Top Subscription Stories of 2020

Top Subscription Stories of 2020

Buying, selling, layoffs, launches and more

2020 has been a year unlike any other. It has been described as unprecedented, unbelievable, unmatched, surreal, chaotic, and heartbreaking. Many subscription companies were impacted – some like food delivery services thrived during the pandemic, providing needed goods and services to consumers, while others like newspapers and media companies were lucky if they survived at all. Here are a few top stories about or related to subscription companies that we’ve covered throughout 2020.

Antitrust lawsuits for Google, Facebook and Amazon

For months, we’ve heard rumblings that the federal government is going after big tech – Amazon, Apple, Facebook and Google – for suspected antitrust and anticompetitive behavior. In October, the House Judiciary Committee released a 449-page report that details their findings from a 16-month investigation that included the review of nearly 1.3 million documents. The report said the companies have essentially become monopolies who favor their own products and services, acquire smaller competitors, and use their advantages over competitors who use their platforms.

“To put it simply, companies that were once scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons,” the committee wrote.

“Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook and Google has come at a price. These firms typically run the marketplace while also competing in it – a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves,” added the committee.

The House Judiciary Committee recommended the following:

Here is a summary of the report’s recommendations.  The full text begins on page 20 of the report, reprinted in its entirety by The New York Times.

  • Restoring competition in the digital economy through structural separations and prohibitions of certain platforms from operating in adjacent lines of business, prohibiting future mergers and acquisitions, safe harbor for news publishers to ensure a free and diverse press, among other measures
  • Strengthening antitrust laws, including strengthening portions of the Clayton Act Sherman Act, and taking measures that will strengthen enforcement
  • Reviving antitrust enforcement through congressional oversight, federal antitrust agencies and private enforcement

“Our investigation leaves no doubt that there is a clear and compelling need for Congress and the antitrust enforcement agencies to take action that restores competition, improves innovation and safeguards our democracy,” Jerrold Nadler, Democrat of New York and chairman of the judiciary committee, and David Cicilline, Democrat of Rhode Island and chairman of the antitrust subcommittee, said in a joint statement.

DOJ files suit against Google for antitrust concerns.

Since that report came out, Google has been named in three antitrust lawsuits. The first was filed in October by the Department of Justice and 11 states. The next two antitrust suits were filed this month, backed by 45+ states and territories combined, alleging that Google used its dominant market power to monopolize online advertising, general search services, general search advertising (display and text-based). Google denies the allegations and plans to defend its actions vigorously in court.

Earlier this month, the Federal Trade Commission and 48 states and territories sued Facebook for creating an illegal social media monopoly. Among other allegations, the lawsuit said that Facebook acquired Instagram and WhatsApp to eliminate the competition. The FTC seeks an injunction against Facebook that would require them to divest Facebook of Instagram and WhatsApp, prohibit Facebook from imposing anticompetitive requirements of software developers, and require Facebook to give prior notice and get approval prior to any future mergers and acquisitions to prevent an illegal monopoly down the road.

EU has antitrust concerns with big tech doing business in EU.

In the U.S., Amazon and Apple have not yet been sued in antitrust cases, but it seems inevitable that it is only a matter of time. Across the pond last month, the European Commission filed charges against Amazon for antitrust violations. The commission, which focused on activity in France and Germany, alleges that Amazon breached EU antitrust regulations by distorting competition in online retail markets. Amazon could face a fine of up to 10% of its annual revenue, or $28.1 billion, based on 2019 figures.

“We must ensure that dual role platforms with market power, such as Amazon, do not distort competition. Data on the activity of third-party sellers should not be used to the benefit of Amazon when it acts as a competitor to these sellers. The conditions of competition on the Amazon platform must also be fair. Its rules should not artificially favor Amazon’s own retail offers or advantage the offers of retailers using Amazon’s logistics and delivery services. With e-commerce booming, and Amazon being the leading e-commerce platform, a fair and undistorted access to consumers online is important for all sellers,” said European executive vice president Margethe Vestager.

Streaming wars heat up

The entrance of new players this year and COVID-19 have changed the landscape of streaming video on demand subscription services, starting what industry experts call the streaming wars. The competition among streaming services started to heat up in November 2019 with the launch of Disney+ and Apple TV+, both premium SVOD subscription services. Launches this year added fuel to the fire. NBCUniversal launched Peacock, a three-tiered SVOD subscription using the freemium model with a soft launch in April and full launch in July. WarnerMedia also got in on the action, launching its premium SVOD service, HBO Max in late May.

