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June 16, 2019
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Subscription fatigue hasn’t hit yet

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U.S. consumers are still embracing subscriptions. More than a third (34%) of Americans say they believe they’ll increase the number of subscription services they use over the next two years, according to a new report from eMarketer. This is following an increase to 3 subscription services on average, up from 2.4 services five years ago.

The report cited data from subscription platform Zuora and The Harris Poll in making these determinations.

The study also debunks the idea that we’ve reached a point of subscription fatigue.

While only a third is planning to increase the number of subscriptions — a figure that’s in line with the worldwide average — the larger majority of U.S. internet users said they planned to use the same number of subscriptions services within two years as they do now.

In other words, they’re not paring down their subscriptions just yet — in fact, only 7 percent said they planned to subscribe to fewer services in the two years ahead.

However, that’s both good news and bad news for the overall subscription industry. On the one hand, it means there’s a healthy base of potential subscribers for new services. But it also means that many people may only adopt a new subscription by dropping another — perhaps to maintain their current budget.

Subscriptions, after all, may still feel like luxuries. No one needs Netflix, Spotify, groceries delivered to their home or curated clothing selections sent by mail, for example. There are non-subscription alternatives that are much more affordable. The question is which luxuries are worth the recurring bill?

The survey, however, did not define subscription services, which could include news and magazine subscriptions, digital streaming services, subscription box services, and more. But it did ask about consumers’ interest in the various categories.

Over half of U.S. consumers (57%) said they were interested in TV and video-on-demand services (like Netflix) and 38 percent were interested in music services.

Related to this, eMarketer forecasts U.S. over-the-top video viewers will top 193 million by 2021, or 57.3 percent of the population. Digital audio listeners will top 211 million by the same time, or 63.1 percent of the population.

The next most popular subscriptions in the survey were grocery delivery like AmazonFresh (32%) and meal delivery like Blue Apron (21%). Software and storage services like iCloud and subscription beauty services like Ipsy followed, each with 17 percent.

Consumers were less interested in subscription news and information and subscription boxes — the latter only saw 10 percent interest, in fact.

The figures should be taken with a grain of salt, of course. The meal kit market is actually struggling. The consulting firm NPD Group estimated that only 4 percent of U.S. consumers have even tried them. So there’s a big disconnect between what consumers say they’re interested in, and what they actually do.

Meanwhile, the supposedly less popular news and information services market is, in some cases, booming. The New York Times, for instance, just this month posted a higher profit and added 223,000 digital subscribers to reach 4.5 million paying customers. And Apple now has “hundreds of people” working on Apple News+, it said this week. 

Of course, consumers will at some point reach a limit on the number of services they’re willing to pay for, but for the time being, the subscription economy appears solid.

 

Walmart partners with subscription-based children’s clothing startup, Kidbox

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Walmart is getting into subscription-based fashion with today’s announcement of a partnership with Kidbox — a sort of “StitchFix for kids” where parents receive a personalized, curated box of children’s clothing on a seasonal basis. The deal will see Kidbox offered to Walmart.com’s online shoppers, where they can fill out a short style quiz, then receive their box of four to five fashion items for around $48 — or 50 percent off the retail prices of the bundled items.

The boxes are available in Sizes 0 through 14 for girls and 0 through 16 for boys, and include styles like sweaters, denim, dresses, graphic tees and more — based on whatever is seasonally appropriate. Kidbox today also has relationships with more than 120 fashion brands, including BCBG, Butter Super Soft, C&C California, Puma and others.

Like other subscription fashion box businesses, Kidbox last year launched its own private labels, too, based on its understanding of consumer trends and interests. To determine what will sell, the company leverages data it gleans from things like the initial style survey, customer feedback and by noting which items are most purchased or most returned, among other factors.

“Walmart has done a lot over the past year to establish itself as a go-to retailer for all things fashion, and we’re honored to partner with the retailer to expand its kids’ assortment online, while also saving parents time and offering them the value and convenience of a stylebox,” said Miki Berardelli, Kidbox CEO, in a statement. “At Kidbox, we pride ourselves on understanding kids’ fashion preferences while also creating moments for them to learn about the importance of giving back,” she added.

For Walmart, the partnership allows the retailer to enter into the subscription-based fashion business without having to build out its own service from the ground-up. Nor does it have to figure out the logistics involved with something like its own version of Amazon’s Prime Wardrobe, which heavily promotes in-house brands, but can be difficult to use because you can only shop Prime Wardrobe apparel — not all of Amazon Fashion.

