Get any group of publishers together in a room and you can guarantee that within five minutes they’ll be moaning about their subscription bureau. But as Chris Gadsby said at the iSUBSCRiBE round table last week, it’s probably our fault we have problems.
The subscription bureau’s role is a pretty thankless one. It’s a low margin business that can only make an operating profit by having large volumes go through without much variation. That’s why the bureaus all charge for every little thing out of the ordinary, including – the publishers’ big bugbear – bits of IT development.
Note I said ‘operating profit’. If a bureau needs major investment in its systems then the costs can be immense. And nearly all the major bureaus have done, are doing, or should be doing major system upgrades.
The other major problem they face is over-capacity in the market, which keeps down the rate that any bureau can charge, so their revenue stream is always lower than it needs to be.
And this is where some of the faults of the bureaus can be laid at the door of publishers, because subscription services tend to be bought like a commodity – at the lowest possible cost; we don’t want to pay any more than we can get away with. And we certainly don’t want to fund the long term investment that will be necessary to cope with digital access and bundled subscriptions.
It strikes me that the current situation is unsustainable and one of three things might happen.
The first is consolidation, reducing the number of bureaus in the market and driving prices upwards to a level that gives better returns for the remaining companies. This was the rationale behind the Galleon/Customer Interface merger a few years ago, but that didn’t significantly reduce the capacity in the market (partly because of the launch of dsb.net).
The second is one of the big bureaus closing its doors, either completely, or to external business. The death of WDIS/Optima (or even ISS for those of you with longer memories) should be a reminder that these things do happen. It would only take one or two major publishers to leave any of the bureaus to throw that company’s finances into a death spiral, and the same could happen if one of the publishing companies that own bureaus decided to stop funding an outfit.
The third outcome is the adoption of a cloud-based services that allow publishers to manage their own subs. We can all see the huge growth in non-publishing subscription-based services and many of these are being run off the back of new systems. Traditionally, in-house subs programs were the poor relations of the bureaus because they lacked the functionality of the big mainframe systems, but it’s easy to conceive of a cloud-based approach that essentially ‘rents’ access to anyone who wants to use it. They already exist for digital access subscriptions.
There is a fourth option of course, and that’s that everyone continues to muddle along as they always have done; publishers complaining about their bureaus, bureaus moaning about their clients, costs being driven down, investment being deferred. To me, that’s the least attractive route that any of us could take.