Top Subscription Stories of 2016

Featuring Netflix, Microsoft, Spotify, Amazon, Walmart and More

Introduction

Top Subscription Stories of 2016 — Source: Pixabay

With subscription news headlines covering everything from SaaS and subscription boxes to streaming video and solar gardens, 2016 was an interesting year for the subscription economy. This made winnowing down the list of top stories a difficult task. After all, big names like Netflix, Microsoft, the New York Times, Spotify and Amazon were in the subscription news headlines almost every week. While those big players were adding new offerings and contemplating success strategies, companies like Walmart, The Skimm, Etsy, Medium, and Bed Bath & Beyond tested the subscription waters. We’ve gone through all of those news stories and more to bring you highlights from 2016.

SaaS

Microsoft and LinkedIn Finally Seal the Deal

Without a doubt, one of the biggest SaaS stories of the year was Microsoft’s acquisition of LinkedIn. After winning a bidding war against Salesforce, Microsoft offered $26.2 billion for LinkedIn, the world’s leading professional network. In Microsoft’s biggest deal ever, the agreement with LinkedIn was made in June 2016, but Microsoft had regulatory hurdles to jump first. While Microsoft got early approval from the United States, Canada and Brazil, the deal did not get the European Union’s blessing right away.

In fact, Salesforce reached out to the EU to express antitrust concerns that Microsoft’s access to LinkedIn data would give it an unfair competitive advantage. Microsoft offered concessions to the EU to mitigate those concerns, and finally, in early December, the EU gave its approval. The deal between Microsoft and LinkedIn was completed on December 8.

Publishing and Media

2016 was another tumultuous year for the publishing and media industries. News outlets like The (Tulsa) Frontier and Honolulu Civil Beat dropped their paywalls to try a nonprofit, membership-based model, while others like Thomson Reuters, the Wall Street Journal and The Globe & Mail collectively cut thousands of jobs. Also, a number of magazines and newspapers went through redesigns and reorganizations, sometimes even ceasing their print publications altogether: Self magazine, More magazine, Mental Floss and the nine-week-old New Day. Here are some other notable publishing and media stories from 2016.

WIRED Adds $4,000-a-year Membership Program

In November, WIRED announced that it is taking subscriptions to a whole new level with a $4,000-a-year membership program called the Emerging Technology Council. A joint effort between WIRED Media Group and Traction Technology Partners, an Emerging Tech Council membership offers exclusive access to in-depth virtual events with emerging technology experts in AI/Machine Learning, VR/AR, Blockchain, etc.; access to two invitation-only, face-to-face meetings; peer-to-peer sharing and real-time problem solving; and other perks. A corporate membership includes one primary member and five team members.

New York Times Acquires The Wirecutter and The Sweethome

In late October, the New York Times acquired The Wirecutter and The Sweethome, online guides for technology gear, home products and other consumer services. The price tag? $30 million plus in an all-cash transaction. The online guides get their revenue from affiliate links that appear after product reviews. Though this creates an opportunity for the Times to diversify its revenue sources, the estimated annual revenue of $5 million would be less than half a percent of the Times’ total revenue, so the strategy here is not clear.

Streaming Video

Netflix Implements $2 Rate Increase

The big news for Netflix in 2016 was its $2-a-month rate increase which was announced more than two years ago. This year customers started to see the increases on their bank and credit card statements, which could impact Netflix’s bottom line for the year, but Netflix subscribers seem to be loyal to their favorite streaming video on-demand service, especially when Netflix is cranking out hits like Stranger Things and Fuller House. One Florida customer, however, is not happy. He is so upset, in fact, that he filed a class-action lawsuit against Netflix for breach of contract, alleging that his pricing was guaranteed for as long as he remained a subscriber.

Comcast Imposes Data Usage Caps and Steep Penalties

Comcast doesn’t want the cord cutters to get too comfortable with their unlimited data plans, so they are imposing internet data usage caps and penalties. For customers in affected markets, anyone who exceeds 1 TB of data usage each month from streaming music or videos, playing online games, downloading photos or surfing the Internet will have to pay for those data overages, and the penalties are steep – up to $200 a month! Ouch. Comcast started testing the strategy in October 2015, and they must have been pleased with the results. The usage caps now affect more than two dozen markets across the U.S.

In other Comcast news from 2016, the company is trying to fight cord cutting by making it more convenient for customers to access popular streaming video services. In July, Comcast signed a deal to include Netflix on its X1 set-top boxes, and in November, it made a similar deal to add Sling TV to the X1.

