Subscription Economy News: Apple, Nest, Wall Street Journal

By Aarthi Rayapura September 8, 2014

Excerpts, quotes and highlights from this week’s Subscription Economy news.

 

Does mass-market health monitoring start today? Lining up deals with music labels and persuading them to agree to a charge of 99 cents a song on iTunes was one of the reasons the iPod became popular, says the New York Times. While the iPod itself was easy to use, it became a gateway to a music catalog that at the time none of Apple’s competitors could offer. The success of Apple’s new watch will be similarly dependent upon a network of health applications. Key challenges: patient privacy as it relates to data breaches and a decent design (fortunately the bar in this field has been set very low).

 

Smart home

“Smart” approaches a dollar. The falling cost of adding sensing and communications to consumer products will mean that a typical family home, in a mature affluent market, could contain several hundred smart objects by 2022, according to Gartner, Inc. “We expect that a very wide range of domestic equipment will become ‘smart’ in the sense of gaining some level of sensing and intelligence combined with the ability to communicate, usually wirelessly,” said Nick Jones, vice president and distinguished analyst at Gartner. “More sophisticated devices will include both sensing and remote control functions. Price will seldom be an inhibitor because the cost of the Internet of Things (IoT) enabling a consumer ‘thing’ will approach $1 in the long term.” Key challenges: data usage, security, and a lack of interoperability and standards.

 

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Recurring-revenue models are relatively lean. For investors, one of the attractions of subscription businesses is their ability to outsource almost all functions other than core product development – keeping their fixed costs to a minimum and allowing them to scale up with little additional funding.  As the Financial Times reports, the cash flow benefits of upfront revenues have not been lost on a new breed of niche ecommerce start-ups in the UK. Several have introduced subscription payment models for their highly traditional offerings – ranging from artisan coffee supplies to shaving equipment to shoes (subscription required, naturally).

 

Firephone
Meet your new 99 cent cell phone. Six weeks after its launch, Amazon cut the price of it’s phone to 99 cents. The fire sale is undoubtedly the result of middling reviews, anemic sales and today’s Apple announcement, but we wouldn’t be surprised to see  99 cent phone debuts in the future. What’s more valuable, a handful of new phone features that will be commodified in a few months, or a new subscriber relationship? (Remember, the new phone also includes a free year of Amazon Prime.)

 

Nest-thermostat1
All marketing is local. Nest Thermostats have already saved an estimated two billion kilowatt hours (kWh) of energy compared to what their owners would have spent on heating and cooling at a constant temperature. That’s enough energy to power 180,000 American homes for a year. In preparation for the launch of its products in France, Netherlands, Belgium and Ireland, Nest customized not only the products – including recording local actors for the voice of the Nest Protect alarm – but marketing, packaging and the company’s online and retail presence as well.

 

Canada

 

Canada goes a la carte. AdWeek reports that regulators are trying to unbundle the country’s cable TV industry. Under the proposed CRTC regulations, subscribers would pay around $20 to $30 for a basic cable service that would include local channels, government feeds and some educational services. Any other additions to the cable TV menu would be customized based on the demands of consumers, not operators. Major content providers are protesting, arguing that bundled packages help underwrite new programming,  support smaller stations, and help offset the cost of increasingly titanic sports deals (you’re paying for sports, whether you watch them or not).

 

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The Wall Street Journal doubles down on the Subscription Experience and extends an intellectual brand into a lifestyle brand. Today the paper launched WSJ+, a complimentary membership program exclusively for subscribers. Readers will have access to a variety invitation-only events, panel discussions with top Journal editors, as well as arts performances and private film screenings. Highlights included guided tours of the Journal’s New York newsroom,  chances to all-expense paid trips, access to top golf courses in the U.S. and free ebooks from HarperCollins Publishers.

VideoOnDemand

 

VOD is a supplement, not a replacement. Cord-cutting, while on the rise, is nowhere near a mass phenomenon.  A new study from global marketing firm GfK finds that twenty two percent of adults in the UK using video-on-demand services, rising to 34% among those aged 16-34, compared to 37% of adults in the United States, or 46% of those aged 16-34. There’s a  strong overlap with pay-television subscribers. In the United Kingdom 72% of video subscribers also pay for cable television, compared to 54% generally. In the United States the figures are 81% and 91% respectively. “These are not people who just want a cheap alternative to pay television,” suggests Julia Lamaison of GfK. “They are people who want even more choice.”

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Recurring Rigatoni. The Olive Garden sells out its first-ever subscription plan in 45 minutes.