Tag Archives: Subscription business model

The Freemium Come On

I had the same sort of thing happen to me twice in the last 24 hours so of course I feel compelled to rant about it. In the first case, I was searching for a better system to keep track of my business development work. I spent some time reviewing solutions and I thought I had found one that I liked. Research told me that there was a free solution that would meet my needs so I signed up. Imagine my surprise when my account said I was now using their enterprise solution for a 30-day trial.  I wrote to customer service asking about the promoted “free” option and was told that in 30 days my account would be downgraded to the free solution although some pieces of what I had access to would be lost.  No, he didn’t tell me which pieces so I’m a little wary of getting too invested in this since who knows if I’m building a database which will then be held for ransom.

In the second case, my “thing” about grammar led me to a browser extension that is supposed to improve upon the tools built in to the operating system, my word processing software,  and the browser.  It too said it was free so I installed it and registered for an account. The first document I ran through it contained a number of errors, some of which were labelled as “critical” (spelling and a comma fault) and others labelled as “advanced.”  Hovering over the critical issues allowed me to fix them immediately, choosing from several proposed solutions.  I clicked on the advanced list and was taken to a page which told me I needed to upgrade to fix the advanced writing mistakes as well as to enhance my text.

In both of these cases, I don’t begrudge the companies for charging for their services.  I think freemium is a pretty good business model and there are some free services that I’ve paid to upgrade over the years after having used them for a bit.  I have a bigger issue with companies that begin as free and then begin charging for features which had been free.  The issue I do have is a lack of clarity upfront.  If it’s a freemium service, state that and lay out the differences between free and paid.  Hopefully, your product is good enough that you’ll convert folks who use it and want a deeper involvement.  Don’t play the airlines’ game of promoting a low cost (or no cost) and then hitting a user up with charges for everything under the sun.  That’s just deceptive.  That’s my take.  Yours?

 

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Filed under Consulting, Huh?

Taking An Umbrella

Sometimes I think that changing landscape of the media business is like the weather:  everyone complains about it but almost no one does anything.  In fact, if you spend any time at all following developments in the media space, you read a lot more about the old models trying to sue the new out of existence (Aereo, YouTube, etc.) than you do about new models being adopted quickly by the older business models.  So today, we have a little food for thought and an example of what can happen when a newer company adapts rapidly.

Image representing Netflix as depicted in Crun...

Image via CrunchBase

As reported by multiple sources this morning:

Netflix‘s Q1 numbers are in, and the company reports that it now has 29.17 million subscribers in the US alone — that’s 2 million more than the number of subscribers the streaming video provider had at the end of 2012. Globally, Netflix reports more than 36 million subscribers, an addition of 3.05 million new customers when compared to the end of 2012/previous quarter…This is, for the first time, greater than HBO’s domestic subscription base of 28.7 million.

And another point:

Netflix isn’t a cable network, but it competes for attention with television fare beyond just HBO. And in that context, Netflix commands more attention—87 minutes per US household per day—than any American cable network.

30 million subs at $8 at month is a quarter of a billion dollars every month in gross revenues and high engagement.  Not too shabby.  That money is funding original programming such as House Of Cards (the implications of which I discussed earlier).  Moreover, House Of Cards itself was bought using all of the knowledge Netflix had on its subscribers’ viewing habits and preferences, something older media doesn’t have since the traditional TV ratings provide next to nothing of value when compared to the granular data streaming services have.  Anyone see that changing?

A couple of years ago Netflix was tied in to physical media, which is still a small percentage of its business.  It was smart enough to pivot to streaming, taking advantage of the growth of broadband and the ubiquity of mobile devices that can’t handle the physical media upon which Netflix had originated   Sure, there was a rather large misstep along the way as they separated the DVD and streaming price plans.  However, they did an excellent job of recovering over the last 18 months, mostly because they listened to their customers and provided increased value by adding more original programming.

The lesson I take from this is that spending energy defending an outdated business model rather than moving forward to take advantage of the new opportunities provided by market changes is ultimately a recipe for failure.  Like the weather, the change is going to happen.  Either dress appropriately or drown in the rain.  You with me?

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Filed under digital media