One of the things we enjoy most about the subscription industry is that it is always evolving. We love watching the trends, the course corrections and the innovation that come with the industry as it matures too. That’s why this week we are focusing on our subscription predictions for 2020: streaming video on demand, newspaper and magazine publishing, vehicle subscriptions, subscription boxes and regulations that affect subscription companies (e.g., privacy laws, business practices, etc.).

The Streaming Wars Continue as New SVOD and AVOD Players Join the Fray

In 2020, we anticipate the streaming video on demand wars will continue on two different fronts – premium services and ad-supported services. Among the premium streaming subscription services will be WarnerMedia’s direct-to-consumer HBO Max. This service is set to launch in May for $14.99 a month. Current AT&T HBO customers and HBO Now direct-billed subscribers will receive access to HBO Max at no additional cost.

HBO Max will offer 10,000 hours of premium content, including new originals from Ridley Scott, Mindy Kaling, Conan O’Brien, Looney Tunes and Cartoon Network Studios. The company plans to target 50 million U.S. subscribers and 75 to 90 million premium subscribers by the end of 2025 to include the U.S., Latin America and Europe.

“With this entire company coming together, we will have one of the most robust collections of premium streaming content that will appeal to all demographics in the household, and be able to achieve incredible scale and reach right out of the gate,” said Robert Greenblatt, chairman of WarnerMedia Entertainment and Direct-to-Consumer.

Peacock, the new ad-supported streaming service by Comcast NBCUniversal, is scheduled to launch in April 2020 with more than 15,000 hours of content. Peacock will show The Office, Parks and Recreation, Cheers, Downtown Abbey and Friday Night Lights and new originals including Dr. Death, Rutherford Falls and Straight Talk, among other content. In a September 17 news release, NBCUniversal revealed that the service will both be ad- and subscription-supported. We interpret that to mean there will be a free, ad-supported version, as well as an ad-free version available for a subscription fee.

While these new players are launching, we expect activity from current streaming services like Netflix, Hulu, Amazon Prime and Disney+. They will invest more in originals, compete against each other for licensing of exclusive content, and experiment with pricing including tiers and bundles. We also expect streaming services to tweak their user experience to make their services the most searchable and the easiest to use. While Disney+ may woo subscribers from Netflix, Netflix has dialed in its own winning formula. We don’t expect them to lose a lot of subscribers – or sleep – over new competitors. Instead, they will continue to do what they do well – provide high quality content to attract and retain subscribers.

Newspapers Consolidate, Magazines Experiment

Last year, we saw significant consolidation of the newspaper industry with the merger between GateHouse Media and Gannett. The new company, which kept the Gannett name, is now the largest newspaper organization in the country with 260 daily newspapers plus USA today. The combined company products more than $4 billion in annualized revenue, over $1 billion in digital revenue and over $500 million in annualized adjusted EBITDA. In addition, the company owns ThriveHive, ReachLocal, Wordstream and sweetIQ.

Shortly after the merger was completed, Gannett announced the first round of layoffs, including cuts at The Indianapolis Star, ThriveHive and the Milwaukee Journal-Sentinel. Additional cuts are expected in 2020, totaling an estimated 960 employees. The company will seek efficiencies in other areas as well.

McClatchy, currently the second largest newspaper organization in the country, is struggling financially. In its third quarter earnings report, the company said it would cut the Saturday editions of all 30 of its newspapers in 14 states by the end of 2020. Among some of the first to cut their Saturday print editions are The News Tribune (Tacoma, Washington), The Olympian (Olympia, Washington), Fresno Bee (Fresno, California), Modesto Bee (Modesto, California) and the Miami Herald (Miami, Florida). The company is currently on notice from the New York Stock Exchange that it is in danger of being delisted if it does not comply with listing standards by March 9, 2021. McClatchy has proposed a plan to regain compliance, which the NYSE has accepted.