The COVID-19 pandemic contributed to significant increases in sign-ups to the streaming subscriptions services. The record sign-ups, in turn, contributed to changes in the streaming subscription business model because the services have a captive audience now – millions of consumers stuck at home during shelter-in-place orders. Some services, including Disney+, Netflix and HBO Max, have discontinued free trials. Disney+ was first when they canceled their seven-day free trials in June, two weeks ahead of Hamilton’s July debut on the streaming service. Netflix and HBO Max followed suit, in October and December, respectively.

Other changes to the streaming services include price increases for Disney+, ESPN+, Hulu + Live TV, and Netflix, and releasing blockbuster films on the streaming services and in theaters the same day. Disney was the first to announce this change; Disney is also charging a premium for some of these films. They charged $29.99 for the premiere of Mulan in September. HBO Max will begin this new strategy with the Christmas Day release of Wonder Woman 1984.

Jason Kilar, CEO of WarnerMedia, explained the company’s reason for the new business strategy.

“We are, of course, in an extraordinary moment. This entails a patchwork of regulations, geographic considerations and, most importantly, fan preferences. With that in mind, we see an opportunity to do something firmly focused on the fans: give them the power to choose between going to their local cinema or opening HBO Max. Super-fans will likely choose both,” Kilar said.

Streaming wars heat up in 2020.

Major acquisitions

Though 2020 was a lousy year in many respects, it was an ideal time for subscription companies looking to grow via acquisition. Here are a few of the most notable acquisitions – and acquisitions that did not overcome regulatory hurdles.

Salesforce to acquire Slack for $27.7 billion: Earlier this month, CRM leader Salesforce agreed to acquire online communications platform Slack for $27.7 billion in a cash-stock deal. This is Salesforce’s largest acquisition to date, followed by the company’s purchase of Tableau for $15.7 billion in 2019. The Salesforce-Slack deal is expected to close in the second quarter of Salesforce’s fiscal year 2022.

“Stewart and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it. This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes,” said Marc Benioff, Salesforce chairman and CEO, in a December 1 news release.

Salesforce to Acquire Slack in $27.7 Billion Deal

Microsoft to acquire ZeniMax Media and game publisher Bethesda for $7.5 billion: In September, Microsoft purchased the award-winning ZeniMax Media, parent company of Bethesda Softworks, for $7.5 billion. Bethesda is one of the largest privately owned game developers and publishers in the world, known for The Elder Scrolls, Fallout, DOOM, Prey, Deathloop, Quake, Wolfenstein and Dishonored. The acquisition will bring an iconic games portfolio, publishing expertise and world-class talent to Microsoft to help the company grow its gaming business. Subject to typical closing conditions and regulatory approvals, Microsoft believes the acquisition will close in the second half of the company’s 2021 fiscal year.

“Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialize and play with their friends,” said Satya Nadella, Microsoft CEO, in the company’s formal announcement. “Quality differentiated content is the engine behind the growth and value of Xbox Game Pass—from Minecraft to Flight Simulator. As a proven game developer and publisher, Bethesda has seen success across every category of games, and together, we will further our ambition to empower the more than three billion gamers worldwide.”

Just Eat Takeaway.com acquires Grubhub for $7.3 billion: In June, Just Eat Takeaway.com announced it would acquire food delivery service Grubhub for $7.3 billion, making it one of the largest food delivery companies in the world. The acquisition is an all-stock deal with Just Eat Takeaway paying a 27% premium of $75.15 per share. On the day the deal was announced, Grubhub stock closed at $59.05 per share. The deal is subject to standard closing conditions, regulatory approvals and the approval of both companies’ boards. The deal is expected to close in the first quarter of 2021.

The deal is expected to close in the first quarter of 2021. The company’s world headquarters will be in Amsterdam, and the U.S. headquarters will be in Chicago, where Grubhub is currently based. Last year Just Eat Takeaway.com and Grubhub delivered 593 million food delivery orders combined. They have approximately 70 million total users globally.

Just Eat Takeway.com highlighted some of the reasons it chose to pursue this acquisition:

  • The combined companies will create the largest food delivery service in the world, outside of China, measured by GMV and revenue.
  • The U.S., U.K., Netherlands and Germany are four of the largest profit markets for the food delivery industry.
  • Grubhub will benefit from the strength of Just Eat Takeway.com, while providing the European company with access to a market with a large footprint.
  • The companies can share best practices and provide a broader offering together.
Just Eat Takeaway.com to acquire Grubhub for $7.3B in All-Stock Deal

Uber acquired food delivery service Postmates for $2.65 billion: In related news, in July, Uber announced it would acquire delivery service Postmates for $2.65 billion in an all-stock deal. The deal would combine Uber Eats and Postmates’ food delivery services. By combining forces, the companies would have 37% of market of food deliver sales in the U.S. According to The New York Times, Uber was seeking a growth opportunity, since posting a $2.9 billion loss during the first quarter. Though Uber’s ride sharing service was down due to the pandemic, food delivery service revenue was significantly up. The deal closed at the beginning of the year.

