By Gabe Weisert, Content Marketing Manager
Here are some of the more notable Subscription Economy stories we’ve been following at the hectic close of a quarter. The biggest takeaways:
- Zillow bought Trulia for $3.5 billion. The deal made sense because there is relatively little overlap between the two audiences: Zillow is popular with home-owners interested in local real estate values, while Trulia has more tools for active sellers. They revenue of the merged company ($341.2 million) is still just a drop in the bucket compared to the $12 billion spent on real estate marketing annually.
- Last week’s earnings reports saw a number of companies clamoring to highlight their recurring revenue numbers, most notably NetSuite, which surpassed the $100 million recurring revenue barrier for the first time. In a statement CEO Zach Nelson called it a “breakout moment.”
- The huge wave of discussion prompted by the Kindle Unlimited announcement continued as a major new ebook study announced that 83.2% of publishers see subscription services as inevitable, and 66.5% of them believe that they’ll have a positive role.
- The New York Times announced that fully half of its revenues are now subscription-based, with digital subscriptions on the rise.
- A new study on online gaming said that after some retrenchment, subscription-based games like World Of Warcraft have stabilized against in-game revenue models.
- Boston-based VC Jeff Bussgang’s personal blog post “Recurring Revenue is Magic” lit up the Internet and found its way to Business Insider.
- And finally, our coolest consumer subscription service of the week goes to Cups, which offers free coffee for $45 a month from participating independent coffee shops in New York.
“When I discuss business models with entrepreneurs and investors, there is a varying appreciation for why recurring revenue is so special. Recurring revenue business models are not a little bit better than non-recurring models. They are 10x better. At Flybridge, we have added ‘business model.’ with a particularly weighting towards recurring models with high gross margins, as one of the important evaluation criteria when we make investment decisions alongside market and team, which are the two canonical criteria for all venture capital firms.”
Recurring Revenue is Magic, Jeff Bussgang
“Circulation revenue now makes up more than half The New York Times’ total revenues, with digital subscriptions on the rise and the company’s recent Innovation Report pushing its journalists and management to drive even stronger results, according to Times senior vice president and chief consumer officer Yasmin Namini.”
Subscriptions More Than Half of NYT Revenues, TheNewspaperWorks
“In an increasingly competitive recurring revenue economy, more than ever before, customers have greater options without having to make long-term commitments. But even with more choices, what is the #1 reason customers don’t renew? Their salesperson never followed up; never inquired about the experience; never talked about the evolution of the product.”
The “Blackberry Effect” in a Subscription Economy, Jay Ackerman
“Is there room in the legal profession for lawyers to deliver a subscription service that runs parallel to legal services? Lawyers maintain newsletters and blogs to try to stay in front of prospects and former clients, but what if they could actually charge for a service that provided value year-round but didn’t eat up billable hours?”
“We designed it from the client experience backwards. Our clients were telling us they wanted these insights but they didn’t want the old process…that was all time-sheet based and we told them what it cost afterwards. Now they can call whenever they want and we will make time with them to sit down and review what’s going on. We know that the data is reliable and it just takes the friction out of it.”
“It is clear that subscription models will be a part of the future of reading and book publishing. How publishers work within these new models is based upon their type of content, their direct relationship with readers, and their ability to tap into current and backlist titles to offer more and more ebooks for readers to discover.
The New Subscription Future, Publishing Technology
“A digital media riddle for 2014: When is a subscription more than just a subscription? Answer: When it’s a membership. In response to incredible shrinking ad revenue and mounting pressure to diversify their revenue streams, publishers are increasingly building out tertiary businesses like brand content studios and research products. But at a handful of niche outlets, publishers are experimenting with something more akin to the public radio model: more inclusive membership experiences for its most-avid readers.”
“Consumer and corporate markets are in the midst of a revolution as businesses transition from selling products to providing services. This subscription revolution is sweeping through all industries across the world. From the smallest corner shop to the largest conglomerate, everyone is vying for recurring business in a bid to gain more predictable revenue streams and create a more valuable supplier-customer relationship.”
Making a Success of Subscriptions – How SMEs Can Join the Revolution, Ingeniuous Britain
“The subscription-based MMO market, now a mature market, is expected to stabilize in the next few years, as free-to-play alternatives reach saturation. With the value of an average pay-to-play player going up, we expect more ferocious competition among Western and Eastern publishers, offering higher quality gameplay and new narrative settings.”
US digital games market update: June 2014, Super Data Research
“Experts are heralding the Internet of Things (IoT) computing phase as the next industrial revolution, estimating 50 billion connected devices and IoT solutions reaching $7.1 trillion by 2020…While we won’t refute these arguments, a focus on shareholder positioning will help us better understand where we are in the IoT cycle and how positioning IoT into a company’s story just became that much more pressing.”
“The third biggest coffee chain in New York isn’t a chain at all. It’s Cups, an Israeli app that wants to turn the city’s independent coffee shops into Netflix-style subscription service. For $45 month, the app offers subscribers unlimited coffee, tea, or espresso (that will cost you a bit more though) at a growing number of small coffee shops across Manhattan and Brooklyn. Today, the company has 45 businesses signed up, but Gilad Rotem, one of the company’s founders, says the company wants to eventually hit 200 shops — the same number of Starbucks outlets in the city.”
Meet Cups: Endless Coffee for $45 a Month, Steven Jacobs
“The move from a traditional focus on products to new models based on service is by no means straightforward. It requires a significant change in approach, with implications that run across the whole enterprise, from manufacturing and service and through to back office functions. This change in emphasis requires businesses to develop new ways of thinking about what they are delivering, how to charge for it and how to support their customers across the end-to-end service lifecycle. A product no longer simply leaves the factory gates and is forgotten. In this new services model, the handover to the end-customer is just the start of the process.”
Today’s Industrial Revolution Means You Won’t Sell Products, You Will Sell Services, Wall Street Journal
“What might Wharton look like in 2035? Mr. Terwiesch agreed to speculate: Students accepted to Wharton would still take part in an immersive program right away. But instead of two years, it would last 10 months—long enough to make friends, participate in experiential parts of the program, and become members of the club…After that, students would graduate into the work force, but they would stay enrolled at Wharton on a subscription basis.”
Would Graduate School Work Better if You Never Graduated From It?, Chronicle of Higher Education