Shrinking Discretionary Spending

We are increasingly moving toward a subscription lifestyle which bodes well for some and could give others a few sleepless nights as consumers’ discretionary spending effectively shrinks.

Only last week we were discussing subscription models with a financial industry expert, who informed us that it is being predicted that some 10% of spending could be subscription based in the near future. That may sound a small percentage but when we remove the must buys on rent, utilities, food, clothing etc. it leaves little discretionary spending and that 10% suddenly becomes a much larger threat and leaves far less in the pocket.

So what does this mean to a media sector and who could be the winners and losers?

Film has increasingly embraced the subscription model with cinema clubs and mega download stores such as Netflix and Lovefilm.com. Television has also moved from its previous dependence on ad revenues to build significant subscription layered services which are aimed at reducing churn and locking members into a bigger package which invariably now includes broadband, phone and much more.

Software was once traded on a one off fee and a perpetual licence, but this makes little sense for the developers who have to maintain a growing and changing environment. We now have Microsoft Office 365 on an annual subscription and Adobe products such as their Creative Suite, Dreamweaver Illustrator and Photoshop going onto a monthly on demand fee model. Interestingly Adobe will still sell standalone versions but these will not be upgraded and today may date very quickly. Abobe are to offer the whole creative suite for a 12 month contract based on fees of £47 a month (£564 pa as opposed to today’s £1800). Software providers see this move as freeing them from the traditional 18 to 24-month upgrade cycle and enable them to release updates as they became available.

Music is still in flux but the likes of Spotify and Pandora have both established significant user bases based on a simple on demand subscription model.

Newspapers have all fallen in and out of love with paywalls for accessing their digital versions. The challenge is often the wealth of material outside of the service and often news is news and unless a specific source adds real value paywalls will continue to have mixed success.

STM, professional and academic publishing has generally been a subscription based environment.

So what about the book trade?

Some have introduced digital subscription models but unless there is a base of heavy readers and wealth of materials it often fails to hit the consumer button. The old book clubs had the opportunity to migrate their offer to digital but often failed to visualise the potential and execute the change. There are obvious potential opportunities for the likes of Amazon. They already have subscription based offers such as Audible, Lovefilm, Free time and that Trojan horse Prime. Being able to mix and match these with on demand offers would give them a substantial offer that very few would be able to match.

If you are able to get all you want, at the right price do you want to shop around? Does the subscription model enhance the consumer / provider relationship and effectively lock out others? We all would like to market and sell direct but for many this will not be practical and being inside the subscription tent may prove more rewarding than being outside it. 

Newspapers and Paywalls

We wrote only this week about the poor figure The Times had since their paywall went up and now sister papers, the Sun and The News of The World, appear to be moving towards implementing their own paywall policy in October. Some would say why not and better to get the cash in the door than give it away free. Others would point to the poor figures from the Times paywall and ask, is it wise.com?

The material in the Sun and The News of The World isn’t highbrow or necessarily intellectually stimulating and therefore it could be said that advertising would be a better route to get revenues. However, if readership numbers online tumble, the adveristing will surely follow in the same direction.

Some believe that the video and celeb trash stories will still generate readership and after all the Sun and The News of The World have lived on the back of this for ever.

It appears the Murdoch is determined to erect his paywall.

Meanwhile the New York Times still is to implement its promised paywall but it apparently testing a paywall on the Telegram & Gazette in Worcester, MA. The paper hides certain local content behind the paywall and gives the rest away. The theory obviously is that local content is valuable. Interesting thought in today's internet world.