Why Do People Think Subscription Works?

It baffles me. I think people need to read about the history of Netflix and how they had a meeting with Blockbuster trying to get themselves bought by Blockbuster because they were running out of funds.

Anyway, maybe someone can let me in on something that I don't know because if you crunch in the numbers it just doesn't work

• Assuming a website has 10 million subscribers and $2 per month. It is $20 Million per month
• Cost of licensing their current library of shows is $10 million per month
• If they add new shows every month assuming 20 new shows per month cost them $10 million(Not very accurate, since there is also the production of their own shows)
• Let us assume that they are running at $0 profits every month. To improve this they try to gain new subscribers
• If you add more new shows at an extra cost of $5 million every month but only get 1 million new subscribers you are still in a deficit
• It is even worse if you fail to add new subscribers.
• If you add 10 new shows every month and subscribers stay the same you don't see any improvement
• Basically, you can add 10 new shows or 100 new shows and still, subscriber numbers can flatline with no need additions
• It is like pouring water into a basket to drink

 

Because there's no better alternative?

 

Munpia's system is better

You are paying for new novels and for just what you want and not forced to have content that you dont want.

Netflix has tried to increase their service numerous times even split their DVD business unsuccessfully since it was too expensive

 

It works because if their margin is low enough they can undercut the rest of the market.

 

That is not true. Netflix are aggressively pursuing in house creation to combat high costs of licensing which increases every year.
You dont have to believe me, Neflix said it themselves.
Netflix also increased prices recently
Many people are already complaining of how there is no new content on Netflix as companies like Disney become more stingy with their licenses
You still cannot get Game of Thrones on there.
Very soon you will need 5 subscriptions to consume all your content

1. Netflix
2. Crunchroll
3. Hull
4. Webnovel.com
5. Disney

 

The big assumption here is that they have 0 profit margin.

If you assume sales revenue = costs of goods sold at all levels, then any business wouldn't work...

P.S.
Try googling "profit maximization economics" for more details.

Applied to Netflix: every new show on netflix gains less new customers. The cost of gaining new customers is increasing. They would only license to the point where that cost does not negatively impact their business. That's why they don't license every show ever.

The very basics is that.
Of course, there's a lot more that can be said, like how business can tank losses sometimes to gain market share because scale is extremely important in that industry, and it's not just retaining customers, but stopping customers from leaving. And many many more, but I think that covers the essentials of what you asked.

 

Subscription is retarded, just have one person make acct and pass that acct around the family and friends. Boom everyone gets free movie

 

I think they are preparing for something, but before they can make it true they need a minimum margin of subscribers that hey haven't atteined yet

 

Systems work only in certain context. The issue here is that once a few companies succeed, others decide to copycat and try to make their own, or parties part of it wish for a higher cut.

This can be scene in many industries, and is shown time and time again. A working system can be ruined and watered down by the parties involved as success eventually turns to some profit isn't as good as all the profit.

Said companies and rights holders forget that the consumers are a limited resource, and there will be a breaking point where. That's usually found when the stock drops heavily.

Subscription itself isn't a failure, but every company making their own is.

 

People expecting Qidian which is chinese company have low cost of operating than Netflix. . .

25$(1/4 my salary)/month to expensive for me anyway

 

Subscription doesn't work for TV shows.
It only works for digital goods like software

 

I think you severely overestimates the amount of money it costs to maintain a thing like netflix, and severely underestimates how much money they get from their subscriptions. Like, i'm not entirely sure what a netflix sub costs here, but i think it's around 10-12$/month, and netflix currently got like, 139m something subs. That's 1,668,000,000$/month from their subs. That's 20,016,000,000$/year. So, yeah, ,they make a lot of money. Obviously they didnt always make that much money, but you gotta keep in mind that their content library grows with their income, so when they started out they didnt use as much money for licensing as they do now, and they didnt even produce originals until pretty recently (like 2013-14?). Less profit > less content > less money used for upkeep.

Talking about money for licensing, let's talk about how much they use for both licensing and producing originals, and that is, according to this, 13 billion, and then they used 2.37 billion on marketing. Idk how much they use for stuff like upkeep of servers and pay to their staff (or if that was already calculated in the 2 earlier sums), but that still leaves around 4. something billion in gross profit. That's pretty good, i'd say.

