Five on Friday: Funding, Flexibility and Free Doesn’t Always Mean Free

Featuring Burger King, Centr, YouTube and Goldman Sachs

TGIF. We hope your week has been a good one and that you and your families and friends are staying safe and healthy. We are wrapping up the week with these Five on Friday features: The New York Times wants more advertisers to be flexible like Burger King, Goldman Sachs is reducing its streaming music revenue estimates for 2020, YouTube will soon allow publishers to sell off-platform subscriptions, Chris Hemsworth is in hot water for questionable subscription practices, and MasterClass raises $100 million in Series E funding.

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Be Flexible Like Burger King

In a May 7 article, “News Outlets Want More Advertisers to Act Like Burger King,” Tiffany Hsu and Marc Tracy of The New York Times explored some of the challenges news organizations are facing with the loss of ad revenue. In many cases, businesses simply can’t afford to advertise. What revenue they do have has to go for essential expenses like rent, utilities and payroll, if they are still operational. Advertising is viewed as a nonessential cost.

Another way publishers have lost money is from blacklisted ads related to COVID-19. When brands do advertise, they are being very careful about where they want their ads to appear. For example, maybe JCPenney wants to advertise in the Chicago Tribune, but they don’t want their ads to run alongside content that include certain keywords like pandemic, COVID-19 or coronavirus. Some brands have canceled their ad campaigns as a result, which is costing media outlets significant ad revenue. According to Integral Ad Science, blacklisting has prevented 1.3 billion ads from being served up on news sites alongside the word “coronavirus” during the pandemic.

In their article, Hsu and Tracy explain that Burger King, Verizon and Amazon have been flexible and making the new normal work for them. In Burger King’s case, the brand decided to use the opportunity to explain its role in the pandemic – providing food pick-up, delivery and drive-thru service. When their ads run alongside COVID-19 related coverage, people are reminded that Burger King is a food option while consumers are sheltering in place.

Verizon and Amazon have also taken the opportunity to advertise. According to Hsu and Tracy, Verizon spent over $4.5 million on advertising on news sites since mid-March, and Amazon has spent $2.3 million to advertise in The Wall Street Journal, the Washington Post (owned by Amazon founder Jeff Bezos) and CNN, also since mid-March. This has helped those companies utilize space that others don’t want while also supporting news organizations.

Goldman Sachs Cuts 2020 Music Revenue Estimates

In Goldman Sachs’ latest Music in the Air report published May 14, the investment banking firm reports that the growing popularity of streaming music platforms has kicked off a revival in the music industry. Goldman Sachs estimates that music revenue will more than double to about $131 billion by 2030. In 2017, live music revenue was about $26 billion, recorded music revenue was $30 billion, and music publishing* was $6 billion. In 2030, they expect live music to be $38 billion, recorded revenue to be $80 billion, and publishing to be $12.5 billion.

*Goldman Sachs defines publishing as revenue collected by music publishing companies, which act as agents for songwriters and composers, collecting and distributing royalties on their behalf.

Image: Bigstock Photo

According to Goldman Sachs, Millennials and Generation Z spend more of their annual income on music than any other age group with 18- to 34-year-olds spending an average of $163, 13- to 17-year-olds spending an average of $80 and all ages spending an average of $152. In developed markets, in 2018, 18% of people streaming music from their smartphones. By 2030, they predict that will grow to 37%.

In addition, the investment banking first had updated its forecast on 2020 numbers. It is now estimating total global record industry net/wholesale revenue to be $20.8 billion, reports Music Business Worldwide. That is up by 3% from 2019, but down by 8% from Goldman Sachs’ estimates for 2019.

“For recorded music, we forecast c.3% growth in 2020, marking the first year of meaningful slowdown since the market returned to growth in 2015, as we expect the growth in streaming will be offset by weaker physical and licensing revenue,” said Lisa Yang of Goldman Sachs.

It will be interesting to see how the COVID-19 pandemic will impact streaming music. Will people be more apt to subscribe after enjoying one of the extended free trials, or after sheltering in place for so many months? Or will they be cutting down on entertainment expenses because so many millions of Americans are out of work?

