Business models matter. They are a form of governance — choose a business model, and you choose the rules you live by and the explicit and implicit incentives that will affect decisions small and large in obvious and subtle ways.

Yesterday, I talked about how we might benefit by moving from the “disruptive” paradigm stemming from the “move fast and break things” mentality of Silicon Valley and into a “slow down and fix things” mode, specifically when it comes to citations in this instance. Part of the solution to the larger shift into fixing things will involve placing ourselves back at the center of the technology world, in a way that gives us control of what happens and the benefits we derive.

This may mean abandoning business models developed in pursuit of scale, rapid information churn, and addictiveness. Many of these business models are built on a lopsided equations that usually come out in favor of the producers, using techniques known to foster addiction, and leaving the consumers with little leverage — businesses that advertise, sponsor, or fund information and services in order to push an agenda, glean marketing intelligence, and extract data offering free services that make the users into the product being sold to the producers.

subscribe message on phone

Business models don’t need to exploit. Some inherently put consumers at the power center. These business models are designed to work when an organization is meeting paying customers’ needs. They are harder to build, but more lucrative, and self-managing in important ways. Part of fixing the future is recapturing this core relationship, where the user is not the product, but the product is made for the user. There is already a group of Silicon Valley veterans aiming to do just that through an initiative called Time Well Spent, which states the problem with the “apparently free but at a high hidden price” model thusly:

What began as a race to monetize our attention is now eroding the pillars of our society: mental health, democracy, social relationships, and our children.

Imagine if Facebook were forced to contend with making most of its money from a few million people paying a small amount each month, whose cancellations would have an immediate impact on the platform’s revenues? Would Facebook (or society) be better or worse off? Would Facebook’s fear of losing paying customers make them put their customers’ interests at the center of their behavior in a way that would increase accountability and foster mutual respect?

Facebook is the example I chose because it is where the limitations and problems with a media company parading as a platform are on full display, and also where the phrase “move fast and break things” originated. The company has been under pressure for the past year to clean up its act in the face of “fake news” and Russian misinformation campaigns. So far, their corrective actions look like more of the same, and I would argue this is because their business model is more of the same — advertising, advertising, and more advertising.

Take for instance the company’s recent announcement that it will begin to allow users to rank news outlets by reliability. This is a good example of how their business model’s limitations manifest in the real world, and how what they term “transparency” and “democratization” actually have to mean the opposite:

“Broadly trusted” outlets that are affirmed by a significant cross-section of users may see a boost in readership, while less known organizations or start-ups receiving poor ratings could see their web traffic decline significantly on the social network.

The transparency fails in that it’s unclear how user voting will be processed by Facebook, how readership will be boosted, what “significant” means, and so forth. It’s vague and opaque. We also need to acknowledge that network effects are inherently undemocratic, unless you conflate democracy with mob action. Given this approach, it seems likely that once a media property is large enough to have a decent following, it is unlikely to be unseated by a quality startup with a germ of an audience. Popularity and the power of groupthink (and incumbency) become entrenched and entrenching. The following two tweets read through from here well:

In addition to how the information is vetted, there are liability and cost aspects in each approach which bear examination, of course. And these seem to be at the heart of Facebook’s approach, which is designed to help them preserve their platform status and the lower liabilities (and costs) this conveys, as Kalev Leetaru noted in Forbes:

. . . Facebook is acutely aware of the growing public scrutiny of the outsized power it holds over what we can see and talk about online. Any attempt by the company to rank news outlets by “trustworthiness” and “quality” would likely be met by a fierce backlash. As government regulators continue their reviews of the company’s actions, such news rankings could tip regulators to view it as an active moderator rather than a passive content host. Instead, by outsourcing these rankings to its user community, Facebook can distance itself from the rankings, arguing that the scores are the result of its users, not itself and that it remains a neutral hosting platform.

Someone I didn’t ever anticipate agreeing with — Rupert Murdoch — commented on these matters in a way I found compelling:

There has been much discussion about subscription models but I have yet to see a proposal that truly recognizes the investment in and the social value of professional journalism. We will closely follow the latest shift in Facebook’s strategy, and I have no doubt that Mark Zuckerberg is a sincere person, but there is still a serious lack of transparency that should concern publishers and those wary of political bias at these powerful platforms.

The time has come to consider a different route. If Facebook wants to recognize ‘trusted’ publishers then it should pay those publishers a carriage fee similar to the model adopted by cable companies. The publishers are obviously enhancing the value and integrity of Facebook through their news and content but are not being adequately rewarded for those services. Carriage payments would have a minor impact on Facebook’s profits but a major impact on the prospects for publishers and journalists.

