This year has already been a wild ride for subscription and membership companies, and we are seeing trends take shape quickly. In our annual subscription predictions members-only feature article, we will look at company operations, regulation and compliance, connected cars, newsletters, payments and streaming video.

Company operations – staffing, restructuring and office space consolidation

All you have to do is read the headlines to know that subscription and membership companies are focusing on long-term sustainability as they face economic headwinds and adjust their priorities. Layoffs are the most obvious evidence that companies are hurting. Companies are also restructuring and consolidating office space to cut costs.

Among the most notable layoffs in 2022 was Netflix which made two rounds of staffing cuts in late spring/early summer after a rough first quarter, reducing their workforce by about 450. Media companies were also hit with layoffs last year, including Lee Enterprises in May (hundreds), Gannett in September (400 job cuts + the elimination of 400 open positions), and CNN (hundreds). The Washington Post (20) and Vox Media (130) are among the media outlets laying off staff already this year.

In 2023, the layoffs continue and changes to company operations, this time with big tech. Thus far, we’ve seen nearly 60,000 layoffs from six major tech companies.

• Amazon: 18,000 jobs, 8,000 more than originally expected, plus the elimination of programs like AmazonSmile and Kindle Publishing for Periodicals
• Google: 12,000 jobs, plus restructuring and realignment of priorities
• Meta: 11,000 jobs, plus cost-cutting measures and imposing a hiring free
• Microsoft: 10,000 jobs, plus hardware portfolio changes and lease consolidation
• Salesforce: 8,000 jobs, plus office closures
• Spotify: 600 jobs, plus reorganization in top leadership positions

Every CEO has said they are shifting their spending to align with their business priorities. In many cases, that means focusing on higher profit margins, new product and service lines, and areas where the companies possess a competitive edge.

We anticipate seeing more of the same this year – layoffs, consolidation of office space, a laser focus on product development, and ensuring long-term sustainability. Though no one wants to say the R word – recession – out loud, that’s where we’re heading. Tech companies did extremely well during the pandemic, serving customers, subscribers, and members in new ways. They had to scale their operations to meet increasing demand, and now they have more staff than they need. Companies are essentially right-sizing their organizations to match the current economic reality.

Regulation and Compliance

Lina M. Kahn was sworn in as chair of the Federal Trade Commission in June 2021. Since then, the FTC has stepped up its efforts to fight against anticompetitive behavior, unfair and illegal business practices, negative option marketing practices, and more. Kahn has increased enforcement and gone after huge companies to protect consumers.

Here are a few examples from 2022:

• March 2022: The FTC filed a complaint against HomeAdvisor for deceptive tactics.
• November 2022: The FTC settled a claim against Vonage for $100 million.
• November 2022: The FTC and states sued Google and iHeartMedia for deceptive ads.
• December 2022: The FTC is trying to block Microsoft’s $69 billion acquisition of Activision Blizzard.
• December 2022: Epic Games, maker for Fortnite, will pay $520 million in penalties and refunds.

Regulators are coming into 2023 strong. On behalf of the FTC, the Department of Justice filed an antitrust lawsuit against Google for abusing its dominant market power in digital advertising technology, which they allege is a violation of the Sherman Act. They previously sued Google for monopolizing search and search advertising in a case set to go to trial in September 2023.

We expect regulators in the U.S., the U.K. and the European Union to continue to step up enforcement of antitrust laws. Kahn has already shown her hand – she is not going to tolerate antitrust behavior, and she is not afraid to go after any large companies. The Competition and Markets Authority in the U.K. and the European Union are also going after large companies for abusing dominant market power. The EU’s Digital Markets Act, which was approved last March, will hold companies accountable.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

In the past, such actions on the part of regulators equated to a slap on the wrist, doing little to get major companies to change their ways. The regulators are starting to see success. At the same time, we anticipate that some companies will fight back. For example, in October last year, Meta fought against the FTC’s attempts to stop their acquisition of Within Unlimited.

We also expect states to continue to clarify and/or tighten regulations where negative option marketing practices are concerned. Watch SubscriptionInsider.com for regular updates from Marc Roth of Cobalt Law and Lisa B. Dubrow, Esq., who keep us apprised of legislative and rule changes and new regulations that will impact subscription and membership-based companies.

