We sometimes refer to this as the All-You-Can-Eat Library Model. It involves offering a buffet of digital content to subscribers, allowing your audience to stream or access it at anytime, anywhere online. Some of the most well-known and successful examples of this content subscription model include the movie-sharing service, Netflix and the music-sharing service Spotify.
The content subscription model has been found to be highly effective for businesses who focus on eLearning, Health and Fitness and Entertainment. However, it’s certainly not limited to those industries. Look at ancestory.com, their massive library of content helps people all over the globe piece together their family trees.
Other examples of companies using this model are GameFly (video games), Scribd and Kindle Unlimited (e-books), lynda.com (how-to courses) and gaia (new age digital content).
The Content Subscription Model is the third model we are reviewing in our series on the 9 Models of Recurring Revenue, catch up on the others here:
Can Small Businesses Leverage Content Subscription Model?
This model is not just for the big players, it has been leveraged by many small businesses and is becoming increasingly popular.
A great example is the business Joshua Jacobo started. As a 28-year-old artist he set out to “democratise art education". He created a library of “how-to” classes led by real artists because he couldn’t believe the cost of a good art education, even those taught by third-string teachers. He also noted that access to art education was severely limited by geography.
Jacobo began his content subscription start-up with $70,000 of his own money and invited artists to partner with him to build the site. Jocobo and his team videoed lessons taught by the artists and posted them to the New Masters Academy site.
The business started with a $19 monthly subscription, and now charges $39 for a standard membership and $49 for premium. The site now boasts 1000+ hours of video lessons. Each month a portion of the Academy’s revenue is paid to the instructors and they divvy up the pool of cash based on the amount of content uploaded.
This Content Subscription Model Is Ideal When You:
- Can create a library of content, both new and evergreen. High quality content is key.
- Have a niche that is highly engaged and has a desire to learn or improve on something. They may already be following you via your blog or other social media channels, and already consuming your free content
Take some time to explore the different pricing strategies within this subscription model to understand what might work best for you.
Here are some examples;
The ‘freemium’ model
This is a mixture of free and premium services. It allows customers to experience limited access to content without putting down money upfront. Companies like Hulu and YouTube use this model.
The advantages of this model are that it allows you to build trust with potential customers by giving them access to explore content before paying for it. It also gives you some flexibility in income streams. You can bring in some income from advertisers (if you offer your free content with advertising) and other income from paid subscribers. Customers feel like they have options and it can help build loyalty.
The challenge is designing the premium package to add significant value to the user; otherwise, companies can end up not having enough premium users to support the model.
Tiered Pricing and Varied Access Model
In this variation of the pricing strategy you have different levels of content access for subscribers based on their plan. In this way you can accommodate casual and high-access users. This gives subscribers more flexibility and enables them to adjust their plans as usage changes. The advantage of this model is that it allows you to add tiers based on customer metrics and usage, it also enables you to change your pricing strategy more easily as you have varied tiers to work with. Adjusting one pricing tier will not be as negative to customers as adjusting a single tier that impacts all customers.
Transforming the way companies do business
The content subscription model completely transformed the way Netflix did business. Starting as a DVD rental company in 1997, they used to rent DVD’s and send them by courier to subscribers! In 2007 Netflix started its online streaming service and eventually transformed it’s business to this new model.
From Netflix to Amazon, it’s been shown that some of the largest and most profitable companies can attribute their success and new revenue streams to these subscription models.
Now it’s over to you to decide whether this model could work for you. One thing is for sure, content subscription models are a powerful tool for companies today.
Why Do We Love Subscription Models?
Recurring revenue that is guaranteed over a period of time, such as through subscriptions, requires less sales and owner effort. This type of revenue typically results in higher profit margins and is prized by buyers. Research shows that businesses with recurring revenue models get higher valuations than those that don’t.
Recurring revenue comes in many different forms, some options that may work for your business include:
- Ongoing service or maintenance agreements
- Leasing and rental income
- Support Contracts
- Consumable product or replacement part contracts
- And of course, subscriptions for products, services, or information
As a company that helps people build value and put themselves in the best position to exit their business for a premium, we know the power of recurring revenue.
The Content Subscription Model has been the third in our 9-part series on Recurring Revenue income.
As we continue to explore the models, you can decide which ones may be most applicable to your business.
Be sure to review our other articles so far in the series:
Keep an eye out for our next article where we’ll dive into the fourth model of recurring income.
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Understanding the 8 Drivers of Business Value
Today, we’ve discussed Recurring Revenue, which is one of the 8 Drivers of Company Value.
Now you can measure your business against all 8 Drivers of Value and get an indication of what your business is worth today.
With that information, you can develop a clear plan to increase the value of your business. You'll not only find smarter ways to grow, you'll also be putting yourself in the best position to exit your business, when the time is right, for a premium price.
interested to know
what drives the value of your business?
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What you'll discover
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CEO and Founder, Exit Advisory Group
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At Exit Advisory Group we help entrepreneurs maximise company value and exit at the top of their game.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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