Asking Facebook to not only acknowledge its social responsibility but to respect more professional, consumer-driven information organizations seems only fair.

As an industry, we seem to be moving away from the business model that puts information consumers at the forefront — the subscription model. One reason is that the subscription model has become heavily concentrated via institutional site licenses, decreasing the number of buyers by 1-2 orders of magnitude, while placing these buyers at a step of remove from the actual consumers, making direct sales to end-users pretty much a thing of the past in academic journals and increasingly for academic books.

There are major benefits to the subscription model, as well, as captured in a recent interview with the founders of Jib Jab, brothers Gregg and Eric Spiridellis. They are curators extraordinaire, and rely on the subscription model for a variety of reasons for their purely digital business — it encourages quality, gives them leverage over distribution channels, and provides them with the latitude to experiment, as they stated in a recent interview on Kara Swisher’s Recode podcast:

Eric: The great thing about those subscription businesses is they’re hard to build, but once you build them, they’re these great subscription revenue streams.

Gregg: As someone who was in the “hits” business for many, many years, there’s nothing better than the subscription business. You can actually sleep at night, and not worry about how your next piece of content is going to do.

There are multiple other forces — many informed by false notions like online delivery is cheap, the public is our core audience, that quick money is the best money, that Silicon Valley has a business model that we can emulate — driving organizations in our industry to shrink from the subscription model. Yet, even as we do, the subscription model is thriving.

To see how subscriptions are doing in a broader sense, I asked Kathleen Greenler Sexton, CEO & Publisher of Subscription Insider. Her answers to an email interview late last week are eye-opening — subscriptions are thriving, drawing investor money, and proving to be more profitable and sustainable. Counter to some boardroom talk I’ve heard, subscriptions for information products are very popular among younger audiences.

Do you see the subscription model as “in retreat” or “ascendant” or neither?

Sexton: Given that 15 million new subscription businesses will enter the North American and European marketing by 2020 with a $102 Billion addressable market, “ascendant” is an understatement. Subscription companies from 2012-2017 grew 8x faster than the S&P 500 and 5x faster than US retail sales. In the United Kingdom, where the population growth is 0%, the growth of the subscription category is 11%, with 12% of UK disposable income spent on subscriptions. In the US, 50% of consumers currently have two paid news or content subscriptions, and that will increase to four by 2020. In some subscription categories, 80% of Millennial and over 90% of GenX consumers are buying weekly or monthly subscriptions.

These consumers are buying subscription boxes for grooming, household item, personal health, clothing, medical items, office supplies, baby items, and more. They are buying subscription streaming services, phone services, online services, news, information, and more.

Businesses are buying all sorts of services via subscription as well — to data, information, software subscriptions, and business services. The subscription explosion is not limited to just consumers.

Why are companies offering the subscription model?

Sexton: Companies are attracted to the subscription model because subscription and membership recurring revenue is not only predictable, but also much more profitable than other models. With a recurring-revenue model, companies can afford to pay more and get aggressive with customer acquisition, knowing that with each renewal they will make a profit. Investors are putting a premium on recurring-revenue focused companies because of the model’s inherent profitability which in turn, is luring more companies to the subscriptions business model.

Q: How have subscriptions changed in the last 10-20 years?

Sexton: In short, everything and nothing. Those who are longtime vets in subscriptions understand that the fundamentals have not changed at all, just everything else from terminology, technology, marketing, and operations and more around those fundamentals has changed.

  • Customers today expect to access their subscriptions – business or consumer subscriptions – via different platforms (e.g., print, phone, app, desktop, etc.). The smart companies understand this and are developing unique experiences on each platform based on what they learn.
  • Customers today pay for their business and consumer subscriptions not only with credit cards but their mobile phones, peer-to-peer platforms, and even BitCoin. The smart companies are partnering with technology and payment platforms that allow them not only to leverage different global payment options, but offer specific recurring revenue tools to recover declined renewal transactions into a successful renewal.
  • Government regulators are much more active today keeping a keen eye on auto-renew disclosures, cancellation processes, and payments. The smart companies are conducting legal audits annually to make sure they are keeping up.
  • Technology options for subscription management platforms and subscription tools have exploded in the past few years, offering sophisticated options at all pricing levels. Said differently, the barrier to entry now is a lot lower than years ago, with platforms and tools that are far superior than even just a few years ago – let alone 10 or 20 years ago.

Q: What’s the strangest working subscription model you know about?

Sexton: I laughed when I first heard of the subscription box, “MeUndies,” which originally targeted the 20-something male demographic with a monthly underwear subscription. What do I know?! Subscription underwear is now an entire category with dozens of companies offering competitive subscriptions way beyond MeUndies’ original target customer.