CBS All Access Offers Ad-Free SVOD Subscription

Now that it has a strong foothold in the over-the-top (OTT) TV marketplace, CBS is shaking things up a bit at CBS All Access to make itself more appealing to cord cutters and cord nevers. CBS is offering an ad-free version of CBS All Access for $9.95. This will omit most TV commercials from on-demand viewing for subscribers, but they’ll still have to watch ads during live broadcasts. CBS is also launching Big Brother: Over the Top, only on CBS All Access and making the OTT service available via Xbox One. In comparison, Netflix is commercial free, and Hulu offers a plan with limited commercials as well as a commercial-free plan.

Time Warner Buys 10 Percent Stake in Hulu for $583 Million

Streaming video service Hulu also had a notable year. Hulu received a $583 million infusion of cash from Time Warner who purchased a 10 percent stake in the company. Hulu also tweaked its business model, dropping its monthly subscription price to $6 for new subscribers for the first year and creating a new service with live feeds of popular broadcast and TV channels to offer viewers something they can’t get on Netflix. In addition to Hulu, a number of new players entered the OTT market, including Revry, CheddarTV and FilmStruck, giving cord cutters and cord nevers many new entertainment choices.

Streaming Audio

iHeartRadio to Launch Two On-Demand Subscription Music Services

Apparently, owning 858 radio stations and having 90 million users on its free radio streaming app are not enough for iHeartMedia, the creator of iHeartRadio. iHeart Radio is launching two new on-demand subscription music services, iHeartRadio Plus and iHeart Radio All Access in January 2017. In an interesting reimagination of radio, the subscription services will combine the best of FM radio with streaming music. Subscribers can listen to their FM radio, and when they hear a song they like, they can replay it instantly or add it directly to a playlist. iHeart Radio says these new options will facilitate on-demand listening, music discovery and music collecting in a totally new way.

Apple Proposes Changes to Royalty Payments, Sweetens Deal for Developers

0)]Apple turned up the heat on the streaming music rivalry, proposing changes to the current, complex songwriting royalty payment structure. The changes could hurt streaming services like Spotify who operate with an ad-supported freemium model. Spotify responded by rolling out programmatic ad-buying in an effort to shift focus away from subscription revenue toward ad growth.

Also, in 2016, Apple announced it would sweeten the deal for developers and subscription companies by changing its fee structure. App developers and subscription companies will still have to pay the so-called ‘Apple Tax,’ or 30 percent of monthly fees received from subscribers for in-app purchases for the first year. After year 1, the fee drops to 15 percent, a big change for Apple.

Spotify Petitions Congress to Take Action Against Apple for Unfair Business Practices

1)]Streaming music service Spotify petitioned Congress to take action against Apple for unfair business practices. According to Spotify, Apple is blocking updates to Spotify on iOS devices because the app does not require its listeners to subscribe to Spotify through Apple, helping Spotify avoid the 30 percent ‘Apple Tax.’

Spotify’s general counsel and secretary Horacio Gutierrez wrote to Apple and Congress to say that Apple’s behavior excludes them from competition because of the price differential. (Apple and Spotify both charge $9.99 a month, but Spotify listeners on iOS would pay an additional 30 percent, pricing them out of the market.)

Apple rejected Spotify’s claims, saying that competition helps everyone, and Spotify has benefited greatly from in-app purchases on Apple. Apple also said that Spotify has violated its developer terms, so it will not give Spotify special treatment. He said, she said. Who will prevail? The FTC will likely decide, but we don’t expect a quick decision.

Pandora Attempts Metamorphosis

2)]2016 was a year of transition for Pandora. It started in February with rumors that the internet radio station was for sale. With losses of $10 million a month though, no one was eager to buy it. A month later Brian McAndrews was ousted from his position as CEO, and replaced by founder Tim Westergren.

Under Westergren’s leadership, Pandora started making big changes quickly.

In June, Pandora announced a partnership with Music Reports, to manage the company’s mechanical licensing and royalty administration for its new interactive streaming service. At the same time, Pandora said it was not for sale and was in the process of reinventing itself, looking for long term sustainability. The company also announced it was working on new, tiered subscription products.

In addition, this summer Pandora rolled out two popular podcasts, Ira Glass’s This American Life and Serial, hosted by Sara Koenig. The following month Pandora inked deals with two major labels – Sony Music and Universal Music Group – and more than 30 independent labels to be a part of its new, on-demand streaming music service.