YouTube Allows News Publishers to Sell Off-Platform Subscriptions

YouTube has seen a lot of changes in the subscription world. They started with YouTube Red, then YouTube TV, and YouTube Music. They have decided to allow other publishers to create subscription content and are now planning to allow news publishers to sell off-platform subscriptions, as a part of the Google News Initiative.

Digiday reports that YouTube is developing a tool to let news publishers sell subscriptions to their digital properties via their YouTube channels. In theory, The New York Times could sell you a subscription to their website without you having to leave the streaming video site. YouTube has had this in the works since 2019 and are planning to test it out by the end of this year.

This new offering is in addition to  YouTube’s channel membership features which allows users to offer perks like exclusive access to live broadcasts, special communication channels, and more. This portion of the website was designed to lessen the likelihood of sites like Patreon being used, and content creators having one seamless hub for all their monetization options.

Digital Information World reports that there are a few details to be ironed out such as how much of a cut YouTube would take. If they take too much of a percentage of subscription sales, this would be less enticing to news publishers, and they may not want to take place at all. After all, it is fairly enticing to be able to have a wider audience to view various news outlet, but if it is not cost effective and advantageous to news publishers, they will fail to see the value in it.

Chris Hemsworth’s Workout App Could Be in Hot Water

At the end of March, Chris Hemsworth announced that his online fitness and wellness app, Centr, would be free for the next six weeks. The goal with Centr was to “make health and happiness accessible to all,” and making it available for free over the next six weeks would allow people to stick to a fitness program during COVID-19 shutdowns without having to worry about being without a gym or fitness equipment.

Founded by actor Chris Hemsworth, Centr allows users to use self-guided workouts, customize their workouts, and exercise at home without workout equipment. Recipes are also available to achieve an all-around wellness lifestyle. Normally, the first seven days are free, and subscriptions range between $10 and $30 a month, depending on what you sign up for. You can access month by month for $30 a month, prepay for three months at $60 or a year at $120. You save 67% when you prepay for a year.

Many users signed up during the COVID-19 pandemic under the free six-week trial. Now, some of the free subscribers are saying that they have been charged up to $99, or even more for a subscription fee, with no warning. A lot of these users attempted to cancel the free trial, and the app has been under fire across various social media channels.

The Verge reports that the main problem seems to be the app’s cancellation process. If a user signed up on an iOS device, they must cancel on that device. Some users were unable to cancel the same way they signed up, so they got charged the subscription fee. On the Centr website, there are three separate pages on cancellation. Some users cancelled their accounts and still got charged, and others didn’t cancel with enough time, so the Centr team is not refunding them. They didn’t start issuing refunds until last week, after many complaints were posted to social media and App Stores. They are deleting negative comments on their Instagram.

Key lesson: transparency and ease of cancellation are an important part of the subscription process. If subscribers feel like they have been taken advantage of, they will complain publicly and that type of negative publicity is hard to manage. Transparency and ease of cancellation should follow subscription best practices.

Image courtesy of Centr (pictured – Chris Hemsworth)

Subscription-Based MasterClass Raises $100 Million in Series C Funding

If you’ve spent any time on Facebook, Instagram or watching TV, you’ve undoubtedly heard of MasterClass, the subscription-based service that allows subscribers to learn from famous fashion designers, writers, actors, chefs, filmmakers and others for $180 a year. MasterClass has hit a new milestone. The startup service has raised $100 million in Series E funding. The company’s valuation is now $800 million, reports TechCrunch. The new capital will help MasterClass design new classes for students and increase production to one class per week. The company is also exploring an audio-only option, short form classes and augmented reality.

MasterClass currently offers more than 70 instructors, including many celebrities like Steve Martin, Martin Scorsese, Serena Williams, Jodi Foster and Gordon Ramsay. They have more than 80 classes with an average of 20 lessons per class with lessons taking an average of 10 minutes. Subscribers get access to all of the classes and can watch them on their phones, computers, Apple TV, Amazon Fire TV, and on Roku.

Some of the MasterClass instructors