The Subscription Business Model Will Fail, Here’s Why.
The Future of the Subscription Trend and Death of Digital Commodity
Netflix, Hulu, Adobe, and Amazon, all of which are part of our daily usage and have become intertwined within our lives. All companies have some sort of subscription plan for users to gain access to their platforms and content. Month by month we pay a fee to use and view content, but at what cost? It wasn’t always this way. The trend started only a couple years ago.
Take Adobe for example. In the old days it used to be you bought the programs for that version of that suite (Adobe CS3, CS4, CS5, CS6, etc.) paying anywhere from $300-$350 a pop. Sometimes they’d bundle them by what you’d use them for. I remember adobe selling colored version of their platform in bundles. I got a red version of CS4 which had illustrator, Photoshop, Flash, and InDesign, but I really wanted After Effects too, which was in a blue version. Once I had it, that was it. I can use it to my heart’s content. A new version wouldn’t come out for another 2–3 years. Of course, in college students shared illegally downloaded copies of the programs, so it made buying them pointless.
Soon, Adobe announced Creative Cloud. A lot of negativity surrounded the plan, but surprisingly it worked and they saw huge growth and revenue, which launched us into the subscription age.
Now, everything has a subscription– even apps. All the dating apps that used to be free (Occupied, Tinder, POF) now have a monthly fee. Business apps (Slack, Evernote), and even TV –HBO, Showtime, Cinemax, all monthly fees. Last year, CBS launched their own subscription platform to get access to Star Trek’s new series. Bad call. Even companies like Disney will launch their own platform with a subscription plan. That in my eyes is just most dollars signs leaving my wallet. I’m sure they’d argue, they will have all their content (Marvel, Star Wars, etc., plus original content), which is great, but honestly,
I don’t want to pay for another subscription. Everyone is jumping on the subscription train.
The Downfall
Here is where companies are shooting themselves in the foot. I understand that switching to a subscription model is about user growth and profits, but it’s also about access to “content”. Content is king. I’ll use that word “loosely” to represent movies, platforms, games, etc. They are putting a value on the content they provide, but because companies unspoken mentality is “we provide the best content”, everyone is following and copying one another. Content/Platforms are not always king–as many companies provide different things. You really can’t put a value on that, unless they say so. Here is the part they overlooked. USER GROWTH WILL EVENTUALLY STALL. That’s because of the business model they are following. Not everyone will want to have a subscription to EVERYTHING. Recently, there was an article saying Millennials and Gen X are sharing their passwords with each other to get access to content without paying for it. Beginning of downfall? Companies say they aren’t worried, but I think they should be.
There was a time you bought a copy of the product off the store shelf and “owned it”, but then companies turned around and said “you don’t own it, you’ re just buying a license to use it”. Just the other day I went to purchase a Disney film and I couldn’t fast forward to the main menu. They forced me to watch previews–very annoyed.
There will come a day (and very soon) where users are going to be backed into a corner-financially, because of the mass amount of subscriptions they are subscribed too. They will have to choose the ones they want to keep and the ones they want to cut. Remember when people were cutting the cord for cable? Well, this will be the same, but they will be cutting the digital cord for subscriptions. Subscription bills will add up, then users will soon see how much they’re paying on a monthly basis, and realize it’s not worth it anymore. Some people have already evaluated their subscriptions at the end of each month and decide which ones to “cancel”. Even I am doing a refresh at the end of the years.
Will Users Feel Trapped?
Do you see yourself as being forcibly subscribed into a plan? Now, we obviously always have a choice, but companies really don’t give us much choice when it comes to housing things like our data. Example: Housing all media in the cloud, but you have terabytes of photos and videos. In order to keep the memories, you’ll have to pay per month because there is nowhere else to store it. You could go out and buy a couple hard drives of 2TB, 3TB, 4TB.
Being a Photographer, I must use photoshop/Lightroom, but in order to use it I HAVE to pay a subscription per month. I’d rather pay a couple hundred dollars to own a copy and be happy with that. At some point, we will rely on certain platforms that charge a fee for their “services”.
So, let’s break it down for the popular things at Normal rates: This is just a rough estimate with popular things out there for the average millennial.
NETFLIX
$7.99/mo-13.99/Mo
$7.99/Mo ($95.88/Year) 1 screen at a time and download videos on 1 phone (Basic Plan, they don’t even promote this)
$10.99/mo. ($131.88/Year) Standard 2 Screens and download video on 2 phones (They promote this)
$13.99/mo. 4 screens Ultra HD ($167.88/Year) (You’re kidding me, right? I have to pay extra to watch HD and take advantage of my QLED TV? FYI, it was prompted on my tv.)
HULU
$11.99/mo. ($143.88/Year)–No commercials
$7.99/mo. ($95.88/Year)–limited commercials (why do I want to pay for something with commercials).