Another new category is Subscription Cars. It’s still early days, but in 2017, numerous car companies from BMW, Mercedes, Porsche, Lincoln, Volvo, and others launched car subscriptions. There’s a lot of experimentation in terms of pricing and packaging, but generally a car subscription includes insurance, maintenance, and more, and all you buy is the gas. Some subscriptions include swapping out cars any time you want. I believe within 5 years many of us will be subscribing, and not leasing or buying, our vehicles.

Q: Why do subscriptions fail?

Sexton: The most common issue I see, with both start-ups and large enterprise-class subscription companies, are companies getting “stuck” and not even realizing it. Companies are “stuck” with outdated technology and don’t realize there are so many great options and solutions on the market today or believe they can’t leverage them for some reason. Or, they are “stuck” with dated assumptions about current best practices. It’s unfortunate to see, but these companies are opening themselves up to market changes, new competitors, and poor performance without a good understanding of the underlying reasons.

Whether information providers are media platforms, journals, books, news outlets, data aggregators, you name it, having a business model that aligns the interests of the consumer and producer makes more sense than those that invite exploitation.

While we’ve been focused on OA, the Internet’s major players have been quietly shifting in this direction themselves. The ala carte iTunes model is now the subscription Spotify model. The per-piece shipping model is now the Amazon Prime subscription model. The mainframe and installed software model is now the SaaS subscription model.

Would you pay $10/month for a Twitter subscription that gave you a better Twitter (sort reverse-chronology, access to premium feeds, more upstream curation by human editors, better threads, and more robust alerting)? What new business agreements could stream from this — premium providers receiving licensing and royalties to sustain their customer-centric efforts, more humans hired in better jobs to ensure accurate and relevant information reaches people how and when it should?

Without a business model aligning interests of producer and consumers, we end up with things like this — Flockademic, a “free” publishing platform named in a way that suggests academics are sheep to be shorn. We also end up with organizations where advertising executives have outsized influence, while subscription marketing can be de-emphasized. How we think and how we structure our businesses are both important factors.

Maybe it’s time to be less sheepish about aligning ourselves with our customers. That’s one way we can start to fix what a decade or more of disruption has broken.

Kent Anderson

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.

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Discussion

11 Thoughts on "Fixing Instead of Breaking, Part Two — The Subscription Model"

Some of what you say here fits neatly with the thinking of open access advocates. For example ‘business models matter’ and ‘business models don’t need to exploit’ might be the opening arguments of an OA advocate. Having said that, you’ve misconstrued Flockademic, mistaking both word and intention with Fleecademic, the territory of traditional academic publishers.

The important aspect isn’t whether people agree that “business models matter” but whether they operationalize business models that work to align interests in a sustainable way. The Gold OA model aligns some interests — authors who want to be published and publishers who want to get paid to publish articles — but doesn’t align with readers, who in many cases have their interests deprecated by publishers dropping requirements for novelty or relevance in order to align better with author interests.

As for Flockademic, it has no business model, and is another attempt by a computer scientist to bring a platform solution to work that is inherently not platform-related — intellectual validation, audience cultivation, and content development. The name is unfortunate, and your attempt at humor noted.

You claim “Gold OA model aligns some interests…but doesn’t align with readers” completely ignoring the huge benefit to readers of Gold OA over the subscription model – the reader reads for free! And then say Gold OA leads to publishers “dropping requirements for novelty or relevance in order to align better with author interests” as though the subscription model hasn’t led to a proliferation of journals of dubious quality for the sake of increased subscription income over the last 50 years.
Meanwhile, in the main article you ask “Would you pay $10/month for a Twitter subscription that gave you a better Twitter” and suggested five potential benefits from this model: three of them (sort reverse-chronology, better threads, more robust alerting) are “a platform solution” that you said in your reply to Ben Toth was irrelevant to the value of a publishing business; another was “more upstream curation by human editors” but this is already being done by free-at-the-point-of-use sites like Buzzfeed (based on the advertising model); which leaves us with “access to premium feeds”. In other words your subscription version of Twitter would take the current situation – where authors can write freely, readers can read freely, and people interact freely across the globe – and impose paywalls! Twitter and the advertising model in general are far from perfect – you describe some genuine concerns in your article – but your proposal is an anachronism that is not aligned with the interests of authors and readers but entirely aligned with the interests of the organisation receiving the subscription fees.
As you suggest yourself, when you find yourself agreeing with Rupert Murdoch and his *straight face* concern that powerful publishers be transparent and not have a political bias then perhaps there is an issue with the argument.

