Sunday, February 28, 2021

Subscription Fatigue and the Need for Meta-Subscriptions

There is a lot of talk about subscription fatigue today. As more and more companies provide streaming video and high-value content as a subscription, consumers are being asked to subscribe to more and more content sources.  

Just look at streaming – most consumers subscribe to Netflix, Hulu, Amazon Prime, Disney+, and HBOmax. You may also consider subscribing to FuboTVSlingTV, or YouTubeTV and the TV networks with Peacock, CBS, and ESPN+.  Or perhaps you like NBA League Pass, NHL.TV, NFL Game Pass, the Tennis Channel, the Golf Channel, or DAZN. There are now hundreds of providers offering interesting content and you can’t subscribe to them all.  



Herein lies the problem. We want to consume the content and are willing to pay for it, but the way it is packaged today makes it impossible to access it all. That's what’s really behind the subscription fatigue. Consumers are getting increasingly frustrated with subscription offerings that don’t give them what they want. What’s missing are meta-subscription services that would offer an aggregation of content from across the different content providers.  


The same is true for news publishers – you can’t possibly subscribe to all the publications to read the articles that your like-minded friends share with you on social media. Again, what’s missing is a meta-subscription that you could subscribe to, perhaps based on a particular area of interest. 


The meta-subscription idea is not new. We have them already for music: Spotify, Amazon Music, Apple Music – those are all meta-subscriptions that allow you to listen to any music, no matter which label has created them. The meta-subscription provider takes over the complexity of the industry so that the consumers don’t have to subscribe to each label individually. So why has it worked for music and yet it seems to be so difficult for news and video?

  

The main reason is the complexity of distribution rights common in film, TV, and print and the distribution rights have been enabled by the dependence on language. 


Music has very low dependence on language. There’s classic which doesn’t use lyrics at all and there is opera that is nowadays always produced in the original language (and trust me, sometimes it’s funny to listen to Americans at the San Francisco Opera singing Janacek in Czech). Rock, pop, and other modern music rely on lyrics more, but the kids in Germany and Italy are listening to songs in English just like the kids in California. 


Singing erases even accents within the same language. U2 are from Ireland, Sia from Australia, Lorde from New Zealand, Ed Sheeran from England, and Ariana Grande from Florida, and yet most audiences can’t tell their accents when they sing. And while Americans hardly ever listen to non-English music, French, Italian, Spanish, and German audiences are much more accustomed to hearing each other's songs. It’s relatively rare that a music act would change their language for commercial purposes (The Scorpions and Celine Dion come to mind, but that’s been a while ago). Language doesn’t matter that much for music. 


Not so in film, TV, and publishing. Books are always being translated, often into many languages. Magazines get translated and often localized. The Runner’s World Magazine, for example, is published in 18 countries. Movies are usually dubbed or at least sub-titled when distributed aboard. While British accents are currently very chic in the US, most English-native actors have to learn to speak with an American accent if they want to make it in Hollywood (think of Nicole Kidman, Russell Crowe, Charlize Theron, etc.). Similarly, Arnold Schwarzenegger's strong Austrian accent wasn’t acceptable for German audiences and his roles had to be dubbed by a German actor Thomas Danneberg. Language is a big deal for film, TV, and print. 


All this language complexity somewhat increases the cost of the content production, but it gives producers a very effective way of enforcing distribution rights for each country. Those distribution rights have been increasing the profits but they are also making it really hard for anyone to create a meta-subscription for content. Spotify had to negotiate contracts with all the labels to make music available and that wasn’t easy. But a Spotify for films would have to negotiate with every studio for every country. 


Yes, there are distribution barriers in the music world. There are occasionally a few famous hold-outs such as the Beatles and Taylor Swift in the past. Don’t expect to find every German, Italian or French song from your US account. But those barriers seem more a function of supply-and-demand dynamics than deliberate limitations. 


What the audiences want are meta-subscriptions. The current trend where every studio is creating their subscription service is completely unsustainable. If you are a sports fan, you can’t possibly be happy having to sign up for ESPN+, the NHL, the NFL, Formula 1, the Tennis Channel, and yet not be able to watch the Olympics because the IOC signed a deal with NBC. It makes no sense. 


Similarly, the Internet and social media make it easy to share articles about your areas of interest but you can’t possibly subscribe to all the newspapers and magazines that your friends are sharing with you. I wrote recently about how frustrating that experience is becoming on social media. Again, what you want are meta-subscriptions that allow you to sign up for any article on your chosen set of topics, no matter where they are published.   


Without meta-subscriptions, consumers will be becoming very frustrated with the complexity of accessing their content of choice. Subscription fatigue is one of the results – people will cancel subscriptions that are not giving them what they want. Because what they want are meta-subscriptions. 