Uber acquires Postmates.
Uber acquires Postmates in 2020. Image courtesy of Uber.

Nestlé acquired meal subscription service Freshly for $950 million: Nestlé completed its purchase of meal subscription service Freshly for $950 million. The deal could potentially pay out an additional $550 million if the five-year-old company shows sufficient growth. Nestlé purchased a 16% stake in Freshly in 2017 to evaluate and test the growing meal delivery market. Since Freshly began, it has shipped nearly 100 million fresh, healthy, chef-prepared meals to subscribers in 48 states. Freshly projects 2020 sales of $430 million.

“We are excited to welcome Freshly to the Nestlé family,” said Steve Presley, Nestlé USA Chairman and CEO, in an October 30, 2020 news release. “Consumers are embracing ecommerce and eating at home like never before. It’s an evolution brought on by the pandemic but taking hold for the long term. Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future.”

“As the leading manufacturer of fresh-prepared meals in the U.S., joining the world’s biggest food brand is a dream come true. Through this union, we’ll gain even more industry expertise while still retaining the heart of what makes us ‘us.’ The delicious news is that with the support of our friends at Nestlé, we already have plans to greatly increase menu variety by tripling the number of weekly meals. You’ll start to see these additions over the coming months,” said Freshly founder and CEO Michael Wystrach.

Wystrach also said that meals, pricing and the meal subscription service will remain the same. Freshly will operate as a standalone business, dedicated to providing customers with healthy meal choices. Through the acquisition, Freshly will be able to scale the business to provide more menu choices and fresher, faster meal delivery.

Nestle acquires Freshly.

Failed acquisitions

Not all acquisitions went as planned in 2020, however. Two notable acquisitions failed this year. In January, Procter & Gamble announced plans to buy the direct-to-consumer, subscription-based beauty brand Billie Inc. In December, that deal fell through when the Federal Trade Commission voted to block the proposed acquisition. The FTC said it would file a complaint seeking a temporary restraining order and preliminary injunction to stop the acquisition. The FTC believes that Billie’s potential for expanding to brick-and-mortar stores posed a serious threat to Procter & Gamble’s business.

In May 2019, publishers McGraw-Hill and Cengage announced they would merge in an all-stock deal. A year later, the companies announced they had mutually agreed to terminate their merger plans because it would have been “uneconomical.” However, it seemed more likely that regulatory hurdles in the United States and the United Kingdom would have been too much to overcome.

Lots of Launches

Many subscription and membership services launched this year. Here are a few notable launches:

Amazon Luna: In September, Amazon launched a cloud-based gaming subscription service – Amazon Luna. The new gaming service differs from others because the games can be played on different devices, no consoled required. Because the service is cloud-based, there is no software to download, and users don’t have to wait for downloads. Amazon Luna can be played with a variety of game controllers including the Luna controller which was built specifically for cloud gaming. A subscription to the Luna+ game channel is $5.99 a month. At launch, the service features more than 100 games.

Amazon Pharmacy: Last month, Amazon announced the launch of its own online pharmacy – Amazon Pharmacy – to provide door-to-door delivery of prescription medications and refills in select areas. Prime members receive unlimited, free two-day delivery of prescriptions in discreet packaging. After setting up a secure patient profile through the Amazon App, customers can add insurance information, manage prescriptions and payment options.

Through the Amazon Pharmacy program, members can price prescriptions (generic and brand name) with and without insurance and with their co-pay to determine the most affordable option. The program has limitations, of course. Currently, only 30-day supplies are provided, and Amazon Pharmacy does not do automatic refills. However, the company does remind customers when their prescriptions are due to be refilled.

Amazon launches Amazon Pharmacy in November 2020.

Apple Fitness+: Apple officially launched Apple Fitness+, a subscription-based fitness app that is compatible with Apple devices. At launch, the new subscription fitness service will offer 10 types of popular workouts including high intensity interval training (HIIT), strength, yoga, dance, core, cycling, treadmill (for running and walking), rowing, and mindful cooldown. New content will be added weekly. Apple first announced the new fitness subscription app in September. Apple Fitness+ is available for $9.99 a month or $79.99 a year, and it can be used by up to six members of the same household.

