Subscriptions in publishing

When is subscription revenue recognised?

A print subscription promises a series of issues, each delivered at a point in time, so revenue is recognised as each issue is delivered; for a weekly or daily title, that is close to evenly over the period. A digital subscription gives access to content the publisher keeps updating, so the publisher stands ready to provide it throughout the period and recognises revenue evenly over time. Cash received for future issues or access is a contract liability, often the largest liability a publisher has. See media accounting and deferred revenue.

Subscriptions in publishing: a print and digital bundle

A newspaper sells 10,000 annual bundles on 1 September, each including the printed paper, full digital access and a branded tote bag given on sign-up, for US$ 300 paid in advance. Sold separately, an annual print subscription costs 240, an annual digital subscription 120 and the bag 15, 375 in total. The newspaper's year ends on 31 December, 4 months later.

The bundle's 300 price is 80% of the 375 standalone total, so each element is allocated 80% of its standalone price. The bag's 12 is revenue on 1 September, when it is handed over. Four months of print and digital are revenue by 31 December, and the rest is a contract liability of 1,920 thousand across all subscribers, released over the next eight months.

How are introductory offers and auto-renewals treated?

The answer depends on the enforceable contract term. A digital subscription at US$ 1 a month for three months, then 15 a month, that the reader can cancel at any time, is in effect a series of monthly contracts: revenue is 1 a month during the offer, and nothing is deferred, because the reader has not committed to any later months. If instead the reader commits to a year, paying less in the first three months, the total price for the year is recognised evenly over the twelve months, creating a contract asset in the early months. Automatic renewal at the end of a term starts a new contract period; it is not anticipated in earlier revenue.

How are subscriber acquisition costs treated?

Commissions paid to agents or partners for each new subscriber are incremental costs of obtaining a contract. IFRS 15 requires them to be capitalised and amortised over the expected subscription period if the publisher expects to recover them, though a practical expedient allows them to be expensed when that period is a year or less. Marketing campaigns and free trial costs are expensed. Where subscriptions are sold through app stores, the publisher also decides whether it is the principal, reporting revenue gross with the store's fee as a cost. See contract costs and app store revenue.

How are newsstand sales and returns treated?

Copies sold through wholesalers and retailers on sale-or-return terms are sales with a right of return: the publisher recognises revenue only for copies it expects to sell, estimated from past sell-through by title and issue, with a refund liability for expected returns. Unsold copies are usually pulped, so the asset for returned goods is often nil. See returns and markdown allowances.

How are corporate licences and archive licensing treated?

Site licences that give a company's employees access to a publication are recognised evenly over the licence term, like individual digital subscriptions. Publishers also license their archives to databases, aggregators and developers of artificial intelligence models. A licence to use an existing archive as it stands is a right to use intellectual property, recognised when the licensee can use it, while a licence that includes continuing access to new articles as they are published is recognised over the term, or split between the two where both are promised. See licences under IFRS 15.

How does US GAAP differ?

ASC 606 gives the same answers on timing, bundles and free gifts. One difference is that ASC 606 allows promised goods that are immaterial in the context of the contract, such as an inexpensive gift, not to be treated as separate performance obligations, whereas IFRS 15 relies on general materiality. See advertising revenue for the other half of a publisher's income.

This guide is general information. It is not tax or legal advice for your situation.