After all, it works pretty well for music! 

 

Tuesday, January 26, 2021

The Paywall Dilemma

Sharing links to articles is immensely popular on social media. The percentage of Twitter, LinkedIn, and Facebook posts that share a link is very high. In fact, clicking on links in social media posts is how many people consume their news and learn about what interests them. 

Yet, there is a storm brewing in the social media world. No, I’m not talking about any politics. It’s about the tension between the social media companies and the publishers of the articles to the links that we post. 


The media companies have been under a great deal of pressure to transition their online revenue away from advertising to the more predictable subscription revenue. The reason for that has been that Google, Facebook, LinkedIn, and Twitter have taken over a big chunk of advertising budgets. Yes, those are the same companies that enable us to share the links to articles in the publications they are putting out of business. 


The drive to switch from ad-supported free readers into subscribers forces the online publications to set up paywalls that stop us from reading their content and entice (or even force) us to subscribe. Publications such as The New York Times, The Washington Post, Forbes, or even TechCrunch are becoming more and more determined to make us pay for their content. And I don’t blame them, good content can’t be free. 


But herein lies the problem. The social media companies that live of social interactions - that to a large extent consists of sharing links to articles - are also the ones forcing the media companies to raise the paywalls that prevent the sharing. 


As a result, our experience is becoming more and more frustrating. Every time I click on a link that someone shared, I get asked to subscribe. It’s getting to a point where I don’t want to click on any links anymore because I know that I won’t be able to read the article anyway. That reduces my engagement which in turn will hurt the social media companies – the very companies that have been siphoning advertising dollars away from the media publications! 


As a user, I don’t mind subscribing to one or two daily newspapers and half a dozen magazines, but I can’t subscribe to all of them. Syndication makes the problem even worst, as I can read a particular article as a subscriber in the San Jose Mercury News, and yet I can’t read that same article on The Seattle Times website! 


It’s a real dilemma. We want to share and consume articles via social media. That’s a big part of the social media appeal. At the same time, the publishers deserve to get paid for their articles. Yet, we can’t possibly subscribe to all the publications and we share links to articles from the publications we subscribe but our friends/followers don’t.  


So, what should give? Should we ban sharing links on Twitter, Facebook, and LinkedIn altogether? That’s not likely, even though that kind of social media experience would address many of the disinformation problems we are facing online today.  


Should the social media companies start paying kickbacks to publishers for every time someone clicks on their article? That sounds intriguing, but Facebook, Google, Twitter, and Microsoft have been enjoying a really profitable business model and they will not easily start sharing those profits with the publishers. To a large extent, the publishers also benefit from the traffic social media sends their way. Actually, maybe the publishers should pay the social media companies a kickback! 


Should perhaps technology solve the problem? Maybe the social media companies could implement an AI-based abstract service that would give us a 2-3 sentence summary of each article without actually taking us to it? Yeah, that sounds like something Google would do (in fact, I think they tried) but the publishers and readers would hardly accept that kind of solution. 


Or, what if there could be a paid meta-subscription service that enables me to subscribe to every article on a particular subject, no matter where it is published? Let’s say, I am interested in astronomy and could subscribe to all astronomy articles, no matter which magazine they appear in. The subscription service would handle the complex commercial relationships with all the publishers. As a result, I could read any article on astronomy via a link shared on social media, without having to be a subscriber to all of those astronomy magazines. 


I am not sure if any of those solutions will work. But I predict that something will be changing in the next couple of years as more and more articles are published behind paywalls while social media drives more and more traffic to those articles. The readers are stuck in the middle and that’s never a steady state. 

 

Saturday, December 26, 2020

Would You Want a Rolex for $50 a Month?

Apple is crushing the Swiss watch industry and it’s not with a cheap watch. The latest Apple Watch costs $400 and most users typically buy a second strap, a charging station, or another accessory. They likely spend close to $500. This is not the kind of pricing disruption that Swatch created back in the 80s with colorful $50 fashion watches mass-produced in plastic. Apple is selling a premium product that isn’t cheap at all. And while Apple keeps growing and growing, the Swiss watchmakers struggle1. 


The Apple Watch stands out with leading-edge technology, great user experience, but also a disruptive business model. Just like most Apple products, the Apple Watch has a relatively finite expectancy and most customers know that. They got used to that with their Apple iPhone – these devices don’t last very long. Apple releases a new model every year and while most people don’t buy a new watch (or a new iPhone) every year, buying a new one every two years is common. That's what most telco providers do when they sell you their “free upgrade” program. Sure, you can hold out a year longer but the experience starts degrading pretty fast. 


