Have we already reached “peak subscription”​?

Some of you already know that I’m really interested — if not obsessed — with the issue of value creation in the new premium content economy.

Recently, several articles caught my attention and got me wondering whether we were witnessing the beginning of a new phase in the current revolution.

Until 2018, the meteoric rise of Spotify’s global membership, Netflix’s soaring pop culture footprint and the NYT’s miracle return to profitability all converged towards one hope: maybe paid subscription was the model of the future, the one thing that could simultaneously save the media, curb intrusive advertising and usher us into a new golden age of TV, music or cinema.

However, a recent report from the equipment firm Sandvine highlighted an interesting phenomenon that was quickly picked up by Motherboard: content piracy seems to be slightly on the rise again. Why? Because the subscription model is so popular that all producers want their slice of the pie and now consumers cannot keep pace with the explosion of exclusive contents and siloed services anymore.

It’s true that things have gotten pretty complex. Each platform now offers multiple plans with various options and sharing possibilities and its has become impossible to access all the best shows/podcasts/music/games/you-name-it at once without spending hundreds of dollars per year. Once disrupted by a few all-you-can-eat players such as Netflix, the content landscape seems to be gradually coming back to being opaque and expensive. And it’s just the beginning: Disney’s acquisition of 21st Century Fox, Comcast’s bid on Sky and the digital giants’ war on talents (think Apple or Amazon’s multi-million exclusivity deals) all point towards more and more walled gardens. Therefore, since consumers’ bank accounts are not as unlimited as Spotify’s catalogue, one should expect a more fickle relationship to paid subscription. According to the consultancy Park Associates, the churn rate for over-the-top video services in America is already over 50%, with the notable exception of Netflix and Amazon Prime. In an ever complex landscape, media players’ main goal will soon be about securing a place among the few un-quittable platforms.

However, don’t go thinking peak subscription means the end of subscription. Expect rather the acceleration of two different sub-models.

First, the return of free, ad-backed content. You read that right — the age of subscription could eventually lead to a partial return of good ol’ advertising backed content. Actually, advertising was never really gone but more and more players are contemplating alternative formulas to lure cash-strapped consumers into their ecosystems. Amazon is reportedly working on a free content app that could benefit from its extraordinary database and its direct connection to e-commerce. Before being acquired by the satellite radio giant SiriusXM, the freemium music service Pandora had bought AdsWizz, an adtech firm specialized in audio advertising. Spotify, which currently has 100 million “free” users, is enjoying substantial growth from video advertising. Finally, advertising-supported video platforms such as Roku are taking off in the US. Against all odds, advertising could remain the prime way to access content, at least not the most premium one.

Second, expect to see more and more bundled offers, providing users with several services at once for a unique fee. For instance, Spotify is already partnering with Hulu and Showtime in a joint $4.99 offer reserved for students and rumours about a Music+Shows+Cloud bundle from Apple are mounting. Some are even foreseeing the rise of “super-bundles”, combining not only media but also real world experiences such as travel or theme parks.

This model represents the best of both worlds. For users, it means lower prices and greater simplicity. For companies, it means super-loyal consumers locked up in all-inclusive ecosystems in which A.I. and recommendation would play a major role.

However, such an approach is incredibly costly as it demands massive amounts of cash to operate various services and subsidize recruitment, at least at launch. This could result in an (even more) oligopolistic market where only a handful of players — Apple, Disney, Amazon, Google… — would dominate everything.

The subscription revolution has only begun but just like a gripping Netflix show, it certainly won’t be as simple and linear as one thinks!

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