Narrative: Subscription Everything

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    Narrative: Subscription Everything (Jan 28, 2017)

    Written: January 28, 2017

    Go back ten years, and almost everything we consumed was purchased or rented – DVDs from Blockbuster or Netflix, software from Microsoft or Adobe, music from iTunes or the local CD store. But in the last few years, we’ve seen all these content industries – software, TV, movies, music, and more – shift from purchase and rental to subscription models. Though Marc Andreessen likes to say software is eating the world, subscriptions are the business model that’s eating the world.

    This trend goes beyond content too – Amazon’s Prime service is one of the most popular subscription services and although it has a content component it began life as a subscription shipping service for purchases. Wireless carriers in the US and elsewhere have moved from subsidy models for smartphones to installment plans, and Apple and other device makers are now offering what are effectively subscription plans for smartphones too.

    As this happens, companies are either adapting or being left behind – Netflix launched its subscription service ten years ago this month, and has seen its business radically shift from DVD rental by mail to streaming, and is perhaps the best example of embracing the subscription transformation. Apple, on the other hand, resisted the subscription model for many years when it came to content, focusing on iTunes purchases and rentals for music and video, even as competing services like Netflix and Spotify began to eat into its revenue streams. Though it has now embraced the subscription model for music, it still doesn’t have an entry in the subscription video market. It has, however, embraced subscriptions elsewhere, as with its paid iCloud storage tiers.

    Subscription models have significant upside for providers – they create predictable revenue streams with regular monthly or annual revenue. But they also create downside for users, as monthly commitments quickly balloon, with none of the flexibility of one-off purchases or rentals. In addition, lower-income families and individuals are often less able or willing to make those monthly commitments and therefore often lose out on the savings they offer versus single purchases. But it’s fairly clear at this point that we’ll increasingly buy everything from hardware to content to software through subscription models, and that the companies that offer the best bundles will lock up predictable revenue streams from an increasingly loyal base of users.

    RIAA Says US Music Industry Grew Rapidly in H1 2017, Driven by Subscriptions (Sep 20, 2017)

    The Recording Industry Association of America (RIAA) today issued its report for the industry’s performance in the first half of this year, and it showed a by now familiar trend: stronger growth driven by rapid growth in streaming. That growth far more than offset the decline in both physical and download sales, with physical sales now just 16% of total revenues compared to 31% back in the first half of 2013. More importantly, downloads have dropped from 44% of industry revenue to just 18%, barely ahead of physical sales, while streaming is now 58% of total revenue. As always, though, it’s worth noting that it’s really subscription streaming that’s driving numbers up, with 61% year on year growth in that category and 74% of total streaming revenues, with just 12% coming from ad-based streaming despite the much larger user numbers. The RIAA says there were an average of 30 million paid subscribers in the US in the first six months of the year, up from 20 million in the same period last year. In its report (linked below) there’s the usual griping about that ad-based revenue stream, a stream the industry continues to go along with but moan about at the same time because it knows it can’t really live without it, even though paid streaming is far more lucrative. In the paid streaming department, the US continues to be quite some distance ahead of most of the rest of the world. A recent survey I ran showed that Spotify and Apple Music alone had captured 23% of online adults as customers between them.

    via RIAA (PDF)

    Spotify Adds Hulu to $5 Per Month US College Student Subscription (Sep 7, 2017)

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    Google is Working on Subscription Tools for News Publishers (Aug 18, 2017)

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    Microsoft Introduces Leasing and Upgrade Program for Surface Line (Aug 1, 2017)

    Microsoft has today announced a leasing and upgrade program for its Surface line, offering a 24-month payment plan for the devices, and an option to trade in for a new device after 18 months rather than paying it off over the full 24 months. The program is called Surface Plus and there’s also a version for business customers, though it seems like a missed opportunity not to call it Surface as a Service… We’ve obviously seen the installment and leasing models become the default for smartphones on US carriers over the past few years, and there are already examples of hardware vendors getting into the game directly, notably Apple’s iPhone Upgrade Program. So this is both a familiar model and a smart move for Microsoft, which recently began to offer bundled Windows and Office subscriptions to business customers and can now offer a single bundle of Surface hardware and those two software packages for businesses. But it’s also a great way to lower the barriers to entry for what are fairly pricey machines for the most part, as Microsoft has stayed firmly above the fray with its Surface line, in contrast to the much lower overall average selling prices of Windows PCs. The Surface Pro starts at $799 (or $33.29 per month over 24 months), while most of the models are over $1000. Reducing that to $40-60 per month for many models should make it much more affordable and predictable as a cost for both individuals and businesses. We’re going to see lots more of this, with hardware vendors packaging up access to one or more devices on a subscription basis with additional subscriptions to software, content, or other services layered on top.

    via Microsoft

    Twitter is Beta Testing a $99/Month Subscription Ad Service for SMBs (Jul 28, 2017)

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    Facebook Confirms News Subscriptions Coming in October (Jul 19, 2017)

    Campbell Brown, the former news anchor Facebook appointed as head of News Partnerships in January, has finally confirmed what’s been rumored for some time now, namely that Facebook is readying a subscription product for newspapers. It sounds like it will adopt the familiar though not universal approach of allowing readers to access ten articles before having to pay for a subscription to a given publication, though it’s not clear that the ten articles will include those readers read separately in their browsers, so that will be a key point for papers to nail down before signing up. Another will be payments and how those will work, since Facebook still doesn’t have credit card details from the vast majority of its users. Since some publications don’t allow any free articles before the paywall kicks in, this won’t be a perfect or universal solution, but on paper should neutralize one of the big criticisms of Facebook’s gobbling up of news consumption. However, given that this has been in the works for some time, and the largest publications will be aware of that, the recent PR push by the News Media Alliance against both Facebook and Google suggests that it certainly won’t assuage all their concerns. Update: also today, Facebook announced analytics for Instant Articles with support from Nielsen, to allow publishers to compare results from their IA and web-based versions. The lack of comparable analytics has been another bugbear for the news organizations using IA, so this should check another box in resolving those concerns, at least on paper.

    via TheStreet

    News Corp Says Nearing Deal with Facebook on Subscriptions (Jun 23, 2017)

    This is really just an update on an earlier piece, which you can also read for free here. News Corp is merely confirming that the talks are in an advanced stage. See that earlier piece for my take on this broad trend, which promises to finally give news publications what they really want from Facebook.

    via Bloomberg

    Facebook Working on Offering Paid Subscriptions for Third Party News Sites (Jun 12, 2017)

    Facebook has been doing a great deal to reach out to news publications recently and let them know that it has their interests at heart, something which has occasionally been in doubt. However, despite all the soft enticements it’s offered to get publications to work with Facebook and use its Instant Articles feature, the big thing publications have wanted is a business model other than advertising, namely subscriptions. It sounds like Facebook is now working on that feature, which would allow users to pay for subscriptions to publications from within its apps. Apple News, of course, already offers that options, but it’s been a closed rather than open platform so far and though I was expecting it to open up more in iOS 11, there’s no word of that so far from Apple. I would guess Facebook would start with a narrower program too and open up somewhat over time. So although this is good news for whichever pubs get included in the first round, many will likely have to wait even longer. But this is a good first step in giving news publications something they probably want more than anything else from Facebook right now.

    via WSJ

    Amazon Channels Accounts for Big Chunk of HBO, Starz, Showtime Subscribers (Jun 7, 2017)

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