If the content is lower quality, difficult to find, irrelevant, or nothing groundbreaking, why read it? The subscription model aligns interests so reading is more likely because of these and other reasons. Making something free does not guarantee interest. Look at the history of free online information sources for guidance here — they die often, and free online video is being culled right now while subscription video is thriving.

Paypoints (you use the inflammatory variant that involves “walls”) are a normal part of commercial life. You have a paypoint with your paycheck, I assume. You encounter paypoints for roads, bridges, food, movies, music, and more. Even authors encounter paypoints with Gold OA. I continue to believe that Twitter would be less of a “garbage pit” (to use one wag’s description of it) if it were more focused on users and their payments than on advertisers and their payments. Someone is paying for it. I think it’s better if I have a hand in the success of something, and am not the product being sold to advertisers or others.

As for paypoints being an anachronism, you might want to update your database — subscriptions are flourishing. Spotify is replacing iTunes. Netflix is replacing movie theaters. Read the interview and tell me subscriptions and paypoints are anachronisms.

I’m not sure whether you’re referring to Gold OA or Twitter in your first sentence (“lower quality, difficult to find, irrelevant…why read it?”), but Gold OA is none of those and is offered by the same publishers who offer reader-pays subscription access, while the millions (billions?!) of users of Twitter/Facebook/etc must have good reasons for reading.

Spotify is an interesting comparison because it isn’t a subscription fee for content as the content is free-to-listen (so no paywall or paypoint) – the subscription is to have the same content as you would without subscribing but without the advertising (so more like an extension of the advertising model). Netflix is much closer to a publishing business subscription model, though it has more of a warehouse approach to content than a careful curation and product development approach. Even the subscription services mentioned in the interview (e.g. “grooming, household item, personal health, clothing, medical items, office supplies, baby items, and more”) seem to be primarily about convenience, not special access to unique and curated content.

However, the anachronism isn’t subscription models per se, but in suggesting a subscription model for Twitter/Facebook where the free-to-post and free-to-read advertising model is already massively, stupendously successful.

Gold OA readership is hard to quantify because measuring it is not a priority, which gets to my point to some degree — we measure what matters, and reading doesn’t matter to the business model of most OA publishers. Hybrid Gold OA is a different matter, and measures of that can be driven by the intersection it has with the subscription model.

Users of Twitter/Facebook are increasingly being seen as addicted, as these platforms use addiction-like techniques to hook them and keep them hooked. Because their business model is based on advertising, they have every incentive to do this. It is not wholesome, but exploitative.

You finally are getting to the point of the post (and yesterday’s) at the end. Facebook/Twitter and others have broken a lot of things. Teens are isolated and depressed. Society is less scientifically literate as a whole. Conspiracy theories and demagogues thrive. Polarization is rampant. Now it’s time to slow down and fix things. The business model of Facebook has been a core element of societal disarray and disruption, so maybe changing it to something where they have to pay attention to the health and well-being of their paying customers instead of to the health and well-being of their advertisers would be part of a solution.

There’s a lot to unpack in what you’ve written but I’d like to focus on one thing: readers’ needs. Whilst Gold OA has undoubtedly allowed those who otherwise would not have access to read some scholarly content, its business model is author-centric and therefore will reward investment in author-facing tools and services, not in reader-facing services. In the absence of a return on capital, who (other than philanthropists) will invest in reader-facing services? Spotify offers a basic, free, service which generates income from advertisers and a subscription service for those who choose a premium (advertisment-free) service. To survive and flourish, Spotify must not only build a large audience (to generate advertising income), it must be responsive to listeners’ needs (to generate subscription income). Gold OA lacks both these drivers and cannot afford to invest in reader-side services or audience-building. The classic journal subscription model is flawed because the librarian is the buyer, weakening the feedback loop from readers, and it totally lacks the ability to build a large audience. As I wrote last year, I think the solution may lie in separating the needs of authors from the needs of readers and letting each side pay for the services they need and, for the reader, I see a subscription service playing a part. http://blogs.lse.ac.uk/impactofsocialsciences/2017/10/24/its-time-for-pushmi-pullyu-open-access-servicing-the-distinct-needs-of-readers-and-authors/

I would pay Facebook, et al., a monthly fee for an account where I had control over privacy and what information was available to advertisers and other parties. I would pay for services that were designed to enhance my life, better my knowledge and understanding, and improve my well-being, rather than those designed to maximize views of advertisements. For more, see http://www.timewellspent.io/

Indeed – this quote stood out to me as relevant to the ‘disruption’ efforts in publishing:

“at large [tech] companies, we often launch products not for the revenue but for the data … and we monetise the data through a different product.”

It seems in the end, where only long term investments will lead companies, end user subscriptions may become inevitable…

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