be pretty much the same as this year.
I tried to teach them differently and would sometimes succeed up the chain until I hit a European executive.
They shared a monopoly with a company that had an even more blinkered outlook on financial and business life. Perhaps that’s why they could only think in zero-sum terms.
Worst employment experience of my life and I jumped at the first good offer to go elsewhere. It was better in every way.