Apple One Bundles: A new subscription trend is bundling products together. Apple is among subscription companies trying the business strategy. In September, Apple announced three Apple One subscription bundles – an individual plan ($14.95/month), a family plan ($19.95/month) and a premier plan ($29.95/month). New subscribers are eligible for a free one-month trial on any service they have not already tried or are actively using.

Apple launches Apple One subscription bundles.

MyPanera+: A new coffee subscription service may not seem like a big deal, especially from a fast-casual restaurant, but the MyPanera+ subscription has gotten a lot of buzz this year, and not just from caffeine. In March, Panera expanded its rewards program to include an unlimited coffee subscription. For $8.99 a month, rewards customers get one cup, any size of drip hot coffee, hot tea or iced coffee every two hours during regular bakery hours, including unlimited free refills of the same beverage.

MyPanera+ was very popular this summer.
Image courtesy of Panera.

Panera is selling the idea based on the cost savings. For the price of four 12-ounce cups of coffee, subscribers can get unlimited coffee beverages of any size or any flavor, including light roast, dark roast, hazelnut, decaf, iced coffee or hot tea. If a subscriber visits Panera every day for a month, that works out to be about $0.30 a day. If they visit weekly, they will probably just break even. To get things off to a good start, in June, Panera ran a #FREECOFFEE4SUMMER campaign on Twitter. If they received 500,000 votes by June 22, they would give a free subscription (FREE UNLIMITED COFFEE) to anyone who signed up for MyPanera+ by July 4. The free coffee offer was good through September 7. This was a brilliant PR move that helped build awareness for the brand and boost subscriptions.

Walmart+: In another attempt to compete against Amazon, Walmart announced the September launch of another subscription service. Walmart+ is a paid membership service, like Amazon Prime. With a cost of $98 per year, or $12.95 a month, Walmart will offer members same-day delivery on 160,000 items, including groceries and other products, discounts at Walmart gas stations, and early access to special deals.

While this may sound shiny and new, this is not a new idea – or a new tactic – for Walmart. In June 2019, we reported on Walmart’s unlimited grocery delivery subscription. For $98 a year, or $12.95 a month, Walmart will receive unlimited grocery delivery. Walmart’s Delivery Unlimited service is still available. As of September 2019, the service was available at 1,400 U.S. stores. The pandemic and the desire for personally delivered groceries and other products may temporarily boost the popularity of the service.

An abundance of layoffs

Many subscription companies fared well during the pandemic, attracting new subscribers to news sites, subscription boxes, grocery delivery, entertainment and streaming services, etc. Not all companies were able to pivot and save their staff. Here are highlights of some of the larger layoffs of 2020. The company said the cuts were due, in part, to the pandemic but also to strategic portfolio adjustments to improve profitability.

LinkedIn: In July, professional networking platform LinkedIn announced it would cut 960 jobs globally in its Sales and Talent Acquisition business segments. The jobs represent about 6% of the company’s global workforce. In an email to employees, CEO Ryan Roslansky said LinkedIn was not immune to the effects of the pandemic.

Meredith Corporation: In September, Meredith Corporation announced it would cut 180 jobs, including 130 employees from its local media group, which owns and operates 17 television stations. The company’s local media brands are in large, fast-growing markets like Phoenix, Portland and Las Vegas, according to Meredith, and they produce approximately 745 hours of local news, information and programming weekly. The remaining cuts will come from Meredith’s national media group, the publisher of popular consumer magazines including Real Simple, Allrecipes, Shape, Better Homes & Gardens, and People. The company’s national brand portfolio serves approximately 120 million readers.

Stitch Fix: Clothing and styling subscription service Stitch Fix announced it would layoff of 1,400 stylists based in California due to the high cost of doing business in that state. The layoffs represent about 18% of Stitch Fix’s employee base of 8,000. Eventually, those stylists and 600 more will be hired in lower cost locations such as Austin, Texas and Minneapolis, Minnesota. The company was also impacted by the pandemic. They saw a 9% increase in the number of subscribers in the third quarter of fiscal year 2020 (for the period ended May 2, 2020). They also had to temporarily close distribution centers in South San Francisco, California and Bethlehem, Pennsylvania to comply with local public health directives.

Media and entertainment layoffs: Though readers and viewers were hungry for pandemic and political news in 2020, new subscriptions could not offset the huge losses in advertising revenue. Poynter’s Kristen Hare has been tracking the media layoffs closely. Here are a few of the layoffs we covered this year:

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There were other important stories to be told this year, but these represent some of the subscription highlights for 2020. Let’s hope that 2021 is much happier, healthier and more prosperous for all of us. Happy New Year from Subscription Insider!

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