At the same time, Pandora rolled out its new ad-free service called Pandora Plus. Plus replaced Pandora One. The key difference is that music on Plus is licensed directly from major record companies. The pricing is still $4.99 a month, like Pandora One, and it gives subscribers ad-free access to approximately 2 million songs. Later this year Pandora will launch a separate on-demand tier for about $10 a month.

Subscription Boxes

Subscription boxes continued to grow in popularity in over-saturated categories like women’s beauty boxes and meal and snack subscriptions, while new entrants ventured into the marketplace with unique offerings. Here are a few subscription box stories that intrigued us this year.

JDM Accessory Vault – A Fashion Accessories Subscription for Men

3)]JDM Accessory Vault launched a fashion subscription service for men that offers affordable fashion accessories for upcoming young professionals. For less than $20 a month, subscribers receive three to five curated, matched male fashion accessories including watches, sunglasses, silk ties, pocket squares, belts, socks, scarves, cuff links and more to complete business, business casual and casual looks. JDM Accessory Vault appears to be “first to market” on this particular men’s fashion trend.

“A college degree is a good start, but to really stand out, grads need to bring more than a piece of paper,” said co-founder Daniel Guerzon.

Unilever Acquires Dollar Shave Club for $1 Billion Cash

4)]In July, Unilever announced it would buy subscription box company Dollar Shave Club, a direct-to-consumer mail grooming subscription box, for $1 billion in cash. Fresh razor blades are available to subscribers monthly, or every other month, ranging from $3 to $22 a month. In addition, Dollar Shave Club sells shaving products and other male grooming items like facial cleansers, creams and lotions, in line with Unilever’s own product lines.

Kees Kruythoff, president of Unilever North America, said they purchased Dollar Shave Club to leverage the global strength of Unilever to support Dollar Shave Club in achieving its full potential. It doesn’t hurt that Dollar Shave Club has highly engaged consumers in a niche audience that Unilever would like to reach.

Innovation

As the subscription economy grew in 2016, more companies jumped on the subscription bandwagon, adding recurring revenue to their bottom line. Some companies and startups were trailblazers in their respective fields, being the very first, or among the first, to take the subscription model for a test drive. Here are highlights of innovative companies from 2016.

Electric Objects Offers Digital Art via Subscription

5)]Electric Objects announced the launch of EO2, the next generation of the digital art display model it developed three years ago. The company also announced the creation of an Art Club available to those who purchase EO2. For $9.99 a month, subscribers gain access to a curated collection of museum classics and new works created specifically for the EO2. The subscription model is helping making art more accessible, an exciting way for a company to share innovation while creating sustainability for itself.

Hyundai Ioniq Electric Car to be Available by Subscription

6)]In November, Hyundai Motor America announced it would make its Ioniq Unlimited electric car available via subscription, giving drivers a new kind of ownership experience. Drivers pay one monthly subscription price that includes unlimited mileage, electric charging costs, maintenance, repairs, wear-and-tear items, and purchase fees like registration. After credit approval, car buyers select their vehicle online and then visit their local dealer to sign paperwork and pick up their car. The program will launch in California in early 2017.

Signal Snowboards Launches First-Ever Snowboard Subscription

7)]If you love to shred, the Signal Snowboards subscription is a ‘must have.’ In November, Signal announced the first-ever snowboard subscription. Starting at $35 a month, subscribers will choose a new snowboard, pay their monthly fee and get their new board within a week of placing their order. The subscription includes a warranty for tip-to-tail coverage. Subscribers will also get access to a members-only demo program that lets subscribers try new boards in the line two weeks a year at no additional cost.

“We love snowboarding and want to see the sport continue to grow and flourish with the changing retail landscape. We have created a direct online platform that allows snowboarders – both new and old – to easily buy a quality USA-made snowboard for the cost of a dinner out or a few beers a month,” said Signal Founder Dave Lee.

Retailers

This year a number of well-known retailers added subscriptions to their many products and services, trying to capitalize on customer loyalty while ensuring their longevity and profitability with recurring revenue. Amazon, Target, Tide and Bed Bath & Beyond all got in on the action this year. Target, for example, added baby subscriptions, so customers get automatic shipments of diapers, wipes, baby formula and other baby essentials. For $29 a year, Bed Bath & Beyond subscribers get a 20 percent discount off all in-store and online purchases as well as free shipping.

