Subscription Economy Headlines

By Aarthi Rayapura July 18, 2014

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By Gabe Weisert, Content Marketing Manager

 

Here are some of the bigger Subscription Economy stories we’ve been following this week. While tech & media companies tend to get most of the headlines, it’s important to note that recurring revenue models are transforming a broad swathe of industries, from healthcare to retail to manufacturing.

 

Some key takeaways:

 

  • Content providers continue to innovate on the subscription experience (Oprah Magazine).

  • The Netflix model is eating the world (Amazon, MakeSpace).

  • Further validation of big enterprise shifts to recurring revenue models (Adobe, Microsoft).

  • Sports subscriptions are leaving cable in the dust (MLS Streaming, DirectTV).

Amazon goes Netflix. Today the company announced Kindle Unlimited, a “Netflix for Books” that giver Kindle users access to over 600,000 titles for ten dollars a month. Obviously some form of author/publisher compensation plan is  in place, but this makes things very interesting for Oyster and Scribd, two similar book subscription services. Amazon continues to deliver on the subscription experience: value, personalization and real-time fulfillment.

 

The “World Cup Bump” is real. MLS Streaming Subscriptions are up 300% as a result of the Brazil games. Nielsen ratings put the U.S. and Portugal game at 24.7 million viewers, making made it more popular than this year’s NBA finals.The MLS Live package, which normally goes for $64, was reduced to $32 this week as a mid-season special. Live sporting events are currently underwriting a lot of cable franchise business plans – what happens when they go away?

 

Nest launches a Thread. In a partnership with Samsung, the smart home pioneer has released IP-based wireless networking protocol enables IPv6 communications, the latest version of Internet Protocol that will replace IPv4, which takes up about 96% of Internet traffic. The low-power “Thread” network is focused on not draining batteries quickly and has been called “the most promising IoT standard yet.” The IoT platform race is on.

 

Adobe keeps winning. Recurring revenue now accounts for over half of the company’s total revenue, they have 2.3 million cloud subscribers, and piracy is down. “I do not think people who pirate our software do it because they are bad people, or because they like to steal things. I just think that they decided that they can not afford it,” says Adobe’s David Wadhwani. “And now, with the switch to subscriptions and with the ability to offer software at a cheaper price, we see that the situation is beginning to change and we’re excited.”

 

Target began rolling out subscriptions this month. In a direct response to Amazon’s Subscribe & Save program, the retailer is offering a 20% discount on thousands of products as well as free shipping and adjustable shipping windows. Despite limited marketing, subscriptions have quickly grown to account for more than 15% of  Target’s online sales (online represents 2.5% of total sales, with 2/3 of that mobile sales and 1/3 of that online sales). Target is realizing that it has 1,800 of its own Amazon fulfillment centers.

 

Netflix and Hulu numbers continue to soar. Netflix posted 23% year over year subscriber growth at 34 million, and Hulu improved it’s base by over 50% with 6 million. The reason? More viewers are gravitating toward full-length content as opposed to shorter clips. People are starting to get tired of sitting through 30 seconds of advertising to access 90 seconds of content. Also, quality content is hard to make, and therefore valuable.

 

Cord-cutting football fans rejoice. DirectTV announced that their popular NFL Sunday Ticket package is now available as an online subscription, no satellite required. There are some major caveats, however: you have to live in an apartment building that doesn’t have DirecTV service available or live in one of the New York, Philadelphia or San Francisco metro areas.

 

It’s a “Dropbox for Real Life.” Makespace, a storage start-up in New York city, is an app-driven solution for cramped city dwellers that drops off and picks up storage bins from its customers for $25 per month. The company has a photographer in its warehouse who will take a bird’s eye picture of the inside of a bin if a customer chooses. It’s your “closet in the cloud.” Is this just a storage facility that charges its users a premium for transportation costs, or something more?

 

Microsoft subscriptions got a lot more tempting. For $7 per month or $70 per year, Office 365 users can get Office on a single computer, plus one terabyte of OneDrive cloud storage. Paying $10 per month or $100 per year gets users Office on up to five computers, each with their own terabyte of storage. Cloud storage has been a big driver of the success of the Office 365 subscription program since its rollout a year and a half ago.

 

Editorial continues to innovate. Hearst’s “O, The Oprah Magazine”  is testing a new tier-based model that will offer exclusive benefits to premium subscribers, including hand-written birthday cards, a box of beauty products and a number of exclusive editorial features. Management is hoping to move beyond “tote bags and paywalls” to compell its readers in new and unique ways. (Zuora CEO Tien Tzuo and Managing Director of Dow Jones Katie Vanneck-Smith recently shared some thoughts on the concept of “editorial memberships” over at Wired.)

 

And finally, Business Insider put together a clever list of “25 Subscriptions That Will Simplify & Improve Your Monthly Purchases” that includes major retail ventures (Target, Soap.Com) popular snack boxes (Blue Apron, Nature Box), clothing vendors (Birchbox, Fabletics), as well as popular subscription boxes for parenting, pet care, and “everything else.”

 

Other worthwhile reads from the Subscription Economy:

 

Hiding in Plain Sight — Is the Subscription Model the Optimal Business Model for the Digital Age?” The Scholarly Kitchen

 

Customer Success Has a Quantifiable Impact on Revenue,” Medium

 

Independent Music Labels and Young Artists Offer Streaming On Their Own Terms,” New York Times

 

The Invisible Economy,” The Atlantic

 

Ride-Share City: Helsinki to Pilot An End To Car Ownership,” VentureBeat