Take this for subscription fatigue

The current buzzword du jour in the media industry is “subscription fatigue”. Accelerating over the past year, but undoubtedly culminating with Apple’s headstrong push into subscription media at their March 25th event, the expression refers to the mounting number of direct-to-consumer entertainment and news subscription options. As the skeptics put it: is there really value in cutting the cord on a $100/month cable package when you’re just replacing it with 10 x $10/month TV services and 3 x $10/month paywalled news offerings? And doesn’t it get terribly complicated to manage and keep track of all these options?

We believe trepidations around subscription fatigue are, to a large extent, unwarranted.

First, giving consumers full freedom to vote with their wallet is now a proven business model in our tech-enabled economy, from software to razors to servers. The ability to cancel anytime, without penalties, is a major psychological difference vis-à-vis other “forced” bundles. Meanwhile, those seeking the simplicity of a bundle can find it through other equally “consumer-first” tools (e.g. Roku, Apple TV).

Second, the potential for fatigue from too much choice is only temporary — many of the media companies pivoting to subscription models won’t be able to sustain their own direct-to-consumer efforts and will either fizzle out or fall back to relying on wholesale distribution. Most video content companies simply haven’t proven they have the chops to think of the world in terms of customer acquisition costs and churn, something their new Silicon Valley peers are trained in during summer internships. Moreover, the legacy businesses have too many existing conflicts along their supply chain: distribution deals with theatres, licensing deals with premium TV channels, internal home entertainment transactional teams to take care of, etc.

Similarly, within the news publishing segment, consumers have gotten comfortably numb and used to ad-supported journalism exactly at the same time as every premium news organization is putting up a paywall. Few will be able to replicate the success of New York Times in building a sustainable digital subscription business. For evidence, look no further than the deal struck by Wall Street Journal with Apple (all recent WSJ content as part of a $10 Apple package vs $20/month retail price at wsj.com), which highlights the need by even the top-tier of content producers for a new breed of wholesalers.

Regardless of the outcome, the space continues to evolve at a dizzying pace. We expect plenty of zig-zagging in business model/strategy announcements as content companies experiment with distribution options. Ultimately, we believe, most will revert to a place of financial comfort which may very well be status quo.