Rise of Subscriptions and the Fall of Advertising

(Note: I’ve got a running update of articles related to this topic at the end of this post…and as long as this keeps getting claps, I’ll keep updating it!)

(Extra note: I’m now writing over at Substack, in part because of my research for this post. I’m not doing paid subscriptions but I encourage you to signup for my weekly newsletter over there!)

We talk a lot about how individual startups disrupt existing business models — such as Airbnb vs. hotels or Craigslist vs. newspaper classifieds — but we sometimes fail to appreciate the more massive disruptions that cut across many industries at once. Ecommerce is one example: People increasingly choose to purchase everything from airplane tickets to underwear via digital storefronts. Consumer habits are slow to change, but when they do change they cut across categories — and even iconic companies with hundreds of years of history can fall away.

I believe we are on the eve of another “macro disruption” based on consumer habit change: Media consumption is moving from advertising to subscription-supported models. We are getting closer to a consumer-controlled world, and every company that spends money on advertising will be forced to find a new way to do business.

Subscriptions are Growing Everywhere

The hottest topic in the media business right now is the unexpected growth in paid subscriptions. Newspapers — left for dead many times in the past few years — are now seeing a resurgence thanks to direct sales. The New York Times gained 130,000 subscribers in November and the WSJ is up 300%. Netflix and Amazon Prime continue torrid growth with their ad-free experiences, and Hulu and YouTube are racing to launch their own subscription models. Spotify and SiriusXM have proven that people will pay for ad-free radio, and Pandora recently bragged that it will rapidly erase last year’s $343MM net loss thanks to the launch of $9.99 monthly subscriptions.

Like ecommerce, in which people start in one category and get more comfortable buying online across the board, people who subscribe to one media channel often start a subscription habit in others. Over time we choose to get our video with Netflix, music with Spotify, news with the Washington Post, dinner from Blue Apron, and meditation from Headspace.

Businesses and consumers are learning to make this subscription habit easier and more appealing. The media players are…