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Selling high-priced products to very few people

Earlier this week I published a profile of Sarah Peck, the host of a podcast called Startup Parent. What’s particularly interesting about Peck’s story is that she doesn’t generate most of her revenue through subscriptions or advertising  – which are the two main methods that creators make money from podcasts.

Instead, she sells entry into a high-priced “incubator” that lasts about six months. Here’s how I described it in the piece:

She eventually settled on launching what’s often referred to as a Mastermind. As one website describes it, “Mastermind groups offer a combination of brainstorming, education, peer accountability and support to sharpen your business and personal skills … Members challenge each other to set strong goals, and more importantly, to accomplish them.” Peck likes the model, in part, because it doesn’t place the entire burden on a single coach or teacher to solve everyone’s problem; instead, knowledge is shared in a less hierarchical way …

Peck priced that first Mastermind at $1,800 and mostly relied on her podcast and newsletter for promoting it. She needed a minimum of four people to sign up, but was hoping for at least 10; she ended up getting six …

That first Mastermind only made a little over $10,000, but Peck found the results encouraging enough to announce another one the following year. “With each iteration, it got a little bit more refined, and a little more specific,” she said. They also got more ambitious, with Peck recruiting high profile women within the entrepreneurship community to come in as coaches. This not only allowed her to expand the program’s offerings, but she also began to offer one-on-one sessions at a higher price point. For the second Mastermind, about 18 people signed up. For the third program, she raised the price to $3,600 and signed up 28 people. In 2021, the incubator had 40 people paying $4,500 for the basic program, and $7,500 for more individualized coaching.

Using this model, Peck is able to generate around $200,000 a year, despite only getting 2,000 downloads per episode of her podcast.

Why do I find this interesting? Well, most creators will reach a point in their careers when they contemplate selling some sort of paid product to their audience. In many cases, that paid product will be relatively inexpensive — whether it’s a $100 annual subscription on Patreon, a $15 ebook, or a $30 branded t-shirt. The idea is that they can leverage their scale to sell a relatively high volume of these products. This is basically the definition of Kevin Kelly’s “1,000 true fans” theory.

But some creators like Peck go an alternate route: instead of trying to create a product that requires massive scale, they develop one that can generate a decent amount of revenue with a relatively small number of sales. It’s not difficult to see why this approach can be more appealing given that it allows you to start making a real income even if you only have a relatively small audience.

That’s not to say that this strategy doesn’t have its own challenges and downsides. Let’s take a look at some of the high-priced products that creators and publishers offer.

Consulting

Creators and journalists usually have some form of expertise in their chosen niche, and so it’s often not difficult to leverage that expertise into some kind of consulting service.

This is how I made most of my income between 2014 and 2020. I would pour all of my free time into creating content for my newsletter and blog, and then I’d have a special landing page on my website that outlined my offerings as a freelance content marketing consultant. What was great about this model is that I could generate pretty good income by converting a very tiny portion of my audience into clients.

For instance, I remember there was one month in 2015 that I managed to convert three of my readers into monthly retainer clients. I kept all of those clients for multiple years and generated around $100,000 annually from them. In order to generate the equivalent amount through paid subscriptions, I would have had to convert 1,000 readers into an $100 annual subscription. I can tell you from personal experience that the subscription approach is much, much more difficult to accomplish.

Of course, there are downsides to the consulting model. My biggest frustration was that the more successful I was at attracting clients, the less time I had to devote to creating my own content. I sometimes had to go weeks or even months in between publishing new articles simply because I was too busy working on paid projects. Client work always took priority.

This model also doesn’t scale very easily, since there are only so many hours you can work and so much you can charge for your services. Sure, you could hire employees to take on more work, but then suddenly you’re introducing a lot more overhead into your business, plus you have to spend time managing those employees. As a freelancer, I had no interest in being someone’s boss.

Courses

This is the route a lot of creators and small publishers go. They create an on-demand course that packages together videos and documents, and then they upload it on a platform like Teachable or Udemy. Courses typically cost a few hundred dollars, and I’ve seen several creators cite it as a way to generate passive income. For instance, I’ve written before about how Ben Collins launched a blog specializing in Google Sheets tutorials and then generated six figures a year selling video courses to his newsletter subscribers.

On-demand courses usually cap out at around a few hundred dollars, but you can charge much more for a live, interactive course conducted through Google Meet or Zoom (ahem, I’m participating in one in April with the University of Oregon). Creators can sometimes charge thousands of dollars for this kind of bespoke access to their expertise.

Of course, this model doesn’t scale very well. Peck told me in our interview that each Mastermind course she sells maxes out at about 40 participants. But if you’re a solo creator and host two courses a year, then you could potentially get up to the mid six figures in revenue.