Walmart also sees Kidbox as a way to expand its growing children’s apparel assortment, which has added more than 100 brands over the last year, including Betsey Johnson, Kapital K, Levi’s, Limited Too and The Children’s Place. More broadly, it wants to further increase its investment in online fashion — whether that’s by hosting high-end retail like Lord & Taylor; offering branded storefronts like those from Bonobos or Nike; doing celeb collabs like those with Sofia Vergara, Ellen DeGeneres and Kendall & Kylie; or by acquiring  fashion brands like ModCloth, ShoeBuy, ELOQUII and others.

Walmart Kidbox shipments will also contribute to the subscription businesses’ “give back” program, where each box purchased translates to clothing given to a child in need, in partnership with Delivering Good.

“We are thrilled to partner with Kidbox to introduce our first kids’ subscription apparel service offering premium fashion brands at a substantial savings,” said Denise Incandela, head of Fashion, Walmart U.S. eCommerce. “Over the last year, we have significantly expanded our portfolio of kids’ fashion brands as part of our broader effort to establish Walmart.com as a destination for fashion. Our partnership with KIDBOX enables us to round out our offering with additional national and premium kids’ brands.”

The partnership with Walmart follows Kidbox’s raise last year of $15.3 million in Series B funding to expand and scale its business. Canvas Ventures led the round, which saw participation from existing investors Firstime Ventures and HDS Capital, plus new strategic partners Fred Langhammer, former CEO of The Estée Lauder Companies Inc., and The Gindi Family, owners of Century 21 department stores.

Kidsbox isn’t the only subscription fashion box business to turn to traditional retail in recent months. This February, Kidbox rival Rockets of Awesome took a $12.5 million investment from Foot Locker, which will sell Rockets of Awesome merchandise on its own website and in its Kids Foot Locker stores.

By comparison, Kidbox’s deal with Walmart does not include an investment. The businesses declined to share the details of their arrangement, however.

But Walmart could put some of its brand in Kidbox in the future, perhaps.

“The team will continue to onboard other brands as the offering expands,” a Kidbox spokesperson said, avoiding an answer to a question about Walmart’s participation in the boxes themselves.

Kidbox today competes with StitchFix, which has its own kids’ line, and Amazon Prime Wardrobe, which lets customers shop for girls, boys or baby, in addition to adult apparel.

The startup doesn’t share its customer numbers or revenues, but claims 1.5 million “community” members, which is a combination of Facebook fans and email subscribers (where overlap is a given).

 

Pluto TV will expand its free service with paid subscriptions, says new owner Viacom

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Last month, Viacom picked up free streaming service Pluto TV for $340 million in cash. This week, the company spoke in more detail about its plans for Pluto TV – including its potential to for ad-supported streaming as well as the ability to market Viacom’s various subscription video properties directly to consumers, similar to how Amazon Channels works today.

At the time of the acquisition, Pluto TV offered over 100 channels of free content from 130 partners, and reached 12 million monthly users – many of whom are younger, and never intend to subscribe to traditional pay TV, like cable or satellite.

While Pluto TV built its brand on offering access “free TV,” Viacom sees the service not only as a way to grow an ad-supported video business, but also a way to upsell those free customers to paid subscription video products.

Viacom isn’t the only brand to have realized in recent months that a good number of consumers are uninterested in paying for TV and movies, when there are so many free alternatives for entertainment available on today’s web – including most notably, YouTube’s massive ad-supported video network, and to a lesser extent, the video offerings from places like Facebook Watch, and even those from social apps like Instagram and Snapchat.

That’s led many in the industry to launch their own, free and ad-supported video destinations. This includes Amazon’s recent debut of IMDb’s Freedive; Roku’s free TV and movie app known as The Roku Channel; Sling TV’s teaser package of free content for non-subscribers; and Walmart’s now over two-year old Vudu “Movies On Us;” among others. Plex also recently said it will venture into this area in 2019.

Viacom believes Pluto TV will give it a leg up in this growing ad-supported video market, explained Viacom CEO Robert Bakish, in a call with investors.

“We believe the majority of the Pluto TV audience is not watching pay-TV today. This segment already exists, so it makes sense for us – as Viacom – to take share,” he said. “Given the segmenting of the market, distributors need a free TV offering.”

