Elon Musk hints at $US8 monthly Twitter subscription fee

In a series of tweets, Musk wrote the social-media company needs to “pay the bills” without relying on advertisers.

Elon Musk already has moved to underpin some of his other businesses with subscription services that can provide a steadier and more predictable income stream. Picture: Constanza Hevia/ AFP.

Elon Musk is looking to quickly boost Twitter’s revenue by embracing subscriptions, a strategy that has had limited success in the social-media business.

Mr Musk has been saying since before completing his $US44bn ($68.8bn) takeover of Twitter that it needs to rely less on the digital advertising dollars that account for nearly 90 per cent of its total sales. Since the acquisition closed last week, he and the lieutenants advising him have emphasised the idea of charging for Twitter’s user-verification process. That service, which adds a blue check mark on the accounts of those who are verified, is currently free but only accounts that Twitter deems “notable” can get it.

The Musk team’s proposals have generated pushback from some users, prompting Mr Musk to tweet late on Monday (US time): “We need to pay the bills somehow! Twitter cannot rely entirely on advertisers.”

Twitter currently offers a subscription called “Twitter Blue,” that lets users test new features before they are released to all users. The subscription — which doesn’t include blue-check verification at this time — charges $US4.99 a month, giving Twitter Blue subscribers the ability to edit tweets 30 minutes after posting them.

Hours later, Mr Musk tweeted “Power to the people! Blue for $US8/month.” He added, in Tuesday’s tweet, that the cost would vary by country.

Twitter and its competitors have considered or dabbled with subscriptions, but they haven’t yet amounted to sizeable revenue for most companies.

The Musk team has proposed a range of possible prices. Jason Calacanis, a longtime start-up investor who encouraged Mr Musk’s initial bid to buy Twitter, tweeted a poll on Sunday that asked users how much they would pay to be verified by the app and get a blue check mark on their account. The poll options included: wouldn’t pay, $US5 a month, $US10 a month and $US15 a month.

Mr Musk appeared to be intrigued by the idea, replying to the post with the comment “interesting.” He had previously said the verification process was being revamped.

As of Tuesday morning, 1.9 million Twitter users had voted in the weeklong poll. “Wouldn’t pay” commanded a big lead with more than 80 per cent of the votes cast. The second most popular option was $US5 a month, which garnered a little over 10 per cent of votes.

Author Stephen King on Monday spoke out on Twitter against some of the proposed high pricing, prompting Mr Musk to respond in a tweet with his explanation why a cost was necessary and asking how the author might feel about an $US8 monthly fee. Mr King later tweeted: “It ain’t the money, it’s the principle of the thing.”

Mr Musk said he would explain the reason and suggested it had to do with defeating bot accounts he has long said are a problem on the platform.

Twitter currently has about 423,700 verified users, according to its own figures. If around 10 per cent of currently verified Twitter users paid $US8 a month, the company would generate an additional $US4.1m in revenue a year. At the higher price point of $US15 a month that Mr Calacanis also suggested in his poll, the same take-up rate would amount to more than $US7.5m a year. Twitter generated around $US4.5bn in ad revenue last year. The updated version of verification potentially could be open to all of Twitter’s more than 237 million users.

“I think people will pay for certain functionality and features. It won’t be the majority of people, but there’s a small base of people that will,” said Rich Greenfield, an analyst at Lightshed Partners. If a preponderance of all users signed up, it could add up to meaningful income, he said.

It’s unclear how many people subscribe to Twitter Blue, since the company hasn’t released any numbers. Twitter, which had about $US2.2bn in ad sales in the first six months of the year, reported $US195m in subscription and other non-ad revenue over the period.

In the Tuesday tweet thread, Mr Musk said that subscribers would get priority in replies, mentions and search, the ability to post long video and audio and half as many ads. The company also is ending the ability of subscribers to access ad-free articles from publishers, The Wall Street Journal reported.

Mr Greenfield said there is evidence users are willing to pay for social-media features they desire. Microsoft’s LinkedIn offers premium membership services that can cost more than $US1,000 a year, though those are mainly targeted at professional users. Twitter-rival Snap Inc., which recently launched a paid subscription option that gives users access to new and exclusive features for $US3.99 a month, has also gained a following.

Snap introduced the service in June and it has grown to more than 1.5 million subscribers. Features include custom app icons and a black star label to identify the Snapchat user as a subscriber to the paid service.

Evan Spiegel, Snap’s chief executive, said the service is mainly geared to some of the heaviest users of the platform. They can want features that may not be of interest for the broader community, making the case for their financial and engineering investment a challenge, he said at The Wall Street Journal’s Tech Live conference last week.

“By offering this subscription product, we can super serve that community that’s really passionate about Snapchat and charge a small amount,” Mr Spiegel said.

He said the service is off to a decent start and that the company would continue to add new features on a regular basis. The company said it views Snapchat+ as an additional revenue source, not a replacement for its ad revenue.

Snap reported sales of $US1.1bn for the most recent quarter and said it generated “substantially all” of its revenue through ad sales. The company didn’t break out revenue from Snapchat+.

Trying to become less focused on digital advertising is something the industry’s juggernaut, Facebook, also explored by pursuing a subscription-based version in which users wouldn’t see ads, the Journal has reported. The social media site, part of Meta Platforms, opted against pursuing such an approach, though, because it presented numerous challenges, including whether a person who uses multiple social-media accounts would have an ad-free experience for all of their accounts. The company decided against the idea so as to not undermine its advertising business.

Mr Musk already has moved to underpin some of his other businesses with subscription services that can provide a steadier and more predictable income stream. Tesla offers parts of its advanced driver-assistance technology as a monthly fee service. His rocket company, Space Exploration Technologies Corp, or SpaceX, provides access to its Starlink satellite-based internet connectivity for a monthly fee.

The self-proclaimed “Chief Twit” has also suggested some broader category of users could be asked to pay for using the platform. “Twitter will always be free for casual users, but maybe a slight cost for commercial/government users,” he tweeted days after initially agreeing to buy the company.

Twitter last year also allowed some content creators to test a subscription service called Super Follows, which lets those creators’ followers pay up to $US10 a month to see additional tweets and content.

New revenue sources would help Twitter deal with stalled revenue growth. The company reported sales edged up 1 per cent in the second quarter. Twitter went private before reporting third-quarter results, though Meta and Snap in their earnings reports signalled ad spending had faced further pressure. Twitter also needs additional sources of money to deal with debt that swelled as a result of Mr Musk’s takeover. The deal’s financing included $US13bn in debt that increases annual interest payments to more than $US1bn, compared with about $US51m in 2021.

Moody’s on Monday lowered Twitter’s debt rating on what it said was the expectation of higher borrowings and reduced cash balances.

Even as Mr Musk has suggested the company would try to find more varied sources of revenue, he also reached out to advertisers as he worked to close the deal to assure them Twitter would remain a valuable place to promote their products and services.

“Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences,” he said in a note that he tweeted out shortly after the Journal published an article citing concerns from advertisers. “Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise.”

The following day, General Motors, a rival to Mr Musk’s Tesla, paused its paid advertising on the site.

The Wall Street Journal