I should have finished this edition of the email newsletter yesterday, but thanks to an outage at Sky Broadband (or more likely Openreach) I had not internet for an agonising 11 hours. This didn’t just mean it was a problem to work, it meant no Netflix or Amazon or Disney+ or Spotify for the majority of the evening. Which led to a family discussion on what we could live without. We would be hardest hit by no internet, everyone wanted to keep Netflix. Amazon was saved, but really for Prime. Broadband has become a utility to us, how do other subscription services reach the same status?
This week we’re taking a look at the evolving media universe, the role of AI in publishing, The Economist’s impressive subscription growth and much more.
Mini bundles and the Media Universe
In the “Behind the Numbers” podcast Insider Intelligence take a look at what’s been happening in media and what the future is likely to hold. They start by reviewing an excellent resource from Recode, which pictures media companies as planets. The planet size is determined by the company’s market cap. The graphic is periodically updated.
Key points from the podcast and the graphic above:
The graphic also includes the relative market cap Apple, Amazon, Google and Facebook - they dwarf all the media companies. Disney at $321 billion is a minnow compared to the $2.1 trillion market cap of Apple.
There are number of combinations of media and distribution. This should have been a winning strategy, but does this matter when you can go direct to consumer? Verticalisation could make a comeback - Apple are making it work with music, maybe podcasts - TV next? (See Comcast’s dilemma below).
The view of Eric Haggstrom of Insider Intelligence was that it was unlikely that a streaming bundle similar to the current cable bundles would be created. More likely that media companies would create mini-bundles of complementary streaming services.
Disney already has Disney+ Hulu and ESPN+, Warner Bros Discovery could bundle HBO Max, Discovery + and the upcoming CNN+ - is this enough of a bundle to shift people from cable? Or is it enough to allow these media companies to add incremental audiences, especially among a younger demographic?
Amazon are playing a different game with their acquisition of MGM - its not about the streaming service its about Prime subscriber retention and building a larger audience that it can show adverts for products on Amazon to.
It’s worth remembering that for now over 50% of US households are paying for a cable subscription and they are watching linear tv.
This media universe is evolving, there will likely be more consolidation especially where you have the giant tech planets and the very small media planets.
Also it’s very early days for many of the streaming services - can they make a success of it? Michael Nathanson recently quoted in The Economist suggested there are 4 attributes required for a streaming service to succeed:
- a flexible balance sheet to enable the content creation
- an ability to expand globally
It’s worth listening to the podcast here or on Apple, Spotify etc.
“Distribution is something computers can do better”
After 8 years in development The Globe and Mail’s artificial intelligence start up Sophi delivered in 2020. Sophi is a mix of technology enabling dynamic paywalls and personalised content recommendations. Using a mix of machine learning and true AI, Sophi is able to determine what content to recommend and where. It also determines what content should be free, monetising from advertising and what content for each individual should be placed behind a paywall. According to this Digiday article Sophi now selects 99% of the articles on The Globe and Mail’s site and what content is distributed via social channels. Sophi is now available for other publishers, the results on their website are impressive:
51% increase in subscription conversions
130% increase in registered visitor engagement
17% increase in CTR from the homepage
Reading though the Digiday article, what was most surprising was the length of time it took to properly use the technology. It also has echoes of a recent newsletter are article about SVOD companies not focusing on making users addicted. Read more.
Comcast aims to make delivery and content work
With AT&T unwinding its content business, Comcast is alone in trying to make content and distribution work. Comcast still has ambitions to become a major streaming player and according to the WSJ is deciding whether to build or buy to achieve its goals.
One possible acquisition is Roku - which we believe is in a great position to become a major streaming player
But in the meantime Comcast is working with WalMart and tv manufacturer HiSense to develop TV’s that would run Comcast software and of course heavily feature its own apps
There is pressure on Peacock (NBC Universal’s streaming service) to grow, it has less than 10 million paying subscribers - although 42 million receive the service as they are existing Comcast customers
Content spending will need to increase - Netflix’s $17 billion spend on content this year dwarves Peacock’s proposed $2 billion spend over two years
Comcast is in a unique position as it is a major supplier of broadband with a growing customer base
The full WSJ article is well worth taking the time to read here.
A widening funnel
The Economist added a record number of new subscribers in 2020 according to their latest financial results. Subscribers grew by over 90,000 to 1.12 million. The growth in part is attributed to the pandemic and people’s thirst for trusted coverage. Points worth noting:
Growth in The Economist audience on “outside platforms” has flourished. They have 2 million subscribers on YouTube and social media channels with a combined 56 million followers. Enabling exposure to The Economist brand and approach to content.
Podcasts have become an important part of subscriber acquisition with more than 3 million listeners a month.
Retention was significantly improved with dedicated “save campaigns” and subscriber only content such as webinars. One webinar a conversation with Bill Gates drew 24,000 subscribers over Zoom.
They realise that their digital channels need to improve, describing their apps and website as laggards.
The Economist has a very clear brand promise that makes them stand out - this has to persist on any digital platform eg “insight not instant news; quality, not quantity; rigour and wit”.
For more detail you can read the full financial report here.
Make your best content free?
The Financial Times recently held a “Future of News” event where one of the most discussed topics was the importance of free content.
Hamish McKenzie co-founder of Substack advised:
Make your best content free - this is what will win loyal readers who can then be turned into subscribers
Putting everything behind a paywall simply doesn’t work, you have to build a devoted following, giving value in free content is key
Ben Thompson publisher of Stratechery and a great podcast took a similar approach:
Thompson publishes long thought pieces which are available free, subscribers pay for his daily news updates (I think they’re actually paying for his view on the news)
Micro-payments won’t work as publishers aren’t selling the content itself, but rather the ongoing production of content
Think about what you’re actually selling, this determines your strategy and the value you can charge
The Washington Post also believes in the power of free content as the first step to developing a relationship with the consumer that will one day translate into a subscription. This approach defines their use of social platforms including TikTok where they have dedicated reporter.
Le Monde echoed the Washington Post’s use of free content to build relationship. Adding that without free content the danger is they would be serving a diminishing elitist audience. Read more of the Press Gazette’s coverage here.
Streaming declines - according to a new study by Omdia the number of streaming services used per US user fell for the first time, declining from 7.23 in November to 7.06 in April.
20% of people in the UK are spending £265 on subscription services they’re not even using. Is this an opportunity? If people are wasting money on services they don’t value, presumably they would happily spend this on subscriptions that did.
Univision the US based Spanish language broadcaster is to launch a global streaming service. The service will initially launch in the US and Latin America in 2022. The addressable market of Spanish language speakers is around 600 million people.
Car subscription market could grow by 70% in the next year - at least that’s the view of some analysts. The lure of the recurring revenue model is likely to disrupt our existing models of car ownership.
NFL is looking for partners to help it realise the opportunity for its media properties.