The idea is that the free TV offered by Pluto TV will continue to attract consumers to the service. And Pluto TV will become more attractive on this front as Viacom adds its own content to the service – including all the programming it has been holding back from other subscription video-on-demand (SVOD) services over the years.

“Our strategic decision to curtail large-scale library licensing to the SVOD players over the last couple of years – it cost us some money in fiscal 2017 and 2018 – but it means that we have large volumes of content to bring to bear now once we close the Pluto transaction,” Bakish noted.

In particular, the content Viacom plans to bring to Pluto TV spans genres like “kids, African-American, reality and comedy,” the company said.

Pluto TV will also gain access to Viacom’s marketing capabilities to grow its audience and its infrastructure, allowing the service to expand globally.

Meanwhile, Pluto TV offers advertisers an attractive audience, as it’s capable of reaching younger viewers who are opting out of pay TV, Viacom believes. Half of Pluto’s users today are ages 18 to 34, and the majority watch the service’s content on their TV’s big screen, thanks to Pluto’s integrations with smart TVs like those from Samsung and Vizio.

“It will provide a rapidly growing source of billions of monthly advanced TV impressions in young and hard-to-reach demos in a premium and safe environment,” said Bakish.

By noting that Pluto TV content would be “safe,” Bakish is taking a pointed dig at YouTube, which has struggled to police its user-gen content in a way that made it safe for advertisers, which even resulted in a brand freeze over ads in 2017. This is still a big concern for YouTube, CEO Susan Wojcicki said this week a letter to the YouTube community.

Last year, YouTube saw “how the bad actions of a few individuals can negatively impact the entire creator ecosystem,” wrote Wojcicki. “And that’s why we put even more focus on responsible growth,” she added.

In addition to the poor taste in programming choices made by various creators, at times, YouTube and more recently Roku, have also had to weigh decisions about how much extremist content they want to host in the name of being an open platform. The risk that comes with that is a significant impact to their bottom line as advertisers flee, the companies have found.

Viacom noted that Pluto TV’s ad inventory is today undersold – today, the company’s sales team sells less than 50 percent of ad space. That leaves room for growth.

In addition to free streaming, Viacom plans to use Pluto TV to grow its paid subscriber base, as well.

Through Pluto TV, Viacom will offer customers the chance to add on paid subscriptions to their account, Bakish said – a strategy employed today by Amazon and Roku.

These add-ons will include those for Viacom’s subscription products like Noggin, aimed at parents of preschoolers; Comedy Central Now; and the company’s newest subscription, NickHits, the CEO said. (The latter targets older kids and recently arrived on Amazon Channels.)

Viacom said the Pluto TV deal would boost revenue in 2019, but will be “slightly dilutive” to earnings. Viacom experts the deal to close in March.

The company reported a mixed quarter, with revenue of $3.09 billion that fell short of Wall Street forecasts, an earnings per share at $1.12 which beat analyst expectations.

YouTube and YouTube Music launch discounted subscriptions for students

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YouTube today is launching lower-cost subscription plans for students who want to enjoy an ad-free version of YouTube or its music streaming service, YouTube Music. The new plans are the first significant changes to YouTube’s music subscription program since its launch last year. At that time, YouTube had also rebranded its ad-free YouTube Red subscription as YouTube Premium.

For eligible students, YouTube Music Premium is now $4.99 per month instead of $9.99 per month, and YouTube Premium is now $6.99 per month instead of $11.99 per month.

YouTube is also running a special promotion which offers YouTube Premium for $5.99 per month if students sign up by January 31, 2019.

YouTube Music Premium competes with Spotify Premium, Apple Music, Pandora Premium, and others, as it offers a way to stream tracks on demand, browse playlists, get personalized recommendations, play artist radio stations, and more. But it also caters to those who want a video component to their music listening experience. And it provides access to remixes, covers, live versions, and deep cuts that aren’t available elsewhere.

In addition to the removal of ads, the paid subscription to the music service includes support for background listening and offline access through a downloads feature, like its rivals.

Upgrading to YouTube Premium then expands that ad-free experience across all of YouTube’s videos – not just music videos – and adds access to YouTube Originals.

It’s not unusual for streaming services to go after students with discounted pricing. Getting younger users addicted to a particular service early on can be a valuable long-term strategy – especially on apps which customize themselves to your likes and interests over time. That makes it more difficult to switch to a competitor at a later date, as you’d lose your personalized playlists and new music suggestions.