In-person events

Consumers have long shown a propensity for paying thousands of dollars to attend live events. Events also have the added benefit of diversified revenue via sponsorships.

Of course, the overhead for events can be pretty high. There’s not only the cost of the venue itself, but then you also have to pay for speakers, event staff, and any amenities you plan to offer. You’re also limited by geographical location, since it gets more difficult to lure someone to an event the further away they live from where the event takes place.

High-priced subscriptions

If you browse through the most popular creators on platforms like Patreon and Substack, you’ll find that most price their subscription at anywhere between $50 and $100 a year. That seems to be the subscription sweet spot for not only creators, but plenty of publishers as well.

Some publishers manage to sell extremely high priced subscriptions. The best example would be the Bloomberg Terminal, which will run a subscriber to about $23k a year. Politico Pro will cost you a mean $12k annually before the group discounts kick in.

But information products like that require a lot of expensive infrastructure and staffing. I haven’t come across any creators who price their subscriptions that high, but some do manage to go significantly higher than the $100 threshold. Usually, these creators operate in some kind of lucrative niche where a subscription is perceived as giving someone some kind of competitive edge. 

Some examples:

PETITION

Description: “Curated financial news, analysis and commentary with an emphasis on distressed investing, restructuring and bankruptcy. We discuss disruption, from the vantage point of the disrupted.”

Cost: $49 a month

Bizmarck Brief

Description: “Intelligence-grade analysis of key industries, organizations, and live players.”

Cost: $100 a month

The Bitcoin Forecast by Willy Woo

Description: “The Bitcoin Forecast by Willy Woo is a paid newsletter. It’s the most popular paid market intelligence letter for Bitcoin. The letter has been running since October 2020.”

Cost: $100 a month

These newsletters can generate six figures in annual revenue with as few as 100 to 200 paid subscribers. They took Kevin Kelly’s “1,000 true fans” theory and reduced it by a factor of 10.

***

So what’s a good way to determine whether you should develop a high-priced product? Well, I’ve long maintained that publishers should diversify their business models across multiple products. For instance, right now I monetize my newsletter through a $50 annual subscription, paid sponsorships, and an $800 online course. 

But ultimately, your chances at success depend on your subject-matter niche. If you run a blog dedicated to hobbyist knitting or celebrity news, you’re probably not going to have many fans who are willing to plop down thousands of dollars for a subscription or course. Success within the Creator Economy comes down to playing to your strengths. In Sarah Peck’s case, she recognized that selling high-priced courses was a hell of a lot easier than growing her podcast to hundreds of thousands of monthly downloads. Massive scale isn’t the only path.

Win a lifetime ticket to Creator Economy Expo in May

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Quick hits

Over a period of years, a YouTuber refined the format of her channel so well that Drake DMed her wanting to come on for an interview. [Colin & Samir]

“My experience is that growth takes twice as long as you think and is twice as hard. The biggest advantage you can give yourself is to devote as much of your energy, resources and focus to the actual content itself rather than the sugar high of piling up big follower and subscriber numbers that are likely more quantity than quality.” [The Rebooting] As someone who's spent the last two years focused on building my own media business, this definitely rang true to me. It's also why I've avoided many of the "growth hacks" that other newsletters have embraced.

Some marketers are finding that podcast ads are much more effective at driving sales than social media ads. [WSJ] From the article: "Podcast CPMs ... rose to $26 in the third quarter of 2021, up from $22 for the same period in 2019, rising above streaming TV ad costs in the process"

Whoa. YouTube will soon start dynamically inserting audio ads into podcasts uploaded on its platform. [Podnews]

This is an awesome idea for a social network. At some random point in the day, it sends you an alert, and you have two minutes to post a photo of yourself and your surroundings. If you miss this window, then you can't post that day or access friends' posts. [Dirt]

I’m pretty sure OZY is still buying fake views on YouTube. [Twitter]

"Patreon has amassed 8 million patrons (i.e., subscribers to creators) and has paid out $3.5 billion to more than 250,000 creators … Currently, 50% of Patreon’s payment volume goes toward creators earning $12,000 to $120,000 annually." [Fast Company]

ICYMI: He got laid off from Yahoo Sports, so he launched his own sports newsletter

Kevin Kaduk always knew he’d one day have to strike out on his own.

Last chance to sign up for my course

Several months ago, I partnered with the University of Oregon to build a course called Growing Your Content Business. The first of 10 sessions starts on April 1. And no, this isn’t just me staring into a camera and giving a lecture. We recruited dozens of speakers from organizations that include Google, Conde Nast, Vox Media, Quartz, Substack, Marie Claire, Reuters Institute for the Study of Journalism, and The Economist.

I DARE YOU to try to find another course that packs that much expertise into its curriculum. I doubt you’ll find one. This is your last chance to get in on the action. You can sign up here.