Subscription Trends 2020: the mid-year assessment
We cast our minds back to the beginning of the year, once again, and to the five predictions that Cerillion made for the biggest trends for the subscription industry in 2020; how have recent developments treated these expectations over half a year later?

While many sectors have groaned under pressure as furloughed and redundant workers tighten their belts, it’s been a bull market for subscriptions, with one in ten people in the UK reportedly subscribing to a new service during this year’s lockdown.

With its flexible business operations and delivery models, subscription services were well poised to pick up the slack of disrupted sectors, while expanding into new ones. This has been reflected by reports of subscriber rises in traditional services, such as newspapers, magazines and streaming platforms, while newer opportunities in transportdining out and even social media are opening up.

At the beginning of the year, as we did with the telecoms sector, we made five predictions for the subscriptions industry when we said the model was “poised to become the default for most businesses.” Just how well have they held up in the face of cold, hard reality?
The great subscription bundling
As anticipated, larger service providers are increasingly switching on to the potential of bundling their subscription offerings, in the wake of Amazon Prime, whose subscriber base has grown the most during 2020.

Apple recently announced the bundling of its services, including Music, News+, Arcade, iCloud and its TV+ service. By combining these services, Apple are no doubt hoping to convert some of Apple Music’s over 60 million subscribers, or even some of the whopping 850 million iCloud users. This move may also be an attempt to throw a lifeline to Apple TV+, which is reportedly struggling to break into the upper echelons of the streaming world; many of its users are suspected to be still making use of the platform’s generous one year free offer.

As Apple TV+ trots along, Disney+ rapidly reached 60.5 million subscribers, thanks in part to its bundling with other services, such as ESPN+ and Hulu in the US, and may in time prove to be the saviour of the brand, as its theme parks remain shut and its productions suspended.

But it’s not only streaming platforms that are looking to bundle their various homegrown channels; Bloomberg Media and The Information have partnered to offer a joint one-year subscription to their services, including paywalled content, podcasts and a subscriber-only Slack channel.
Personalisation continues to evolve 
With the full in-person retail experience now something of the past (for the time being anyway), AI and the Internet of Things are continuing to make it easier for subscription providers to tailor their user experience. To this end, major providers are processing vast quantities of data and making changes, both large and small, to their products, pursuing that bespoke consumer experience – and the increased ROI that it brings.

Subscription boxes have been experiencing a boom period, with over half of businesses remaining unaffected by the recent retail downturn, and almost a quarter experiencing a rise in customers. From dedicated bibliotherapists sending you books, to expert stylists sending new outfits based on your tastes (and proportions), curation driven by human experience is a major selling point for these services.

The subscription box market is, however, a fickle one; can this massive growth in subscribers be maintained in a segment known for high churn? Earlier this year, beauty subscription business Birchbox was laying off 25% of staff worldwide and selling its French division – COVID may have bought the business some reprieve, but will it last?
Geo-specific offers 
As streaming growth in North America has stalled while its international share continues to grow, the industry’s giants are looking to the wider world for new growth areas. For example, the aforementioned Disney acquired Indian streaming service Hotstar, through its merger with 21st Century Fox last year, offering its 8 million subscribers a mix of local and international productions.

Netflix has stated it is committed to creating more international productions, rather than simply purchasing international distribution rights to shows; however this commitment is not necessarily coming from the kindness of their hearts; back in 2018, the European Parliament imposed a quota on domestically produced content on streaming services, and for platforms to contribute to national film funds.

On the other side of the coin, not everyone is so keen on the prospect of geo-locked content, with one Maltese MEP calling for equal access to Netflix content across Europe, arguing that blocking content to users from certain countries while charging the same in subscriptions is “discriminatory.” In fact, geo-blocking of content is being linked to increased rates of piracy, while almost two-thirds of VPN users do so in order to access geo-locked entertainment.

To the East, Chinese platforms such as Tencent’s WeChat have been pivoting towards Western consumers, partnering with Visa, Mastercard and American Express to enable international payments in China through WeChat Pay. WeChat’s Western edition is, however, subject to one particular regional difference – rigorous political surveillance, monitoring international users for unsavoury sentiments.
‘Smart’ audio subscriptions become the new normal 
Though hearing so much about “the new normal” may now cause your ears to close up in disgust, the home-bound, socially distanced masses are increasingly turning to smart speakers and audio-based services, with general use of these devices increasing across the board during lockdown. To take advantage of this, news outlets are turning to audio articles to entice readers to subscribe and become listeners. For Alexa, use of its Skills feature rose 65% worldwide during spring, as Amazon continues to expand its usage potential through its app, integrating service-agnostic functionality with iOS and Android.

Meanwhile, Amazon hosted its Alexa Live 2020 event (virtually, of course) for developers and businesses hoping to capitalise on Amazon’s continuing dominance of the smart speaker market. These developers have recently been given the greenlight to start developing with Alexa Conversations, an overhaul intended to make engaging with the AI seem more natural and fluid.

Confidence in the security of Alexa was, however, dented by revelations of a flaw that allowed hackers to access user conversation histories, a concern that may hinder the expansion of this market. If providers want consumers to make further use of smart speakers and monetised subscription services, they must contend with these issues in order to unlock their full potential, lest these speakers become little more than glorified radios.
Pay according to use 
As we’ve recently covered, usage-based billing extends the monetisation capabilities of service providers, offering end-users vastly more options when it comes to managing the terms of their subscriptions whilst only paying for what they value.

In the US, Charter Communications are pitched in a heated battle with the Federal Communications Commission to remove a stipulation banning them from implementing usage-based pricing, which they want to use to take advantage of so-called “power users” who have exponentially increased their usage rates during the lockdown.

The ruling, one of the key terms from their 2016 merger with Time Warner Cable, has been branded “outdated and counterproductive” by Charter in its latest filing. However, some critics argue that if banned from usage-based pricing, Charter will respond by making video streaming prohibitively expensive in an attempt to prop up the dwindling cable TV industry in the US.

Despite the fierce debate over this, the usage-based model remains a powerful tool for subscription businesses looking to reach more customer segments with a pricing approach that is better tuned to their needs and consumption patterns. In a time of major financial uncertainty, when consumers are cutting their spending and businesses are depending on tighter margins, usage-based pricing is now more important than ever.
In this remarkable time for the industry, Cerillion continues to transform businesses for the new economic landscape.