As of 7:45 p.m. EST yesterday, McClatchy stock was valued at $0.48 per share, just $0.19 shy of its 52-week low. This is a dangerous situation for the company to be in. The company could file bankruptcy, it could seek a buyer, or another company could attempt a hostile takeover similar to the one MNG Enterprises, parent of Digital First Media used to gain control of Gannett last spring.

Newspaper industry expert Ken Doctor said the four biggest newspaper chains could consolidate into one in 2020. The top five are currently Gannett, McClatchy, Tribune and MNG Enterprises, owned by Alden Global Capital. Doctor reported that, in early December, Tribune and Alden Global Capital entered into a cooperation agreement. Alden currently owns 32 percent of Tribune, and it cannot buy more than that until June 30 of this year. In exchange, the Tribune board is now eight members, rather than six with Alden choosing two new directors.

This is reminiscent of the tactic Alden employed when attempting its takeover of Gannett. If Tribune and MNG merge, that reduces the total number of major newspaper organizations to three with McClatchy in dire financial straits. Doctor points out that several owners (Alden Capital and GateHouse parent New Media Investment Group) are hedge fund owners. They are focused on the bottom line, not on journalism, which will hurt the newspaper industry and an essential component of democracy – the fourth estate.

Magazine publishing has also contracted quite a bit in the last several years with publishers shuttering popular magazines and taking others digital-only. In the last year, there has been an interesting shift though, as publishers like Meredith Corp. have brought some magazine favorites back into print, while others have shifted their business model. Here are a few recent highlights.

The Atlantic: In September, The Atlantic announced changes to its subscription model, two years after its last overhaul. The magazine’s newest digital subscription strategy includes slightly increased prices to its tiered subscriptions plans, starting at $49.99 a year for a one-year, digital-only subscription plan.

Coastal Living: After seeing ‘resounding’ success on the newsstand, Coastal Living is once again available via subscription. Starting with the winter 2020 issue, quarterly issues of Coastal Living will be available for home delivery for $20 per year or $30 for two years. The magazine will also be available at newsstands for $12.99 an issue. Doug Olson, president of Meredith Magazines, said, “We are giving the passionate readers of Coastal Living what they want – the opportunity to secure annual and biannual subscriptions to this beloved brand.” Coastal Living has a total audience of nearly 4 million.

Cooking Light: Previously combining Cooking Light and Eating Well magazines, Meredith is making Cooking Light available for home delivery. Like Coastal Living, quarterly issues will be available at newsstands for $11.99. It is also available annually for $20 per year or $30 for two years. “This consumer-driven model is a profitable approach that underlines the appeal and desirability of a great product and the power of print. As we create innovative ways to connect with consumers across channels, it’s exciting that the immersive experiences our print products offer continue to resonate with existing and new audiences,” said Olson.

Sports Illustrated: Acquired in Meredith Corp’s purchase of Time Inc., Meredith sold Sports Illustrated to Authentic Brands Group for $110 million. Under new management via Maven, Sports Illustrated later cut one-fourth of its staff. Maven will use contractors to replace the work previously produced by staffers.

Vox: In September, Vox Media bought New York Magazine and its related assets including the Cut, Grub Street, Intelligencer, The Strategist and Vulture. New York Magazine had been struggling, laying off staff in the spring of 2019, and had plans to restructure. The purchase by Vox, keeping the magazines alive in one form or another.

In addition to these magazine-wide changes, many magazines – including those owned by Meredith Corp. – are expanding their offerings beyond magazines. Some brands have branched out into branded products like Southern Living, while others like Food & Wine are hosting events. Virtually all of the brands have also taken a multimedia approach, going beyond printed content to add audio, video and social platforms to their brand. We expect to see these trends continue as publishers figure out what works and what doesn’t.