Connected cars

Car manufacturers have tried for years to make a go of the subscription model with no substantial success. There are as many reasons for their lack of success as there are car manufacturers themselves. For example, many of them launched tests in limited markets, and did not gain enough market share to make an expansion worthwhile. Others, like Volvo, tried to work around the traditional auto maker-dealer model, and they infuriated dealers instead.

The latest trend is connected cars. Drivers may still use the traditional financing or leasing route to pay for their vehicles, rather than “subscribe” to a vehicle, but car manufacturers are trying to get drivers to subscribe to specific features so they get subscription revenue long after cars have left their lots. This has met with mixed reviews.

BMW calls these subscription features “Functions on Demand,” also called BMW ConnectedDrive Upgrades, which charges drivers for access to certain pre-installed features, explains The Drive. Last summer, BMW rolled out heated seats for a monthly fee ranging from $17 to $30, depending on the country. The Manual reports that customers could subscribe to the heated seats for one month, one year, three years or for unlimited service. Customers outside the U.S. were furious, and BMW quickly backpedaled and clarified the service for American customers.

In a July 15, 2022 statement, the automaker said that U.S. customers order heated seats on 90% of their vehicles. If the vehicle is initially ordered with heated seats, they are fully operational throughout the life of the vehicle. However, BMW may install other features that are not accessible right off the showroom floor. Customers have to purchase access to those features via subscription.

“With BMW ConnectedDrive Upgrade, customers will be able to explore new software-based features on a short-term basis by purchasing a trial, or buying that feature outright for a period of time or for the life of the vehicle.  It is important to note that BMW ConnectedDrive Upgrade is intended primarily as a digital aftersales solution and will not affect options that were ordered at the time of the vehicle purchase,” said BMW.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

In a similar move, late last year, Mercedes began offering extra acceleration for $1,200 a year for customers who wanted to increase the torque and maximum output of their Mercedes-EQ vehicle.

“The Mercedes-Benz subscription enables customers to enjoy the flexible and carefree use of Mercedes-Benz vehicle models. The subscription caters to the individual needs of customers who want to use a vehicle for a certain period of time and pay all of the related costs in a fixed monthly installment. E-mobility is accelerating this trend. More than a third of the EQ customers in Germany are already choosing the subscription model as their form of financing,” Mercedes said.

In 2023, we expect car manufacturers to try to utilize the subscription model for aftersale purchases and to expand their revenue streams. The car manufacturers can be more efficient on the assembly line without customizing each vehicle to customer specifications, but customers can subscribe to features they are willing to pay extra for. This makes sense for luxury car makers, who have audiences with disposable income that have high expectations for performance and luxury features. However, we don’t think this model will be successful with price sensitive consumers or those who are more interested in basic functionality and reliable transportation than they are bells and whistles. Ultimately, car makers have control over what options a vehicle will offer a customer, and how the customer has to pay for the functions, but consumers may balk at this level of control.

Based on past experience, we do not see car subscriptions as a viable payment option (versus buying outright, financing or leasing vehicles) for most car manufacturers, especially not on a national or global scale. No one has come up with a successful formula to date.

Newsletters

A few years ago, newsletters were the shiny new toy for journalists, writers, podcasters and other creators who wanted a monetizable platform to share their news or ideas. That’s how Substack was born in 2017, and why other platforms like Facebook, Twitter and Medium joined the fray. Those platforms wanted creators to share their stories, thoughts, opinions and ideas, and newsletters allowed them to find target audiences and to monetize the creators’ work using a revenue share model. Everybody won. The platforms expanded their reach and received revenue, creators expanded their audiences too while making money, and readers could subscribe to their favorite creators.

But the bubble burst and some newsletter platforms have faltered. Facebook’s newsletter platform, The Bulletin, is closing in early 2023. The program had only been around since June 2021, and it attracted writers including Malcolm Gladwell and Mitch Albom. In January 2022, at the six-month mark parent-company Meta said it was pleased with The Bulletin’s progress with more than 115 publications and content creators calling The Bulletin home.

In January 2021, Twitter acquired newsletter platform Revue, and they began testing it in August 2021. Twitter users could subscribe to a test group of content creators’ newsletters from the users’ profile. In December 2022, Twitter announced they were shutting down Revue as of January 18, 2023. As an alternative, Twitter is testing the expansion of tweets from 280 characters to 4,000, says TechCrunch.