Walmart Acquires Jet.com, Tweaks ShippingPass to Compete with Amazon

8)]Perhaps the biggest foray into the subscription world in the last year was Walmart’s acquisition of Jet.com, a two-year-old online retailer, for $3 billion in cash. Initiated in August, this billion-dollar deal will help Walmart broaden its product offerings to better compete with Amazon. Just a few months earlier, Walmart revised its three-day subscription service, ShippingPass, to a new two-day service.

For $49 a year, ShippingPass Unlimited subscribers get free two-day shipping with no minimum orders and free online and in-store returns. This subscription doesn’t have all the bells and whistles that Amazon offers, but for frequent online Walmart shoppers, this might be an attractive alternative to the pricier $99-a-year, free, two-day shipping product that Amazon offers.

Amazon Continues to Beef Up Amazon Prime Membership

9)]Speaking of Amazon, this major online retailer fits into a category all its own. Its Prime membership, available for $99 a year or $10.99 a month, includes a host of products and services including free two-day shipping, free same-day delivery in eligible zip codes, Prime NOW, restaurant delivery, free release-date delivery on certain items, Prime Video, Prime Music, Prime Photo storage, Kindle Owners’ lending library, Prime reading, discounts on Amazon Music Limited and much more. This year Amazon has continued to add value to its membership program by adding these perks and features:

– Amazon leases 40 jets, tests drones to meet Prime demand (Dec. 2016)

– Added HBO and Cinemax channels to Amazon Channels (Dec. 2016)

– Added Twitch Prime for gamers (Oct. 2016)

– Launched two new music subscription Services (Sept. 2016)

– Signed exclusive multi-year deal with PBS KIDS (July 2016)

– Launched ComiXology digital comic subscriptions (May 2016)

– Went head-to-head with YouTube with launch of Amazon Video Direct (May 2016)

Ad blocking

0)]This has been an interesting year for ad blocking. Publishers including The Atlantic, the New York Times, Business Insider, WIRED and GQ fought back against readers who use ad blockers, implementing strategies to appease their readers while also respecting their business models’ need to earn revenue from their work. The IAB also got involved, developing the DEAL approach to help publishers communicate and engage with readers who use ad blockers.

Not to be left out, the Newspaper Association of America, now the News Media Alliance, spoke on behalf of its nearly 2,000 news publishers in the U.S. and Canada by filing a complaint and a request for investigation with the Federal Trade Commission. There’s no word yet on when the FTC’s findings will be made public.

On the ad blocker side of the house, Adblock Plus was in and out of German courts, winning most of its lawsuits against German publisher Axel Springer. It did lose one particular judgment in June, however, in the Cologne higher regional court that said Adblock Plus could not charge Axel Springer to have its ads whitelisted. Perhaps the most ironic twist of the year was when Adblock Plus announced it would be selling ads via a new Acceptable Ads Platform. In other words, the biggest of the ad blockers is now selling ads.

Insider Take

It was exciting to see all the innovation in the subscription industry in 2016, whether it was the launch of a new product or service or a new technique or strategy to grow or recapture revenue. We expect to see more innovation in 2017, as well as more publishing and media consolidation, mergers and acquisitions, product and service experimentation, and new solutions for managing ad blocking.

Of course, we’ll be tracking the latest trends and bringing you daily subscription news as well as best practices, how to guides, case studies, tools and checklists, and more in the New Year.

Thanks for reading!

Filed in Auto-renew Subscription, Business Media and Publishing, Business Operations, Business Services, Business Strategy, Consumer Media and Publishing, Consumer Services, Customer Service, Entertainment and Streaming, Freemium, Industry Announcements, Magazines, Memberships, Mergers and Acquisitions, Metered Subscription, Micropayments, News, Newsletters, Paywall, Product Development, Regulation and Compliance, Revenue and Sales, SaaS and Cloud Services, Subscriber Acquisition, Subscriber Only, Subscriber Retention, Subscription Boxes, Subscription Gaming

Dana E. Neuts

Dana Neuts is Subscription Insider's Editorial Director, covering our daily subscription news as well as member features, case studies, premium content, and reports. Dana is also a writer, editor, marketer and communications professional. Her work has appeared in AARP Bulletin, The Seattle Times, Seattle Business, 425 Business, 425 Magazine, South Sound Magazine, Northwest Travel and more. Her specialties include business writing, community news, senior issues, travel and, of course, subscriptions!