Vehicle Subscriptions Will Fizzle and Flounder, Trying to Find Their Way

Since 2017, auto manufacturers and automotive businesses have tried the vehicle subscription model as a way to boost their bottom lines, but none of them have been particularly successful. In fact, some have dropped their programs, while others have ditched them and brought them back or revamped them entirely. The rationale behind vehicle subscriptions is that a new generation of drivers wants alternatives to traditional car ownership. Drivers want flexibility, all-inclusive pricing and easy sign-up and cancellation. Here are some of the more notable experiments:

Hyundai: In late 2016, Hyundai announced it would make its Ioniq electric car available via subscription in Southern California. The subscriptions would be available for 24- and 36-month terms, and subscribers would pay one monthly subscription fee that included unlimited mileage, electric charging costs, maintenance, repairs, wear and tear and purchase fees. There was no down payment or final fee at the end of the subscription, and most of the transaction could be completed online. In October 2018, Hyundai pulled the plug on the subscription program, says Green Car Reports.

Cadillac: In January 2017, General Motors announced the launch of Book by Cadillac, a luxury car subscription, where subscribers would get access to luxury Cadillacs for $1,800 a month, including unlimited mileage, registration, insurance and maintenance. Their subscription program was offered on a month-to-month basis with no long-term commitment. Less than two years later, in November 2018, GM terminated the Book by Cadillac subscription program. CNET reports that Book by Cadillac will be coming back in February 2020, launching a pilot in San Francisco. The new Book by Cadillac service would focus on convenience, flexibility and value, and it would work more closely with dealers.

Volvo: Volvo announced its Care by Volvo vehicle subscription program in September 2017, making its XC40 SUV available for selection online and an all-inclusive subscription fee to be paid monthly. In January 2019, the California New Car Dealers Association (CNCDA) filed a complaint with the California Department of Motor Vehicles, saying that Volvo’s subscription program was violating a number of California laws. In August 2019, California’s New Motor Vehicle Board unanimously agreed to investigate Volvo’s business practices. Shortly thereafter, Volvo announced changes to the program they they believe address CNCDA’s concerns.

Ford and Lincoln: In 2016, Ford Motor Credit Company acquired Canvas. In September 2019, Ford sold the assets of its Canvas subscription program to Fair.

Many other manufacturers (e.g., Lexus, Mercedes, BMW, Toyota, Jeep) and automotive-related companies (e.g., Fair, Enterprise, Cox Automotive and Holman Enterprises) have launched vehicle subscription services. Each seems to utilize its own version of the subscription model, and none of them seem to have it figured out. We expect this to continue because many of the car subscriptions are just a different version of leases dressed up to look like a subscription. As much as we love subscriptions, the model isn’t working for vehicles. Auto manufacturers shouldn’t be using the model just because subscriptions are popular. They should figure out what drivers – and dealers – really want and critically evaluate whether they can use the subscription model to give it to them. If not,  focus on what they do well – manufacturing, selling and leasing vehicles.

Subscription Box Market Matures, Growth Will Continue in 2020

The subscription box marketplace has exploded over the last several years. Today we can buy virtually anything in a subscription box, including everything from cookie baking kits and organic snacks to STEM activity boxes and kids’ athletic shoes. New subscription boxes are launching all the time, showing that the subscription model remains popular with consumers. A few recent launches include Harry & David, Harry Potter’s Wizarding World Gold, Build-a-Bear’s Cubscription,

They are so popular that My Subscription Addiction has annual awards for the most popular subscription boxes. 2020 is the fourth annual year for the awards; they’ll announced the most popular boxes in January. Categories include best boxes for product discovery, best boxes for newbies, best box loyalty programs, best specialty beauty boxes, best boxes for families, best fitness subscription box and more.

The market is maturing which means big milestones for some, while others aren’t sustainable. In the milestone category, subscription food service Sifted hit $10 million in annual recurring revenue in less than five years. It also has a three-year growth rate of 2,099%! Available is six U.S. cities, Sifted provides chef-curated, catered meals to companies like Twitter, StitchFix, Box and theChive.

In October, beauty box brand IPSY hit revenue of $500 million. Founded in 2011 as early adopters of the subscription box model, the company said it is the third largest subscription service after Amazon and the largest beauty subscription in the world. Among its impressive accomplishments, IPSY has shipped more than 1 billion products to date, and its online community has more than 25 million members.