$39.99/mo. ($479.88/Year)- Live TV–with basic channels.
YOUTUBE RED
$11.99/mo.-Content ($143.88/Year)
$9.99/mo.-Music ($119.88/Year)
New Phone Upgrade–Every year. Remember, you’ll never own the damn thing, you’ll be paying for it. For life…
Average $49.91/mo. ($598.92/Year)
AMAZON PRIME-$12.99/mo. ($155.88/Year)
HBO-$14.99/mo. (179.88/Year)
INTERNET (Xfinity/FIOS)
I’ll use my Xfinity rate for this 74.99/mo. (899.88/Year x 2)-Two-year contract
My triple play by the way was cheaper than buying internet by itself for 69.99/mo. Unfortunately, I can only have xfinity and nothing else. My complex has a contract/deal with them.
Adobe
$9.99/mo. ($119.88/Year)- I downgraded from the everything model
Sketch App -I’m a designer, so this is essential
$79.99/yr.
OKCUPID “A-List”
$19.95/mo. ($238.40/Year),
$14.95/3 mo. ($44.85 Total 3 Month),
$9.95/6 mo. (59.70 Total 6 months)
TINDER
$9.99/mo. ($119.88/Year) (under 30),
$19.99 ($239.88/Year) (Over 30) +$Extras
Talk about age discrimination.
CLOUD STORAGE
APPLE
$2.99/mo. ($35.88/Year) for 200GB
$9.99/mo. ($119.88/Year) for 1TB
$1.99/mo. ($23.88/Year) for 100GB
$9.99/mo. ($119.88/Year) for 1 TB
SPOTIFY
$9.99/mo. ($119.88/Year)
APPLE MUSIC
$9.99/mo. ($119.88/Year)
TOTAL YEARLY PRICE (At minimum price points for all sections above)
Cell Phone Data
$40-$50/mo. ($480/Year) Rough average- There are many plans to choose from.
$3134.56 Per year
Remember, this is a ROUGH estimate as everyone’s subscription usage is different. The bulk of it is the internet provider. Can’t access any of the stuff without the internet or mobile plan. However, it’s still up there in price as we all use most of the content in the list above.
Valuable Disks & Competitors
At some point used Blu-Ray movies will jump in value, if they haven’t already. Ones that stand out now are the Marvel film, which in the store (Best Buy) go for $30+ dollars. Even Amazon is putting value on new released Blu-Rays for Prime members. I couldn’t even find the new Avengers Infinity War Blu-Ray on Amazon (at release day value), and was forced to purchase it elsewhere for a lot cheaper than what Amazon offered. I believe the market value of used movies will go up, because at some point many people don’t want to pay for access to multiple streaming services, especially at $3k+per year. Movies that come out now give you codes to access it digitally, but not one iTunes movie codes to download it, like in the old days. People will soon realize they can pop in a movie to their player, sit back, relax, and watch it as many times as they want without having a subscription to watch it.
What will happen?
There will come a time when a customer is going to have to choose between what content they want because it’s just going to get to expensive (remember $3K/Year!). They will cancel. They will evaluate and figure out what’s most important to them, bottom line–price.Unlimited will be a luxury not a commodity
The term “Unlimited” has its limited–Ironically. Nothing is TURELY unlimited anymore. AT&T’s Unlimited data plan is capped at 20GB. So much for unlimited.
I feel the days of flipping and watching tv will be coming to an end. The ability to watch everything. Remember as a kid you’d turn on the tv and have 60–80 channels. It was free, no fee, no subscription (Maybe if you wanted the Disney Channel). I think at some point (slowly happening), they will piecemeal the options more, and more. It will get to a point of you paying for what should have been free in the first place. You want to listen to music unlimited with no commercials, nope you have to pay for that. What about the radio? Sure, but there are a crap ton of talk shows with maybe three minutes of content and 10 minutes of commercials.
The ability to use everything at our finger tips “unlimitedly” will slip away. What will happen is instead of having “no contracts” and “cancel anytime” terms, companies will realize users are being picky with the subscriptions and force them into contracts. They might start at 3 months, 6 months, and even go to 1 year, In order to access content. It wouldn’t surprise me if they tie a contracts to a season of a show you love so much, that way they are still getting their revenue and charging in the Uber sense “at high peak”.
Xfinity and Fios will always be around, but to keep customers they will adjust their business model to match the tin market trend, so they will offer something slightly better (a bundle package), but generally the same. Even Comcast is getting bold and started their own mobile phone plans.
Final Thoughts
I’m worried yet hopeful about what the pricing future will hold for content. It’s getting to a point companies are piecemealing the smallest things into tier point in order for you to “access it”. It’s getting more expensive. I miss the days of buying things as a one off. I’m curious to see how Apple will take on the video platform marketplace with offering it for free to their users, Only catch is maybe you have to own an Apple Device?
