The Success Of Digital Convenience

Michael Hedges June 8, 2022 Follow on Twitter

From time immemorial shaking money out of somebody’s pocket has made the world go ’round. This has created and, then, changed civilizations. As wealth expands so, too, has the art and science of getting it from one pocket to another. We really do like the exchange, particularly when its convenient.

Quite appropriately, executives at streaming platform Netflix needed quick answers for investors when the subscriber count fell precipitously. The appropriate target was chosen back in March: account sharing. Too many folks - maybe 100 million - were turning over passwords and such to family members, friends, neighbors, in-laws, out-laws and others not in the physical household. The chosen solution was right out of the Murdochian school of customer engagement: make them pay.

Netflix got all the attention on this because it’s Netflix, the world’s largest streaming video platform. Its first quarter 2022 financial report indicated 200,000 lost subscribers, first drop in a decade. Investors and shareholders the world over punish companies with any motion other than growth. In this instance, Netflix’ stock was whacked by 30%. Job cuts were announced. New productions, which propel Netflix’ sales, were axed. And, horror above horror, advertising might be coming. In addition to the password sharing problem, the company blamed increased competition, obvious after the new Disney Plus platform launched - and dozens others.

Streaming platforms - video and audio - have been on the rise for several years. Netflix had something of a head start, at least among those looking for one-stop shopping. Coronavirus restrictions limiting access just about everything sent subscriptions to these entertainment services into overdrive. Consumers liked the convenience. Subscription revenues, generally, became popular for all sorts of retail businesses. As lockdowns eased - and even where they didn’t - consumers did a bit of back-of-hand accounting and began adjusting household budgets appropriately. Those households with three or four video streaming subscriptions cut back to one or two, all the better to sign-up for a pet food delivery service.

The subscription model continues to entice businesses and, for different reasons, consumers. From shareholders to accountants, there is no greater love than regular, predictable income. Not to be forgotten in this digital age, is the trove of data made available from subscribers, not only for marketing but product development. Consumers, particularly Millennials and Zoomers, see the benefits of subscription and “usership schemes” enabling easy access to the latest and greatest, often free of maintenance hassles. TikTok, known to all Zoomers, is planning a subscription service. Apple is moving forward with monthly payments plans to entice iPhone buyers deeper into services.

Several headwinds are roaring at the subscription business model. Newsletter platform Substack, popular with influencers, stumbled recently as a funding round failed, “economic uncertainty and interest rates dampened investor enthusiasm,” noted eMarketer (May 31). Most subscription model adopters are in consumer discretionary sectors, always affected by winds from each and every direction. Publishers, formerly known as newspapers, are notably sophisticated in marketing subscriptions, moving from the cookie data that powered digital advertising to subscriber data. The New York Times’ acquisition of word game Wordle, a definite hit, is widely expected to be brought into its subscription blanket. So long as the money doesn’t run out, games will always be popular.

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