We won’t even explain Medium, which is a great platform, but it has changed its business model more times than we can count. Though under new leadership, we don’t expect Medium to have a long-term future.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

Why were newsletters so popular? People were tired of mainstream media, and the platforms wanted to provide a place for individual journalists and other creators to be heard. They created newsletter platforms with a simple user interface, and newsletters could be offered for free or via paid subscription. Many media organizations still utilize newsletters, but they are often free or available to subscribers as part of their subscription package.

We don’t see newsletters making a comeback in this economy when consumers have so many choices for how and where they get news, hear opinions, stories, books or articles. They can subscribe to their favorite publications (print or digital), listen to many podcasts for free, or watch streaming video to hear from their preferred creators. Newsletters cost money, clog the inbox, and have not delivered on their promise. It’s a shame really. We love the concept behind newsletters, and the freedom they gave creators to monetize their work and expanding their reach.

Payments

Payments have exploded in recent years, making so many more options available for merchants and subscribers alike. People can subscribe to their favorite products and services by using credit and debit cards, prepaid cards (in some cases), Apple Pay, PayPal, Venmo, ACH and so many more. Subscription companies who want to appeal to the widest audience possible will make as many payment options available as they can, keeping in mind that different countries allow different payment methods.

Minna Technologies educated us on this topic in an October webinar in which they explained that subscribers now want to go to one place – their primary bank, for example – to manage their subscriptions, whether it is updating a payment method or canceling a subscription altogether. Based on what we learned, the trend we are seeing is that subscription companies want and need to meet their customers where they are. Even if they are losing a customer, providing a seamless transaction for a past subscriber could offer enough goodwill that the customer might actually return to the subscription in the future.

We have seen this through PayPal as well. When customers subscribe to a product or service using their PayPal account, PayPal tracks subscriptions and customers can cancel them directly in the PayPal app. Apple offers a similar feature. We expect to see this trend continue, as subscribers want to manage their subscriptions from a single portal. Smart subscription companies will get on board with this trend, because it has the potential to help them engage with their customers, provide a better user experience and avoid chargebacks.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

Streaming video

There was so much change in the streaming video space last year that we think the streaming video services will normalize a bit this year. Hopefully, pricing will stabilize since most services raised their prices last year. Also, many of the services now offer an ad-supported, lower-priced tier, allowing consumers to subscribe to more services or to better afford the services they already have. Here are a few trends we may see in 2023:

• More services will crack down on password sharing by offering affordable options.
• Streaming services will continue to invest in original and exclusive content, but they may budget more conservatively in a volatile economy.
• Companies like Netflix will continue to test and experiment with new products and services (e.g., gaming, live programming, etc.) to diversify revenue and to see what adds value to their existing subscriptions.
• Free trials will become a thing of the past. The major streaming services have already done away with free trials.
• Smaller, niche streaming services will be acquired by larger companies, or they will go out of business altogether.
• Sports will become a big attraction on streaming video. Sports fans cannot get enough, and they will go where their favorite sports are being played.

There was so much change in the streaming video space last year that we think the streaming video services will normalize a bit this year. Hopefully, pricing will stabilize since most services raised their prices last year. Also, many of the services now offer an ad-supported, lower-priced tier, allowing consumers to subscribe to more services or to better afford the services they already have. Here are a few trends we may see in 2023:

• More services will crack down on password sharing by offering affordable options.
• Streaming services will continue to invest in original and exclusive content, but they may budget more conservatively in a volatile economy.
• Companies like Netflix will continue to test and experiment with new products and services (e.g., gaming, live programming, etc.) to diversify revenue and to see what adds value to their existing subscriptions.
• Free trials will become a thing of the past. The major streaming services have already done away with free trials.
• Smaller, niche streaming services will be acquired by larger companies, or they will go out of business altogether.
• Sports will become a big attraction on streaming video. Sports fans cannot get enough, and they will go where their favorite sports are being played.

Overall, we expect 2023 to be similar to 2022 in the subscription space, but companies will continue to evolve, cut costs, and pivot to the next new thing to beat the competition. What are your subscription predictions for the new year?

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.