As the year draws to a close, we are reflecting on some of the top subscription stories of 2021. In Part 1, we revisit Netflix’s many attempts to diversify revenue with new products and services, the popularity of paid newsletters, and buy-now-pay-later services for subscriptions. We are also looking at the podcasting wars which has new players, programs and partnerships, and Spotify’s ever-expanding features and functionality, thanks to a series of acquisitions.
Netflix Diversifies Revenue with New Products and Services
As the streaming giant’s membership growth slowed, Netflix diversified the company’s revenue streams through new products and services, including merch, gaming, podcasting and a book club.
In June, Netflix officially launched an exclusive online shop featuring limited edition, high-quality apparel and lifestyle products tied to their shows, movies and brand. They kicked off the Netflix store with anime-inspired collectibles and teased products from shows like The Witcher and Stranger Things.
Four months later, Netflix partnered with Walmart to create a new retail hub to showcase exclusive items and innovative experiences that bring Netflix shows to life, including everything from music and fashion to toys and games. Merchandise includes items based on CoComelon, Ada Twist Scientist, Nailed It, Squid Game and Waffles + Mochi.
“At Walmart, we recognize the importance of bringing those trends directly to our customers and fast. That’s why I’m excited to announce the launch of the new Netflix Hub at Walmart, which establishes Walmart as the Netflix destination for family entertainment experiences,” said Jeff Evans, executive vice president of entertainment, toys and seasonal for Walmart, in an October 11 blog post.
“Through this new partnership, Walmart will not only offer products that bring the imagination of Netflix creators into reality, but Walmart customers and Netflix superfans will also find a new, exciting entertainment destination. The Netflix Hub brings together some of its most popular shows in its first digital storefront with a national retailer, and we’re proud to partner with them on this new adventure that will let our customers dive even deeper into their favorite stories and characters,” added Evans.
In addition to their merchandising opportunities, Netflix also debuted Netflix Gaming. Originally planned for 2022, Netflix hired Mike Verdu, formerly with Electronic Arts and Facebook, to spearhead this opportunity. They also bought Night School Studio to help expand their games team. Night School Studio will be the first games studio to join Netflix to help expand their narrative and design aspirations. In November, the company finally launched their first batch of five games available on Android devices. All users need to access these games is a Netflix subscription – there are no in-app purchases, ads or additional fees.
But Netflix didn’t stop there. The streamer also made a deeper foray into podcasting in 2021 to broaden their market reach. They hired N’Jeri Eaton, a former Apple and NPR executive in July to become their head of podcasts and the company’s first director of podcast programming. The company has since expanded their library of podcasts and are planning to create more podcasts. They even launched a Netflix Hub on Spotify to help users more effectively find their favorite Netflix-inspired podcasts.
And then there’s the new Netflix book club – yes, a book club! A book club might sound counterintuitive for a streaming service because reading books takes subscribers away from their screens, but there are synergies here.
Uzo Aduba, star of Netflix’s adaptation of the book, Orange Is The New Black, was a part of the book club’s soft launch. Through the book club, which officially launched in November, readers will be able to explore an “ever-evolving, curated collection” of newly adapted books, that viewers will then be able to watch on Netflix soon after. For those who have already watched the movie or TV show, there will be featurettes about the books behind the action. Netflix has already adapted popular books like Bridgerton, To All Boys I’ve Loved Before and The Queen’s Gambit.
Netflix is finishing the year on a high note, and we are eager to see their fourth quarter financials to see if their new ventures are translating into additional revenue, higher member retention and/or steady membership growth.
Paid Newsletter Publishers Help Creators Monetize Content
2021 was a year of creativity and monetization opportunities for creators of all types. One of the most popular tools for creators this year was paid newsletters. Launching in 2017, Substack is one of the first companies to harness the power of paid newsletters. This year, Twitter and Meta (Facebook) joined the fray, wanting their piece of the newsletter pie, among others. Through their tools, creators had more opportunities to better connect with their target audiences while also monetizing their unique brands and content.
“With a robust community of writers and readers, Twitter is uniquely positioned to help organizations and writers grow their readership faster and at a much larger scale than anywhere else. Many established writers and publishers have built their brand on Twitter, amassing an audience that’s hungry for the next article or perspective they Tweet,” said Kayvon Beykpour, product lead, Twitter and co-founder, Periscope, and Mike Park, vice president of publisher products, in the announcement.
