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.
Netflix Squeezes Fox Out of Top 4 Must-Keep Viewing Options (Jul 12, 2017)
New research Consumer Intelligence Research Partners (CIRP) suggests that Amazon has 85 million Prime subscribers in the US, based on a recent survey. That number feels quite a bit too high to me – my analysis of Amazon’s year-end 2016 financials suggested a number closer to 70 million globally, which of course includes at least a few million subscribers in other countries. A survey I did a year ago suggested that a majority (over 60%) of households in the US didn’t have Prime, so it would be a massive turnaround in just a year for a similar percentage to have a Prime subscription. So I take the overall number with a pinch of salt while acknowledging that the directional stuff is correct. One interesting secondary data point is that 28% of Prime households are using the newer monthly subscription option rather than the annual option – that also feels a little high, but it’s indicative that people are drawn to the benefits of that option, including the smaller one-time outlay, the flexibility of a month-to-month subscription, and the familiarity of that model.
BuzzAngle, a company which tracks the North American music industry, has released a first-half 2017 report, with lots of numbers on music consumption patterns in the US over the past six months, and Variety here has a summary of some of the key findings. One of the most striking numbers to me is that subscription streams accounted for nearly 80% of total streaming audio plays in the first half, with ad-based streaming only driving 21% of listens. That was slightly surprising to me, because the number of ad-based streaming music users is much higher than the number of paid subscribers, so I went back and checked some earlier data from BuzzAngle in this year-end 2016 report. It appears that this balance began to shift dramatically starting in the middle of 2015, which is not coincidentally when Apple Music launched. Importantly, BuzzAngle treats streaming video plays of music (e.g. music videos on YouTube) as a separate category, so the split mentioned above only accounts for pure audio streaming such as Spotify’s free and paid tiers and their equivalents. But it’s still striking that the balance has gone from roughly 50/50 between subscription and free audio streaming at the beginning of 2015 to 80/20 in Q2 of this year. And in Q2, subscription audio streaming actually eclipsed combined ad-based audio and video streams for the first time, so it’s now the largest category even when video plays are included. It’s worth remembering that this is US data, and the US has shifted dramatically from being a streaming laggard to being a leader over the last few years, so this certainly isn’t reflective of global behavior. But it is worth noting that subscription music streaming not only provides the vast majority of revenue and profits in the US, but now also a majority of actual plays as well.
NBCU has announced a new subscription offering for watching England’s Premier League soccer games, which will cost $50 per season when it launches in August this year. The catch is that these games were previously available online and through NBC’s apps to authenticated pay TV subscribers as an additional offering over and above the games shown on its live linear TV channels. So it is taking what used to be a perk for authenticated pay TV subs and making it a separate, $50 service, making this a bid for new revenue from dedicated soccer watchers. What that means in practice is that viewers who care about this will now need to subscribe to TV packages that include the NBCU channels and to this separate subscription if they want to watch all possible games. This is definitely part of a trend towards direct-to-consumer offerings, many of which are coming from traditional players not willing to offer full cord-cutting solutions, which means that they actually end up setting the user experience back instead of moving it forward, as in this case. The traditional TV players continue to be more interested in experimenting and dabbling with services that can provide new revenue than – to use an analogy from a different sport – skating to where the puck will be by offering truly new offerings that allow users more control. I continue to believe that there will come a tipping point when we see real innovation in giving users just what they want because the alternative is rapid decline, but we’re clearly not there yet. But it’s also notable that both Fox (through the deal announced earlier today with Facebook) and NBCU are seeking new ways to monetize their second-tier sports content which otherwise doesn’t appear on TV.
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.
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.
Amazon has begun offering a discounted monthly Prime subscription for low income households. Specifically, it will offer those who receive food stamps a $5.99 per month option, compared to the standard $10.99 per month or $99 per year options. In a survey I did just over a year ago, it was very clear that lower income households were far less able to benefit from the subscription explosion and services like Prime than their wealthier counterparts – the chart linked here gives the summary of penetration of Prime by income, and the article here explains the rest of the detail, though it’s behind the Techpinions paywall. The reality is that it’s tough for households with low or unpredictable incomes to commit to annual subscriptions and even monthly subscriptions, so lowering the cost of the monthly option will make it more palatable while giving customers the flexibility to start and stop their subscriptions on a monthly basis. The WSJ article here focuses on Walmart as the target here, and that’s obviously a reasonable angle given Walmart’s success with lower-income shoppers, but this is really about expanding the addressable market for Prime, regardless of who’s currently capturing those customers. The Prime “flywheel” continues to be Amazon’s strongest competitive weapon, and bringing more households and the people who live in them into the base of Prime subscribers will continue to benefit Amazon enormously.
