Subscription Overdose?

Fred Wilson points to a great read by Tom Evslin on subscription based pricing. He brings up Netflix as his first case study then goes on to talk about the flat pricing of dial-up services at AOL and AT&T WorldNet or the pricing of most VoIP service providers. He presents an interesting argument on the simplicity of billing for each of these services and, in fact, the apparent increase in overall margins for the provisioning company.

This subject is particularly interesting to me right now as I'm looking at investing in a company that purports to have found a way to add another $5 to a cable bill for a great value added service. It's a neat business and I think it will work, but I won't get in to that. I'm fascinated by the amount of money that we've started paying for automatically on a monthly basis.

We can break it down directionally (these numbers are made up and I'm not expert):
  • Mobile Phone - $50
  • VoIP - $25
  • CableTV - $75
  • Satellite Radio - $12
  • TiVo - $13
  • Netflix - $20
  • Internet Access - $40
That's $235 right there on standard (according to me) consumer communications & media, and it doesn't yet include any online content, online gaming, ringtones, wifi, mobile data, international calling, pay-per-view, or the $80 a month gym membership that is under-utilized by most (no intended comment there). All that would take the monthly bills north of $400!

The Washington Post has also commented on this topic, and I excerpt:
This lock-'em-in-and-keep-'em-loyal routine has roots going back 100 years, with King Camp Gillette, who at one point gave away his innovative safety razor, then made his fortune selling the disposable blades. High-tech companies have found a way to raise the stakes. The foundation of their new business model may have been pioneered by the cable industry in the early 1940s when it began offering consumers, for a small monthly fee, access to a better television picture. In its early stages, cable charged less than $5 a month for a service that was nothing more than retransmission of local TV stations. Now the industry has become a telecommunications and entertainment behemoth that offers hundreds of channels, high-speed Internet access and telephone service, among other things. The monthly cable bill for millions of subscribers now totals well over $100.
I've heard that story before, with different actual figures. And, it's just astounding!
blog comments powered by Disqus