Many event-based entrepreneurs who made it battle-scarred through 2020 are thinking of membership. The best pivoted early to virtual events and, whilst we all know there are downsides, found a sweet spot of larger attendee audiences with greater global reach. One asked me quite reasonably, ‘so what’s the difference between a video interview of an industry leader put up on a subscription website that the reader has paid for, and paid attendance or membership to a virtual event to listen to the same leader?’ Good question.
Here’s my view. Much depends on what kind of business you want to build and what kind of exit you want.
In option 1, the core business is a paid-content play, i.e. a subscription business offering some combination of intelligence/data/learning. Yes, I know events offer fabulous content too, but for the sake of clarity I’m using ‘paid-content’ here to mean intelligence/data/learning. In this option, events act as a brilliant marketing funnel to that core subscription proposition. Advantages? This is a relatively straightforward business to value, based on the EBITDA multiples paid for similar paid-content businesses. If renewal rates are high and you have a large, international market opportunity, you might expect a double digit multiple. Disadvantages? Harder (and typically more expensive) to build from scratch.
In option 2, event attendance is part of a paid membership proposition that includes intelligence/data/learning etc. Procurement Leaders (successful exit to World 50 Inc, July 2019) might be a good example. Advantages? This feels easier to evolve to, especially if the attendee proposition is strong. It can fit neatly with Good / Better / Best packaging.
Disadvantages? In my view the resulting valuation is likely to be lower for two reasons.
First, the multiple is likely to be lower. In other words, a £1 of event-membership subscription won’t be valued as highly as a £1 of pure paid-content subscription. Why? The paid-content play of option 1 is likely to have higher renewals, most likely from enterprises rather than from individuals, have higher barriers to entry and more exclusive content than a virtual event/video library approach, and will have less of a pricing ceiling; i.e. it will have more ability to layer in serial price increases and new products that build account value over time. Underpinning all these characteristics is that the paid-content proposition is more likely to be a must-have, to be something that solves a fundamental business problem.
To overcome this, the attendee proposition needs to be very strong. To get those high renewals and average order values that justifies a high multiple, you need the attendee proposition to fully play its part. It needs to be well researched and formulated, and something that really addresses a fundamental business problem, with content that a user can’t easily find elsewhere or create themselves. Can your event-membership proposition do this? Can it be compellingly and directly linked to transforming a user’s sales, on managing their risk, on finding the right supplier? My hunch is that it won’t be sustainable as a renewal driver over time if it was just packaged together to get the business through the pandemic, totally necessary as that was at the time. As an aside, if the event content is driven more and more by paying members, it might even put a ceiling on the sponsorship that can be generated.
Second, and more profoundly, will the paid content part of option 2 emerge and flourish anyway? If you and your senior team are coming from an events background and if your P&L is currently dominated by events, it is harder for the intelligence/data/learning proposition to get traction and emerge. Consciously or unconsciously, it will be hard not to be biased towards events. It’s where you started, it’s what you know; ‘why invest in the research and development needed to underpin subscriptions, when we could launch that new event instead?’ Option 2 can be done. But to successfully build option 2 requires a compelling vision of the business and exit you want, a really strong, focussed plan of action, and the governance and commitment to set up the right organisational structure and hire the right senior talent in.
Andy Baker is Senior Adviser at Collingwood Advisory. Andy joined Centaur plc as Managing Director of The Lawyer in 2017, and is a member of the 5-strong Executive Committee. He has led the development of a market-leading subscription and information business, based on double-digit increases in subscriber usage, outstanding retention rates and yield increases, market penetration gains and new data-led product development.
Previously, Andy spent 6 years as Managing Director of HSJ, the Health Service Journal. Andy led the team that transformed HSJ from advertising to subscriptions-based, from print-centric to digital-only, and from declining performance to healthy growth. Andy led the sale of HSJ from Ascential plc to Wilmington plc for £19m in early 2017. Andy holds a first degree from Oxford and an MBA from IMD, Switzerland.