Saturday, March 19, 2022

Oversubscribed? Peak Subscription? -- No, Peak Unlimited, Flat-Rate!

Amanda Mull wrote "This Is Peak Subscription: Forking over another $5 a month is getting pretty old" in The Atlantic (3/3/22), identifying the pricing problem: "trying to divine what constitutes an acceptable return on, say for or 10 bucks a month." Buying a new smart TV and loading all her streaming apps, she asked, 

Why am I paying for these things? How much of this stuff do I even enjoy? ...the kind of light-bulb moment that has stuck with me as I peruse my credit-card statements or shuffle through apps looking for something to watch on TV, trying to divine what constitutes an acceptable return on, say, five or 10 bucks a month. ...No one is sure how many subscriptions the average household will bear before it snaps and starts canceling things, but we might be about to find out. 

To which Tien Tzo (CEO of subscription management company Zuora) said: "Nonsense. Hogwash. Poppycock. Balderdash." in his well-reasoned rebuttal, "Is The World Oversubscribed?" (3/19/22).

As those familiar with FairPay strategies can see, both are right. This is peak unlimited, flat-rate subscription! That is because for most services the acceptable return actually realized will vary from month to month, depending on many variables not known until the month has ended. That means the acceptable price must vary with that month's need.

I expect a shakeout that will gradually kill many subscription businesses, but two kinds will thrive and grow.

  1. The biggest players, with the richest value propositions have the market power to survive even their bad pricing models.
  2. The others will find ways to make their pricing more flexible, able to track to varying levels of value, but still simple. (as Zuora's Subscribed Institute suggests).

Few yet understand how they can do that -- here is how...

My previous post, The Great (Streaming) War of Stupid Value Propositions -- Continued!, explains how more flexible strategies might operate as "risk free subscriptions" in which the consumer does not risk paying for a subscription they get little or no value from in a given month:

The essence of the risk-free subscription is to be flexible, in order to be value-based -- cheap or free at low or zero usage, and rising at a reasonable rate as usage and other aspects of value received increase in that month, up to a set monthly cap. Think of it as a pay-ramp instead of a pay-wall. This kind of flexibly affordable model that is based on the value that each individual viewer actually receives (and that ramps up less prohibitively than pay-per-view) will get more viewers to buy more subscriptions. That will generate more profit from more viewers for every provider who has content that viewers want.

Such a pricing model also offers sensible economics across a mix of providers and aggregators. Disney could leave most of its content on Netflix for those who are only occasional viewers, while attracting its more regular fans to direct relationships on Disney+ with added features (such as its newest and hottest shows, and extra perks).

Instead of the all-or-nothing battle for AYCE subscriptions, providers can build relationships with all or most of their potential viewers. Think of this as agile pricing for a good customer value experience (CVX) -- and for a fair revenue share to platforms, content providers, and creators.

More on this theme:

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More about FairPay

A brief introduction is in Techonomy"Information Wants to be Free; Consumers May Want to Pay"
(FairPay is an open architecture, in the public domain. My work on FairPay is pro-bono. I offer free consultation to those interested in applying FairPay, and welcome questions.)

 

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