This summer, they began testing paid newsletters with creators. The program has since expanded, giving readers the opportunity to subscribe to creators’ content via their Twitter profiles. Using the Revue platform, writers and publishers can develop free and/or paid newsletters for their readers and subscribers. Revue creators own their list of subscribers and are in control of it. Creators who create a paid product share 5% of their revenue with Revue. For paid newsletters, if a subscriber chooses to subscribe to a premium newsletter, they will be asked for their payment information.
Substack raised $65M in Series B funding to help further fund their paid newsletter platform. With that investment, the company announced they would expand their financing program to help writers starting their own media businesses, help Substack writers succeed with the subscription model through fellowships more, invest in initiatives that support local news and reporting, and more. More than half a million people subscribe to the platform, and the top ten paid newsletter publishers make more than $15 million a year.
Meta also launched their own newsletter subscription service, Bulletin, this year. Bulletin is offering users a mix of free and premium articles, podcasts, subscriber-only groups, live audio, and exclusive content and video.
“The goal here is to support millions of people doing creative work. More and more independent writers are discovering ways to use their voice and make money through other avenues, similar to the ones we’re introducing here,” Zuckerberg said.
The company’s goal is to avoid writers who focus on political subjects and instead focus on sports, environment, fashion, and other neutral topics. Bulletin is hosted on a website separate from Meta (Facebook).
Zuckerberg told creators that Bulletin would not take a revenue cut until 2023 and would ensure that it would be less than Apple’s 30%. To get around Apple’s platform fees, Meta would give eligible creators custom links to allow them to accept payment directly rather than through a third-party payment system.
“As we build for the metaverse, we’re focused on unlocking opportunities for creators to make money from their work. The 30% fees that Apple takes on transactions make it harder to do that, so we’re updating our Subscriptions product so now creators can earn more,” Facebook said.
Other platforms that have launched or expanded their usage of paid newsletters this year include Forbes, Patreon subsidiary Memberful, Axios, The Atlantic, Google’s Museletter, and The New York Times. We expect to see more of this in 2022 along with possible partnerships and consolidations.
Buy-Now-Pay-Later, Subscription Edition
During the pandemic, buy-now-pay-later services have grown in popularity. With so many people stuck at home or working from home, many of us have shopped online and the buy-now-pay-later model has made it easier. Need a “go to” jacket for all those Zoom calls, or maybe school clothes for the kids? With buy-now-pay-later, shoppers can buy all those items and space their payments out over time, often without interest. Kind of like credit cards but better!
In recent months, services like Afterpay, Klarna and Affirm have started offering buy-now-pay-later options for subscriptions. These are great for subscription companies and retailers because they help minimize risks like chargeback and fraud, since the payment service pays the merchant up front. Consumers love them because they can budget for larger purchases and spread their payments out. Imagine being able to pay for your favorite annual subscription in installments?!!
In August, Amazon and Affirm announced their partnership, to allow customers to use the buy-now-pay-later option on certain purchases over $50. When the announcement was made, Senior Vice President of Sales at Affirm, Eric Morse, said, “By partnering with Amazon, we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on Amazon.com in the U.S. Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.”
With Affirm, unlike other payment options, users have the flexibility to spread payments across 18-, 24- and 36-month periods. Affirm also has the option to charge interest.
This year, Klarna and Afterpay started offering consumers the option to pay for their subscriptions in four installments. Klarna made this move first. They started allowing users to pay for subscription options from over 250,000 retail partners. With this move, they added the US to their repertoire of countries that currently offer Klarna for subscriptions. Klarna has this option available for Sweden, Norway, Finland, Germany, the UK, and the Netherlands.
In the coming year, they are looking to expand further. David Sykes, the head of the North American division of Klarna, said, “The subscriptions market has seen massive innovation in the last decade to meet increased demand and popularity amongst customers. As competition intensifies, the brands that provide the best services across value, flexibility and a customer-obsessed experience will thrive.”