Loot Crate, on the other hand, is out of loot. In August, the company voluntarily filed for chapter 11 bankruptcy. The company is more than $30 million in debt, behind in $5.87 million in sales tax payments and, at the time of our August story, had not yet shipped $20 million in Loot Crate subscription boxes it had sold.

A Clutch survey of 528 online shoppers showed that 54% of shoppers surveyed subscribe to a subscription box services. The top seven boxes are:

• Dollar Shave Club, 29% (grooming)
• IPSY, 21% (beauty)
• Blue Apron, 17% (meal kits and recipes)
• BarkBox, 17% (dog treats, toys and other supplies)
• HelloFresh, 16% (meal kits and recipes)
• Birchbox, 14% (beauty)
• Sephora Play, 14% (beauty)

What makes these boxes popular are the benefits that appeal to consumers. The beauty boxes, for example, give subscribers an opportunity to try new beauty products. The meal boxes help subscribers plan meals that align with their health goals and lifestyles. They also allow subscribers to try different recipes and meals they may not create on their own.

And, of course, all of the boxes appeal to subscribers because they are convenient. Subscription box companies curate the selections, often tailored to subscriber preferences, and then deliver them directly to consumers. Many of the company also offer additional discounts, rewards and perks.

One of the ways that subscription boxes have become successful is that they are learning and perfecting retention tactics to keep their customers. The companies go beyond the initial sale by continuing to personalize each customer’s experience, providing exceptional customer service and offering loyalty reward programs so customers keep buying and referring the subscription boxes to their friends. Subscription boxes have also expanded into retail stores which broadens their potential market base and gives them additional retail sales while diversifying their revenue.

Regulatory Agencies Will Scrutinize Business Practices More Closely

After some high profile cases, regulatory agencies like the Federal Trade Commission are taking a closer look at the business practices of subscription companies. Of particular interest are free trials, cancellation policies, data privacy, and subscription scams.

Free Trials and Compensated Reviews: The UrthBox case that was recently settled with the FTC is a good example. UrthBox, a customized snack subscription box company, misled consumers by offering a free snack box in exchange for a nominal shipping and handling fee. If consumers didn’t cancel their subscription by the end of the free trial period, they were charged for six months of the snack boxes. The FTC said the terms of this offer were not clearly or conspicuously posted. Also, UrthBox compensated subscribers with snacks and cash bonuses for posting favorable reviews online without disclosing that the reviews were essential paid for. UrthBox settled the case for $84,000 which the FTC refunded to customers in December.

Subscription Scam: In December, New York Attorney General Letitia James won $16 million in a newspaper and magazine subscription scam. James represented more than 68,000 New York residents who had been scammed by a network of New York and Oregon companies, some operating under the name Orbital Publishing Group, Inc., who fraudulently solicited magazine and newspaper subscriptions. The New York State Supreme Court ruled in favor of the plaintiffs and permanently barred the fraudulent network of companies from mailing unauthorized and deceptive subscription offers going forward.

Deceptive and Unfair Business Practices: In September, the FTC sued Match.com for deceptive and unfair business practices, duping consumers into subscribing to their online dating services to see fake messages from fraudulent accounts, failure to disclose refund terms if the subscriber didn’t meet someone in six months, deceptive billing and cancellation practices, and violation of the Restore Online Shoppers’ Confidence Act by not providing an easy way to cancel their subscriptions. Match is fighting the claims, stating the FTC has taken business practices out of context and they are wildly overstating the impact of fraudulent accounts. The case is still pending.

These represent only a small number of the cases that regulatory agencies are reviewing for deceptive business practices and fraud. Subscription companies must take great care to conduct business transparently and fairly, including disclosing all terms and conditions of their subscriptions clearly and conspicuously. They also must make cancelling a subscription easy and protect their subscribers’ data. In 2020, we expect to see more of these kinds of cases as unscrupulous companies try to cut corners to make a buck.