Microsoft Xbox Game Pass Will Launch in June (May 24, 2017)
Microsoft first announced the Xbox Game Pass subscription service back in February, but as I don’t seem to have covered it then it’s worth briefly talking about now, as the launch date has been announced today. The subscription is a sort of Netflix for Xbox games, featuring 100 games at any given time, though the specific titles will rotate in and out over time much as movies and TV shows do with Netflix’s library. It costs $9.99 per month and users will be able to download the games and play them as long as they remain available and the user remains a subscriber (Sony’s equivalent service merely streams games, so that’s one competitive differentiator). The service is notable mostly for the fact that it’s yet another example of a content category that’s traditionally been transactional moving to a subscription model, a trend captured in the Subscription Everything narrative here on the site. That’s both a better fit for many consumers who would rather pay a smaller amount monthly than big lump sums infrequently, and a more predictable revenue stream for Microsoft, which has already shifted to annuity models for other aspects of its business. From a consumer perspective, the subscription seems like a good deal – just the eight featured titles Microsoft highlights in the service at present are priced at an average of around $20, versus $10 to play all of them and lots more for a whole month. We’re going to continue to see more and more content consumption move to subscriptions, squeezing out those providers which continue to sell using only by-the-drink models, though there will always be those consumers who prefer to purchase at least some content that way.
via The Verge
Amazon today announced its earnings for Q1 2017. Revenues grew strongly, but as with Q4 the rate of growth was slower than it had been for most of last year. Operating margins also continue to fall, driven by a slight dip in AWS margins in the last couple of quarters and continued big losses in the International business. The feeling I have is that e-commerce growth is just a little slower than Amazon anticipated – several metrics it normally keeps within very narrow bands have crept out in the past couple of quarters. I take that as a sign that retailers like Walmart are fighting back more effectively, sacrificing margins in pursuit of higher growth, and that this is affecting Amazon’s growth rate (though it still remains far higher than any other retailer’s organic growth, online or otherwise). Following some additional disclosure in its 10-K last quarter, Amazon has now shaken up its reporting segments for the non-AWS business and provides a little more visibility into its subscription and fulfillment businesses. The subscription business – mostly Prime but also other smaller businesses like Audible – generated 5% of revenue. Fulfillment and related businesses generated 18% of revenues, and the growth of that third-party seller business on Amazon, which now accounts for 50% of units sold, continues to be an important driver of higher gross margins along with AWS. From the 10-K, I estimated that Amazon had roughly 70 million Prime subscribers at the end of last year, and though the quarterly numbers are a little harder to pass it looks like it may have seen decent growth this past quarter too. Prime continues to be one of Amazon’s greatest strengths as a driver of stickiness and revenue growth.
Pandora Opens Streaming Subscription to All (Apr 18, 2017)
This is an interesting wrinkle on the theme of premium TV channels going direct to consumer. In this case, AMC Networks is talking about going through the pay TV companies rather than around them, which would ensure high-quality distribution but would also limit it to those audiences already paying for traditional TV services, whereas its stated target is the millennials who famously don’t pay for those services. The price being talked about also seems very high: the AMC network is pretty cheap for pay TV distributors – one recent figure I saw suggested under 50 cents per month – so charging $5-7 just to take out ads seems steep. As a company, AMC makes a little over half its revenue from fees, and the rest mostly from ads, so charging ten times as much as it charges distributors just to remove ads doesn’t feel quite right. But it’s good to see the traditional cable networks experimenting with a variety of models as they try to stem the tide of both cord cutting and cord shaving, even if this doesn’t feel like it’s quite going to hit the spot.
I’m in two minds about this report. On the one hand, I’ve thought for a while that some kind of premium subscription service would be a great way to allow the heaviest users of Twitter to pay for the value they get out of it (while potentially avoiding ads), and serve as a useful additional revenue stream at a time when Twitter’s ad revenue has been stagnating. On the other hand, the news that this will effectively be an enhanced version of Tweetdeck is less appealing. Tweetdeck is for a particular type of Twitter user – one who wants lots of tabs open at once with various different feeds – but that’s not all power users by any stretch. And as an app Tweetdeck has a somewhat miserable reputation for reliability – the only times I ever see it mentioned on Twitter itself are when it’s crashing on people. I’ve used it occasionally in the past, but not for some time now, not least because it’s been neglected as a native app on macOS since 2015. If this new option really is limited to and centered on Tweetdeck, it’ll have appeal mostly limited to a certain kind of power user (mostly companies, brands, and professional social media managers), but if it’s instead aimed at power users broadly and supports other endpoints too, then it’s more interesting. We’ll probably have to wait until Twitter concludes its testing to know one way or the other, though.
via The Verge
HTC announced this subscription VR service for its Vive headset at CES, but it’s now opening it up to developers. The fact that only 14,000 consumers have signed up to be notified when it launches is a useful reminder of just how small the VR audience on any of the high-cost platforms is today. And I would guess that many users will still end up shelling out lots of money on a per-game basis because the best premium content won’t be part of the subscription, at least in the long run. But a subscription model for VR makes a ton of sense for non-gaming content as more of that starts to show up, although arguably it’s a better fit for mobile VR experiences which are more attractive to non-gamers rather than the big-ticket PC- and console-based rigs.