This is partially due to the relentless cycle of innovation, and Apple is a master at that. Every new release introduces something better than the previous release and if you are stuck on the old technology, you are missing out. There is also the ever-so evil planned obsolescence that Apple builds into its products. The old hardware can’t handle the new operating system, battery life degrades, and the phone jack is no longer supported – Apple is a master at that!


Swiss watches come with a history.
 And so, Apple watch users are finding themselves buying a new watch every 2-3 years, which translates into, $250 per year. That’s why it’s not a stretch to call it a subscription - you are effectively paying just over $20 per month to own an Apple Watch.  

Let’s compare that with owning a mechanical Swiss timepiece. You can get some amazing watches for $5,000 – Omega Speedmaster (the Moon watch), Breitling Navitimer, Tudor Blackbay, and many others. These watches do not only tell time, they are also a piece of jewelry, and they serve as a status symbol or a symbol of fine taste. They may not run hundreds of apps like the Apple Watch, but they offer something else – each watch is a hand-crafted mechanical masterpiece. Of course, there are some wonderful watches for under $2,000 and you are also welcome to spend over $20,000 if you like.  


My point is that for $5,000, you can buy a beautiful Swiss watch that will last you a lifetime. These watches are designed to be very robust as they have been built to keep time under challenging conditions - underwater, in the dust, mud, and even in space! Mechanical watches are definitely more durable than the Apple Watch. Patek Philippe – a company that makes some of the most luxurious watches money can buy – advertises with the slogan: “You never actually own a Patek Philippe. You merely look after it for the next generation.” While you won’t find anything for $5,000 in the Patek Philippe catalog, you can find many quality Swiss watches for that amount that will last you a lifetime.  


Comparing $250 per year with $5,000 for a lifetime becomes an interesting consideration. Why not sell the Swiss watch as a subscription? The manufacturer's payback would be 20 years which feels like a long time. But the manufacturers share 40% of that with the dealer and a subscription could (and should) be sold directly online which would reduce the cost of sale significantly. The manufacturer's cost of goods and the advertising expenses for all those ads with sailboats and racecar drivers would presumably remain the same. 


Now, you might object that I can’t compare an Apple Watch and a Swiss luxury timepiece. It’s a different class of wearable, aimed at a different audience. One can’t really compare those two markets. True. As the markets stand today, I completely agree.  


Yet, all those Swiss watchmakers would love to attract new audiences. Their present target market consists mostly of well-off male buyers with a love for mechanical watches or with the need to show off their status. Many of the watchmakers have been trying to attract different audiences by offering cheaper collections with quartz movements and through consolidation by buying up different brands. For example, the Swatch Group owns brands ranging from the high-end Breguet, to mid-stream Omega, to the more affordable brands like Hamilton and Tissot, and of course the cheap fashion watches by Swatch. 


The Apple Watch can do many things but there is a reason Mr. Bond is choosing another brand...

There were 20 million buyers of Swiss mechanical watches last year and the manufacturers would love to sell to another 5-10 million professionals who are perhaps not willing to spend five thousand dollars at once. A subscription-based business model could accomplish that.  


Now, the right price for such a subscription might not be $250 per year; maybe it’s $400. But there is probably a price at which the economies make sense for both the sellers and the buyers. The subscribers could buy into different levels of subscriptions that would give them access to different price levels of watches. If you get tired of the Omega Speedmaster after a couple of years, perhaps you can swap it for an Omega Seamaster. A Rolex, which costs about double that of an Omega, might be more expensive. Maybe $50 per month. The subscriptions could also include servicing once every five years.  


Interestingly, watches are more durable, preserve their value better, and their service costs much less than cars. Yet car subscriptions already exist – just check out Carbar in Australia or Clyde in Switzerland (ha, Switzerland!).   


Swiss watches were not always high luxury items. Before digital technology took over reliable timekeeping, mechanical watches were the only solution. They were designed to keep time especially for people who needed precise timekeeping to do their job: pilots, soldiers, divers, train engineers, etc. They were tool watches. 
 


Some Swiss watches became cult objects.

All of that changed when cheap digital watches came out in the 70s. All of the sudden, the timekeeping problem was solved cheaply and people didn’t have to buy any Swiss timepieces to tell time. The Swiss industry came under pressure and had to reinvent itself. It turned watches into jewelry and it worked for a long time. But now, maybe it’s time to reinvent itself again. And, maybe a subscription-based business model is the solution. 


Watchmaking is not the only manufacturing sector that needs to re-invent itself. At Zuora, we work with many manufacturers who transformed their business model from selling products to selling services as subscriptions – from medical devices to industrial machinery. One of the ways to build a recurring revenue model is to “repackage” your existing offering “as recurring”. Besides potentially reaching new audiences, the subscription-based model has proven itself as much more resilient than the traditional way of selling products. Especially in times of economic uncertainty like we have right now.