Subscription services are a bit of a no-brainer in 2014. Spotify, Netflix et al are well-established; Amazon this year announced Kindle Unlimited, the eBook service which may be their most successful subscription service yet; and HBO and Vimeo recently announced their intentions in the area. But what does this mean for new-comers to the arena?
Subscription services like the above have been successful for two reasons. Firstly, they appeal to the short attention-spanned, convenience-craving modern consumer. The best services offer cheap, fast, easy access to an (almost) unlimited range of (sometimes) exclusive content, with no ads and tailored recommendations.
Secondly, they get the buy-in of content suppliers. There are a few reasons for this. Music and film streaming services in particular have proven to be a fairly effective check on piracy. Subscription services are able to place new content in front of an audience who are geared up to discover new content, increasing reach (if not engagement). And whilst streaming may not always make as much economic sense as hard sales, downloads or pay-per-view options, streaming services have become ubiquitous enough that having content excluded from a service that competitors are supplying content to could have real implications for content suppliers.
Success doesn’t only come on the back of tying suppliers’ hands. Subscription models are also a great way of locking consumers into a service: once a customer is paying you a monthly fee for all their music, you don’t have to worry that they’ll go running off to someone else to buy the latest Kanye album at a lower price.
But locking customers into your service can come at a price – the exclusion of those who might be interested in your product, but aren’t interested in paying for your service. This might prove to be a stumbling block for both traditional content retailers and smaller companies looking to move into the space.
Traditional content providers who want to offer a subscription service need to adapt to a new way of doing business. Subscription services herald a new form of content provider. These providers aren’t selling a product anymore – it’s not about driving sales through pushing the newest or best-selling releases. Providers are now selling a service. Some of the ingredients to success may still be similar – like content range, exclusive content, competitive prices and the elusive brand loyalty. But there are new requirements too – like delivering a great user experience; offering different subscription levels or freemium pricing; cross-platform and device availability; and deciding where advertising fits into your service. There are also differences between selling yourself as a service, rather than a retailer – great customer service, for example, is a must.
For traditional content providers whose business models aren’t already geared to these ideas, this may be challenging – especially combined with the real risk of cannibalization of existing offers and sales. With the exception of Amazon, this might explain why more traditional content providers have been slower to move into the space. Amazon are an example of resolving the tension by simply selling a product alongside a subscription service – but they’re also a company who can afford to lose sales on one front to bolster sales on another. Companies without a wider ecosystem to benefit, or without Amazon’s capacity for risk, may be more challenged.
And what about newer brands? Now that the market leaders are well established, any new subscription services for music, film or books are unavoidably pitching themselves against the giants – and most customers won’t subscribe to more than one subscription service for a specific type of content. Smaller subscription services may be limited to finding success in a niche. The music store and promotion platform Bandcamp, for example, is currently on trial subscriptions to releases from a specific artist. This is more like a traditional subscription service – the equivalent of paying to receive a specific magazine once a month, instead of paying to access the whole magazine stand.
Subscription streaming services still have challenges ahead. Any major backlash against super-low artist pay-outs may still make them unsustainable. As more services appear, a relatively homogenized offering may see growth stagnate.
The future – those brands that can successfully challenge their existing business models, or take a killer niche mainstream – will be interesting to see.
For more informations please contact Hannah Lendrum at firstname.lastname@example.org.