Afterpay made their move shortly after Klarna did. On November 24, they announced that they would also allow customers to be able to pay for subscriptions with their service. Confirmed subscriptions with this option are IPSY, BoxyCharm, Savage x Fenty, and more. Afterpay announced they would also allow this to go to other regions and want to make this an in-store option as well.
Customers will also be able to prepay for items and start making their installation payments when the item ships, similarly to how Klarna used to run their business. This gives merchants more wiggle room for their product launches and can more accurately create a desire for what is needed to be ordered. To help merchants offset costs, they are also allowing deposits for custom orders.
In their November 24, 2021 news release, Zahir Khoja, general manager of North America for Afterpay said, “By offering customers the option to pay for subscriptions with Afterpay, we’re not only giving consumers flexibility to pay for more expensive monthly costs, but we’re also helping our merchant partners capture a wider consumer base through this convenient experience. As more retailers expand into the world of subscriptions, Afterpay is more than ready to answer the call for both consumers and merchants.”
Who’s winning the podcast wars?
You’ve heard of Shipping Wars, Storage Wars, the streaming wars, and now we have a new fighter in the ring: the Podcast Wars. Podcasts have been around since 2004 when the format was created by Adam Curry and Dave Winer. There has been a huge surge in popularity in the last five years. With podcasts, everyone wants to get in on the action, so we saw a lot of new players, programs and partnerships this year.
To expand its podcast footprint, Amazon acquired ART19, a podcast hosting and monetization platform that started in 2015. With these tools, Amazon is better able to attract podcast creators, publishers, and advertisers. ART19 powers hundreds of millions of podcast downloads per month, so with Amazon on their side, they could easily boost that number. Amazon also acquired Wondery, benefiting Amazon Music users who could access a new library of content library. In October, Wondery launched a new kids’ podcast subscription service, Wondery Plus Kids, aimed at ages 4 to 12 for just $4.99 a month. Though Wondery is owned by Amazon, Wondery Plus Kids launched exclusively on Apple Podcasts on September 28.
Not wanting to be left out Meta (Facebook) started to roll out their podcast product in June. In an email to podcast creators, Facebook said, “Facebook will be the place where people can enjoy, discuss and share the podcasts they love with each other. To help them find your work, we can add a new tab to your page that will feature your podcasts.”
Hosts will be able to link RSS feeds of their podcast to their page, and that will generate News Feed posts for future podcasts. New episodes will also appear in a Podcast tab. With this, podcast hosts can choose if they want soundbites from their podcasts to be shareable, which would help extend their reach, and lure in new listeners.
In April, Apple, seen as the leader in podcasts since their inception, announced the pending launch of Apple Podcasts Subscriptions, a global marketplace for premium podcast subscriptions like those produced by The Washington Post, Pantsuit Politics, Meet Cute, The Athletic, NPR, Luminary, Pushkin and more. The service will be available in 170 countries and regions, and it will include discoverable channels curated by creators, including both free and paid channels.
“Fifteen years ago, Apple took podcasts mainstream, offering creators a premier, open platform to inform, entertain, and inspire hundreds of millions of listeners around the world,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “Today, Apple Podcasts is the best place for listeners to discover and enjoy millions of great shows, and we are proud to lead the next chapter of podcasting with Apple Podcasts Subscriptions. We’re excited to introduce this powerful new platform to creators around the world, and we can’t wait to hear what they make with it.”
After a brief delay, Apple officially launched Apple Podcasts Subscriptions in June with new podcast channels added weekly. At launch, listeners were able to purchase premium podcast subscriptions through the Apple Podcasts app to gain early access to content, enjoy an ad-free experience, and support their favorite creators. With thousands of subscriptions, channels, shows, genres and formats, there is something for virtually everyone.
Spotify is perhaps the unofficial leader of the pack in terms of subscribers (music + podcasts) and podcasts. At the end of the second quarter of 2021, Spotify had 2.9 million podcasts on the platform, an increase of 0.3 million podcasts since the end of the first quarter of 2021. For the same period, the company reported 165 million premium subscribers and 365 million monthly active users. This includes both music and podcast listeners.
