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Prediction 6

Digital media: the subscription prescription

“The subscription model is not new but it is being successfully refreshed and invigorated for the digital consumer. Indeed, the growing adoption of digital-only subscriptions is a clear indication of consumers showing increasing willingness to pay for content online.”

The key trends that Deloitte predicts for digital media subscriptions:

  • Half of UK adults will have at least two online-only media subscriptions in 2018 and four in 2020.
  • We estimate there will be 580 million subscriptions and about 350 million subscribers this year (see Figure 1). Twenty-six million of these subscriptions will be in the UK.
  • The total number of online media subscriptions, as well as the average number of subscriptions per individual and household, should grow by at least 20 percent in 2018 and continue to increase in the medium term. 

What is a digital media subscription?

A digital media subscription refers to content - typically TV, movies, music, news, magazines and games - that are accessed online and on demand. Traditional pay TV subscriptions are therefore not included. The cost of these subscriptions will typically be under £8 per month each in 2018.

The majority of the 580 million subscriptions are expected to be for TV and movie (subscription video on demand, SVOD), and music services. The number of online-only subscribers of other content is modest. There are currently only tens of millions of news, magazine and video game subscribers. 

Figure 1. Global digital media subscriptions (million) 

Source: Deloitte Global analysis, 2017 

What is driving this growth in digital media subscriptions? 

Looking across all forms of online media, there are a number of principal drivers contributing to the rise in online media.

Fundamentally, the growth in the number of companies offering online media subscriptions and fragmentation of content libraries, plays a key role in consumers increasing willingness to pay for content online rather than consume ad-funded content. This is also driven – especially for news – by rising awareness of the variations in calibre of providers.

For some genres, the attractiveness of the online model is becoming more compelling than pre-existing traditional alternatives. Music subscriptions offer access to tens of millions of tracks and hundreds of thousands of playlists, some of which are customised to the subscriber, and all are available on demand. Subscription bundling offerings, such as Amazon Prime, bundles a range of add-ons to delivery, including video which provides further convenience to the subscriber. 

In order to reduce the cost, in some markets consumers are cancelling their pay TV subscriptions outright or else downscaling their package. In some cases, these consumers are replacing all or some of their TV content with SVOD.

There are also several technological enablers are making online-only subscriptions more viable and easy to use including the steady rise in broadband speeds, the growing base of devices that facilitate access to online media services, and the ease of sign-up.

How can organisations respond to this growing market?   

The revenue is certainly welcome, but it is, for individual media, quite modest still – in the low tens of billions globally. Thus the media industry cannot rely on online subscriptions alone, even if for some media companies this option does bring in the majority of their digital revenue. The sector should also remain focussed on advertising – but with ad formats and an ad load appropriate to its customer base. 

The media industry should also consider how best to sell content on an individual article, track or article basis. In this regard, blockchain technologies may be an efficient approach to tracking supply and demand. 

Furthermore, other revenue models, including tips and contributions, should also be considered. As discussed in the 2018 prediction Live broadcast thrives in an online world, live-stream tipping revenue is now in the billions of dollars.

One balance that suppliers should also consider is how best to make online-only services tangible. Interestingly, demand for printed books remains far higher than for eBooks, partly because of the signal to those in the vicinity that this conveys. Choice of newspaper has always been an important signal, and news organisations should consider what tangible objects (such as tote bags, pins and notebooks) could be bundled into a digital subscription to signal a reader’s preferred news supplier.