Content subscription: the most demanding business model

María Novillo

24 September 2021

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Ten years ago, it seemed unthinkable that users would pay to download movies from the internet (let alone watch them online) or to watch gamers play on YouTube. The Internet had democratised access to information and it seemed a challenge for users to accept the fees imposed to access certain types of content. 

But they did. And, despite the difficulty of staying in the market, the truth is that it is one of the most attractive consumption models for today’s hyper connected consumer. 

From the first digital newspapers in the 90s — which required a subscription to access the whole or part of its content —, to the streaming music platforms that back in the early 2000s were already offering an on demand service in exchange for a monthly fee, the rise of streaming video and the emergence of OTT (over-the-top) platforms consolidated the mass consumption of subscription-based content.  

But if the Internet is full of free content, why are users willing to pay for it? Although the answer may seem obvious, the truth is that the success of this model does not only depend on the variety of the offer, nor on the possibility of accessing privileged information that could give us a professional, academic or intellectual advantage. It even goes beyond the FOMO, which drives users to subscribe to one or more platforms in order to feel part of a group and connect with others. 

In essence, it is a shift in power dynamics. The subscription model puts the consumer back at the center. Control shifts from the brands to the users themselves, who can now choose what content to consume, but also where and when to do so. A paradigm shift that has implications for brands, users and the content itself. Keep reading to discover them all! 

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What does the subscription-based content boom imply for brands?

The main aspect to keep in mind for brands that want to succeed in the demanding subscription content market is that, in order to guarantee good conversion rates and maximise the number of subscribers, the top of the funnel should be as wide as possible. This is why, in general terms, mass-consumption content makes up a large part of the offerings of these businesses.

For that reason, and in order to maintain a varied offer in line with the tastes of such a heterogeneous and global audience, the production capacity of these companies requires agreements and collaborations with external partners (purchase of rights, content co-creation, etc.).  Only then they will be able to respond to users’ constant need for new content. 

Cognitive technology also plays an important role, since artificial intelligence and the ability to obtain information on consumer preferences and behaviors are key to achieving a differentiated experience.

However, despite the high investment required, subscription models also drive an increase in customer lifetime value, their lifecycle being longer than in single pay systems.  The possibility of increasing the range of services offered — for example, through premium content for which the user has to pay an additional fee within their usual subscription service — is always an open door to greater profitability. Platforms such as Disney+ turn to this system to increase the profitability of their premieres in the face of the closure or decline of movie theaters.

Implications for users: change in consumption habits

We have already mentioned the power that “on-demand consumption” gives users, allowing them to consume content in a 100% personalised way, thus encouraging phenomena such as the audiovisual “marathon”. 

This personalised model has distanced users from traditional media (TV, radio, print), considerably reducing their attractiveness and influence. In fact, many traditional media have already opted for subscription models to keep their audience and not be left behind. They offer exclusive content, 24-hour formats in the case of reality shows and even previews. At the same time, this model has led to the emergence of social tribes: paying for a subscription fosters the feeling of belonging to a social group, in which consuming the same content becomes another way of establishing and consolidating social relationships. 

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How content subscription models have transformed content itself

Beyond the implications for brands and its effect on consumer habits, the rise of subscription models also has an influence on the content itself, which must include new elements to meet users’ needs.

In this regard, it is important to bear in mind that, although the need to target a mass audience always guides the content towards a global approach, it will be local nuances that make the difference, adding value to  generalist contents and making them. 

Content also has to take social dilemmas into account, paying attention to the big contemporary questions and concerns when it comes to its own messages, as the content is in constant contact with the social moment. Thus, it is not surprising that on streaming platforms we find a “wave” of content focusing on diversity, equality or sustainability, in line with the great challenges of today.

However, the need to constantly generate content to maintain the value of the subscription is so high that, in many cases, platforms opt for a volume strategy. They offer users a wide variety of contents, but they are all very similar to each other, so that although the level of supply is high, the level of differentiation and originality is medium-low.

The future of subscription content

At this point, we can say that the subscription content industry has overcome its first challenge and has been able to adapt to the needs of consumers. According to the World Economic Forum, 60% of younger generations  already rely on paid digital content for their entertainment and, in a few years, users willing to pay for information or entertainment content will be the majority across all age groups. 

The subscription economy has grown by more than 400% in the last decade, and — partly driven by the COVID-19 pandemic — is experiencing a digital boom. In this context, it is not surprising that new players are looking for their niche in this market, adding to all the implications mentioned above the effects of fierce competition and the difficulty of differentiation. 

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Source: Zuora

The need to innovate, to continue creating and surprising users almost on a daily basis — launching new contents weekly, constantly renewing the offer, bridging content to maintain momentum, etc. — is higher than ever. Especially if we take into account that most users are subscribed to more than one platform, which increases the difficulty of differentiation: offering diverse and exclusive content is no longer enough

Moreover, we cannot forget that digital media and entertainment platforms are no longer only competing with each other, but also with the users themselves who, through platforms such as Patreon, have democratised the subscription model. 

But differentiation is not the only challenge that brands will have to face in regards to the rise of subscription-based content. For some, such as Netflix, this boom has made them victims of their own success: with a market share of more than 60% in some countries, continuing to grow in the face of increasingly strong competition is a challenge. The solution seems to lie in strict control of shared accounts and family plans, a measure already adopted by Spotify

However, many questions remain about the future of the industry: will account sharing be considered a form of piracy? Will traditional media be able to modernize and cope with this new model? At Good Rebels we will keep an eye on the developments of the sector and make sure your brand taps into the potential of this model which consumers have already adopted as their own.