Using the freemium model, Spotify podcast listeners have the option to listen to an ad-supported version for free or to pay a subscription fee of $9.99 a month for an ad-free experience. Though Spotify’s Podcast catalog was a little harder to navigate, they benefit from featuring popular exclusives like The Michelle Obama Podcast, Renegades Born in the U.S.A. (with Bruce Springsteen and Barack Obama), Son of a Hitman, Butt Dial, The Ringer, the Joe Rogan Experience and Higher Ground.
Another part of Spotify’s strategy that will serve them well is being creator friendly. Spotify has developed a platform for podcast publishers and creators, making it easy for them to make their work available to fans and to monetize it.
Other players in the podcasting space include iHeart Podcasts, Luminary, SiriusXM and Pandora, and Netflix. As of October 2020, Spotify was the clear leader of podcast providers in the U.S. Who will come out ahead in 2021?
Spotify is on a shopping spree
Spotify may have set a new goal for themselves: being the place you listen to everything. They’ve gotten quite a lot of traction this year, and it’s only the beginning.
Spotify is working on beefing up their podcast offerings. In September, the company successfully rolled out their premium podcast subscription option to help compete with Apple’s podcast subscription. Much like Apple, creators are able to allow listeners to get exclusive content. The best part? They’re not taking any revenue from creators until 2023. Creators are able to choose from 20 different price points to allow for flexibility, and they can download a list of contact information for their subscribers.
They are in the process of acquiring the audiobook company Findaway. The deal is expected to close in the fourth quarter of fiscal year 2021. Findaway’s goals are to help distribute audiobooks to listeners across the globe. Under the Findaway umbrella are multiple brands, with moving parts that help retailers and libraries deliver audiobooks, help audiobook sellers, and even create audios.
“It is Spotify’s ambition to be the destination for all things audio both for listeners and creators. The acquisition of Findaway will accelerate Spotify’s presence in the audiobook space and will help us more quickly reach that ambition,” said Gustav Söderström, Spotify’s Chief Research & Development Officer.
Video is also something Spotify is working hard to integrate into their apps. They found that songs are more likely to be shared and discovered if they have a video behind them – what the company calls a Canvas. They are looking into integrating a Discover feature into their app where users can more easily find new songs they enjoy while boosting shareability.
Spotify started to offer the option for video podcasting to help compete with YouTube. They acquired Anchor in 2019, and that has been critical for helping them build out this tool. Spotify is currently allowing creators to publish video podcasts, and listeners will be able to listen and watch their favorite podcasts on any device.
Other recent acquisitions, though not all in 2021, include:
- Gimlet Media, February 2019: The purpose of this acquisition was to help Spotify increase its IP development, production and advertising capabilities to support Spotify and its creator base.
- Parcast, March 2019: At the time of the acquisition, Parcast had launched 18 premium podcast series including Serial Killers, Unsolved Murders, Mind’s Eye and others. This acquisition gives Spotify access to Parcast content while helping Parcast scale and grow their brand of content.
- The Ringer, February 2020: Founded by Bill Simmons in 2016, The Ringer has popular sports and pop culture content that will attract a wide range of listeners.
- Megaphone, November 2020: Megaphone hosts more than 5,500 podcasts. This acquisition will help Spotify with its strategy to further expand into the podcast market and to better serve podcast publishers and advertisers with innovative tools, like Spotify’s proprietary Streaming Ad Insertion (SAI) technology which was introduced earlier this year. Using listener data, SAI serves up relevant ads in real-time to podcast listeners.
- Betty Labs and Locker Room, March 2021: This acquisition gives Spotify the ability to create a new live audio experience similar to Clubhouse. Spotify has since rebranded the tool, calling it Greenroom.
- Podz, June 2021: Podz is a tech startup focused on making podcast discovery easier and more personalized. We find their discovery process a bit clunky, so this acquisition will help them streamline their catalog and make shows, channels and creators easier to find.
On New Year’s Eve, we’ll share Part 2 of the Top Subscription Stories of 2021, including the ever-evolving Twitter, the acquisition of Meredith’s assets by Dotdash and Gray TV, the FTC’s subscription crackdown, the merger between Discovery Inc. and WarnerMedia, and last but certainly not least, Alden Global Capital’s attempted hostile takeover of Lee Enterprises. Until then Merry Christmas and Happy Holidays from the Subscription Insider family!