Spotify began offering half-priced student plans five years ago, which expanded worldwide in spring 2017. Last fall, it also began offering a discounted bundle with Hulu aimed at students, which later added access to Showtime to further sweeten the deal.

Apple Music also introduced its own student plans in 2016, similarly discounting its subscription by 50 percent.

These moves have likely paid off in terms of growth among the young adult demographic. Spotify’s Premium Subscribers grew to 83 million in Q2 2018, while Apple Music passed the 50 million subscriber mark this fall.

By comparison, YouTube proper is far larger with 1.8 billion logged-in monthly users, but the company hasn’t shared how many of those are paying subscribers to either YouTube Premium or YouTube Music Premium. However, as YouTube Red, the service had only reached 1.5 million subscribers within its first year.

YouTube says full-time students at an accredited college or university in the U.S. can take advantage of the new student pricing. Those discounts will roll out to users in other countries later in the future.

Streaming service VRV adds NickSplat, a channel featuring classic 90’s Nickelodeon TV

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VRV, a fandom-focused digital streaming service, has signed a deal with Viacom and Nickelodeon to launch a new streaming channel dedicated to Nick’s classic 90’s shows and more. The new channel, called NickSplat (yes really), will stream via VRV as an over-the-top service, and will offer fans access to nearly 30 classic series, the companies say.

Its lineup includes series like “AAAHH!!! Real Monsters,” “CatDog,” “Doug,” “Rocko’s Modern Life,” “All That,” “Are You Afraid of the Dark?,” “Clarissa Explains It All,” “Kenan & Kel,” “Legends of the Hidden Temple,” “The Angry Beavers” “The Wild Thornberrys,” and many others.

VRV says additional shows will be added at a later date.

The channel will also be available both as a $5.99 per month a la carte subscription and it will be included in the VRV premium bundle, which is $9.99 per month. In a sense, the a la carte option is the equivalent of it being its own streaming service, but one without its own standalone platform, as with Viacom’s Noggin, aimed at the preschool set.

VRV’s premium bundle offers a variety of channels beyond NickSplat, including also Ellation’s anime streaming service Crunchyroll, Funimation, Rooster Teeth, Shudder and others, as well as exclusive series like “HarmonQuest,” “Killjoys,” “Thundercats,” and “Gary and His Demons.”

“VRV, with a sophisticated user base that loves the best in animation, is the perfect platform to launch our NickSplat channel,” said Sam Cooper, Viacom Executive Vice President of Distribution and Business Development Partnerships, in a statement about the launch.

“Viacom’s content – including our deep library of genre-defining television – is highly in demand, and our audiences are always looking for new and innovative ways to enjoy our programming. We’re committed to finding the best partners to bring our individual brands direct to the consumer, and this relationship with VRV is an exciting step forward in our strategy,” Cooper added.

VRV arrived in 2016 as something of a competitor to Amazon’s Prime Video Channels, which also provides access to niche digital streaming content in a single destination. However, VRV offers members over 20,000 hours of free content, with the option to upgrade to the Premium tier for more, as well as its exclusives. Amazon’s Channels, on the other hand, is only an a la carte service where members pick and choose which channels they want. There aren’t any channel bundles available at this time.

In addition, unlike Amazon Channels, VRV isn’t targeting a mainstream user base, but has been more focused on serving various fandoms – anime fans, gamers, comics fans, sci-fi and fantasy fans, and others.

With NickSplat, it’s now going after a slightly different demographic – kids who grew up watching Nickelodeon on linear TV and are nostalgic for those old shows. Maybe they even want to stream them for their own kids these days.

For Viacom, a partnership with VRV gives it a chance to monetize its older library content in a different way than throwing it out on a bigger platform, like Netflix (where, frankly, it would be seen by more viewers). However, VRV is not the only place some of these old shows can be found – there are also Nick classic series on other services, like Hulu and Amazon – the latter where they can be purchased by episode or season. In other words, if you’re sorta obsessed with one or two old Nick shows, you may want to just go find them elsewhere. NickSplat only makes sense if you want a big back catalog of classic Nickelodeon.

VRV is available online and as an app on Xbox One, PS4, Apple TV, Roku, Fire TV, Android TV, Chromecast, Android and iOS.

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