Also, licensing agreements often last for some time, so the entire 13 billion up there was very likely used for growth, i. e. new licenses and originals, and not paying/upkeep for what they already got (sure, some of it was probably to renew or renegotiate, but unlikely for it to be all), so what you say about them having to pour in more money than they already do if they want to grow, isnt necessarily true, since that's what they're doing already, and they're making a huge profit while doing it.

Imho, subscriptions will always be the better money making option if you have a large userbase (or even just enough for it to be sustainable). Many people might be hestitant to blow like 10-20$ to go see or buy a movie, but way less people would be hestitant about (and tbh, might even forget) the 5-10$ that just automatically gets withdrawn each month, while you have an all you can eat buffet of whatever the content provided is.

Edit: Like idk why people in this thread are acting like Netflix is doing bad, cuz they're really not lol. Their gross profit continuously grows, their market share continuously grows, their stock is currently going up after having fallen a bit earlier lasts year, hell, Netflix is doing pretty damn fine.

 

I have studied all that. I know Netflix didn't make any profits for years until recently.

I don't increasing cost of subscription will help. Unlike a software that you create one product every year or so.
Netflix needs new content almost daily. Unless they want to verge charge an additional $1 premium for every new movie watched.

If they use a Munpia model, you pay per episode.
If you only watch 2 episodes then you pay $2 for instance.
I think subscriptions were a knee-jerk reaction to piracy and it just doesn't work

You are looking at only recent numbers and also ignoring the state of the industry.
It looks more like a ponzi scheme at this point.

With Disney and others pulling their content off Netflix , it will appear even less attractive than it previously was
Don't just study the last 4 years. Study their entire history. Their total debt so far.
$4 is how many percent of their total running costs?
Compare their operating costs to companies like Tencent.
From off the top of my head, I know that Netflix spends as much as companies twice their valuation.
They should have purchased Fox

 

With cable failing, everything is a digital goods.

Translations can work by subscription, as can games and as does the existence of patreon.

Just defining a product and saying a business practice cant work on it is highly premature. What matters is the state of the industry it belongs in, the state of the consumer culture and its biases at the time.

The easier explanation is the old standard of: is it unique, is it in demand? In demand, not unique you have to go by low margins. In demand and unique is the sweet spot; other two options is a fools errand.

When the subscriptions were aggragates (not individual) less choices and more product meant a larger pool of subscribers. As the subscriptions became individual to maximize individual right-holders profits (such as Disney making their own service) the subscribers wallets are being stretched for the same content.

The market changed to being less unique but are now in a bubble of profit demand with little care over realistic margins.

Why do you think AAA games are failng now with live services?

 

I said subscription for businesses like Netflix and novels don't work. It works well for other forms though. And yes, the industry is broken but it is also a gamble for shows to become popular so I doubt it will change. If only a small fraction of content are popular and in high demand then it is not a surprise that they charge an arm and a leg for it

It is not premature. This is from looking at the years of Netflix and Amazon Kindle Unlimited subscriptions.

I will make it very simple for you.
Every new author means increased costs but does not guarantee revenue ( new subscribers)

As many have said. Netflix need to diversify into other businesses and use it to cushion the blow when they hit hard times eg merchandising and theme parks.

I know nothing about the gaming industry but my answer is Karoshi.
That is what is killing the industry
Honestly, I don't really care.
Gamers with their entitlement to free content make those on here look like saints( Then again there are lot of gamers here lol)

 

@Wujigege I'm just saying that it fails due to the greed and circumstance, but I'm not denying that you're right; more so just talking of why it is failing. It is inevitable, but they are speeding the process.

In isolated cases though, media subscriptions can work. In particular, niche projects, or circumstances in which parties of rights-holders for different shows and networks partner up to decrease said margins for guaranteed retention. Considering current climate though... It will fall hard and for a good while before that happens.

 

I think greed can be a good thing
For example, I am greedy to translate more chapters of novels.
I am greedy to spread Asian culture through novels, subtitles etc
Companies are just greedy to cut costs and ignore consequences.

 

There is different forms of greed, we just like to try to excuse it without the care of context or consequence. Confusing self-interest for personal drive or work ethic is a common practice. It is like arguing over variations of political or bureaucratic structures, but completely ignoring the existence of corruption. An ideal of perfection is just that, one that you can imagine; but even if it can conceivably come to fruition, the result will never be lasting by virtue of humans being humans. The practice you normally find is companies pushing profit over sustainability.

It is a common fallacy where people defend greed and self-promotion by combining attributes concerning morality; when real world situations usually find that you normally see the former with none of the latter. It would be better to not mention the raison d'etere and focus more on the process and result.