Subscription Theme Week

Google, Microsoft, Nvidia, Reuters, Samsung, Sony…

Is another wall about to fall?

Walled-garden models for content delivery are being chipped away, resulting in opportunities for big brands and innovative start-ups. Entertainment subscription packages are being introduced to keep up with the times, breaking content away from more traditional delivery methods. Programming is going à la carte, and services like Netflix have shown people’s willingness to pay for subscriptions to Internet-based content. It’s been an intriguing few months for anyone following these services.

Earlier this week, CCS Insight covered Microsoft’s introduction of its $199 Work & Play subscription package (see Daily Insight: Microsoft Makes a Bundle). The subscription bundle includes access to games, music, Skype Unlimited, cloud storage, productivity applications and even global Wi-Fi. Yesterday, CCS Insight covered YouTube’s new $10-per-month, subscription-based video music service (see Daily Insight: Video Kills the Rdio Star).

Now there’s more: Sony has introduced a subscription-based Web-TV service for the US market called PlayStation Vue. The entertainment package will include about 75 channels, including most — but not all — popular stations. Traditional networks like CBS, Fox and NBC will be included, but ABC and other Disney-owned stations, won’t be. Time Warner content such as CNN is also noticeably absent. It’s a clear indication of conflict between legacy and Internet-influenced business models.

Sony’s service will initially require subscribers to have a PlayStation, essentially turning the games console into a set-top box. Sony executives said the service would eventually be introduced for other devices as well, but its installed user base of 35 million capable PlayStations in the US still represents a significant potential market. Testing of the service will start in New York during 2014, and will be rolled out to other American cities during the first quarter of 2015. Pricing information wasn’t provided, but CCS Insight believes that this will have to be well below $90 — the average amount paid for broadcast television in the US. Sony has the disadvantage of being unable to offer multiplay packages.

In another announcement this week, Reuters introduced itself as a television broadcaster with a new video-streaming news service called Reuters TV. The service, costing $2 per month, is aimed at younger news viewers and will only be available through dedicated smartphone and tablet apps. Reuters TV will allow users to set up customized bulletins that can be downloaded for later viewing — during the commute to work, for example. However, charging even a small amount for news content has become a challenging business model.

Nvidia announced yesterday that it’s launching a cloud-based gaming service that will run specifically on its Nvidia Shield Tablet and the Shield portable console. The service, called Grid, will initially be cost-free, and could be rolled out to other devices running Nvidia chipsets. It could be a successful model for selling hardware if it proves popular. However, CCS Insight doesn’t believe that success is guaranteed given the poor track record of cloud-based gaming services.

Samsung is also expected to roll out a mobile-centric video subscription service under a division run by former Disney executive John Pleasants, who is now Samsung’s executive vice president of media solutions. Few details are available about the potential service, but Samsung won’t be alone: Xiaomi is also working on a video content service for its connected devices.

Content subscription services are trending. Some are experiments and might not last, but the underlying current is clear. Last month, CBS and HBO announced Internet-based subscriptions for their content, perhaps the best example yet of an à la carte model. Content and media owners prefer subscriptions to ad-funded models as a means of generating revenue from their content.

Hardware and software companies are making moves to compete with legacy broadcasters, and 2015 will be an interesting year for content services. Traditional broadcasters and set-top box makers should track the progress of new subscription packages. The pace of change is accelerating.