Magazine Bundling – Bundling That Works?

Cable bundling is bad for consumers. We can all agree on that. Fortunately, consumers are voting for Netflix et al with their wallets, and will in the process, eventually, kill this model. 

But what about Magazine bundling? In other words, what if you could read tens of magazines for a flat monthly fee?

That has legs and some serious growth potential thinks KKR, the major Private Equity firm, which just invested $50m in Next Issue. As Steve Perlberg at the WSJ writes on CMO today:

Call it the Netflix of magazines. Next Issue Media, a subscription service where readers can have access to as many as 145 magazines for a monthly fee, has closed a $50 million financing round with KKR, WSJ reports. The private-equity behemoth — which will take a minority stake in the company — is hoping that magazine readers will show the same love toward the subscription model as music-lovers have to Spotify, book-readers to Oyster, or TV-watchers to Netflix. Next Issue Media has quietly gained more than 150,000 subscribers, who can pay $9.99 a month for publications including Vogue, Esquire, and Fortune, and tack on $5 more for weeklies like the New Yorker and Sports Illustrated. Publishers, for their part, receive a portion of the revenue based on how much time readers spend with their content — an incentive to publish quality stories at a time when the economics of web publishing often encourages a race to the bottom of lowbrow, yet popular and “shareable”, content.

The biggest differentiator vs cable bundling is that if someone wanted to just read 3 or 2 or even 1 of the  magazines in the bundle, they can go get them directly from the publisher – something that is not possible with cable today. And that’s a good thing.  

Still, with reading itself shrinking, I can’t help but wonder if growth for this model will be capped beyond the hard-core-reader market…

Marketing To Teens: 1956 Edition

As part of celebrating 125 years of being around, the Wall Street Journal recently highlighted a number of stories it published over the years.

The one that stood out to me, on the business front, was this 1956 piece called “Teenage Customers: Merchants Seek Teens’ Dollars, Influence Now, Brand Loyalty Later” – that highlights the relatively advanced state of marketing, even back then. 

I can’t copy paste an excerpt (no OCR), so two image excerpts will have to do:

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and this:

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If you subscribe to The WSJ, the compilation of stories is worth taking a look at…

 

Aereo’s Death Knell

For the uninitiated,

Aereo is a two-year-old company that picks up television signals and sends them to the Internet-connected devices of Aereo subscribers, all without permission from or payment to the broadcasters who provide the programming. The broadcasters, including Walt Disney Co.’s ABC, Comcast Corp.’s NBC, CBS Corp. and 21st Century Fox, argued that Aereo is an illegal operation because it violates the networks’ exclusive rights to transmit their shows to the public.

On June 25, 2014, the broadcasters won.

Keach Hagey writes on The WSJ, that this is most like the death knell for Aereo, and it very well could be. Which is a terrible thing for consumers. While anyone is free to install an antenna on their rooftop or rig up their own version of Aereo at home and do everything that Aereo was giving them, it is likely that they may not want to invest ~ $200 or $300 doing that. Or, they may live in an apartment or house where installing an antenna is difficult if not downright impossible.

So the reason they liked Aereo and were willing to pay Aereo a handful of dollars every month is because Aereo made it very convenient to do what each American resident is allowed to 100% legally. Tap into and if they want, record and view over-the-air programming from anywhere, at anytime. 

In effect then, the Supreme Court outlawing convenience, in the name of copyright law that was written for a different era. And since it’s not the SC’s job to write new laws, Congress must ideally do that and protect the consumer’s rights. But for that to happen, consumers must group together and fund tens of millions of lobbying and get such a law written and passed. 

Good luck to anyone waiting for that day.  

 

An “Outsourced” Airline – Will It Fly?

 

Deny-NAI

In a globalized economy, companies source individual parts of their product or service from whichever country or company offers the lowest cost, best quality, etc. This is what manufacturers, retailers, IT companies and others have been doing for the last couple of decades. Consumers get cheap(er) products, supply chains mature and local jobs disappear.

And now, an airline trying to do the same thing, is running into a lot of opposition from the international Air Line Pilots Association. Among other things, it took out a full page in the Washington Post recently (because…a lot of lawmakers and policy types who ultimately they need to influence live in the DC area. I guess.) that I included above.

Their core argument, as Claire Zillman writes in Fortune Magazine, is this:

“At bottom, [Norwegian] seek[s] to establish a new flag of convenience in Ireland to avoid Norway’s labor laws and lower labor costs,” Delta Air Lines (DAL), United Airlines (UAL), and American Airlines (AAL) said in a joint letter to the Transportation Department.

“That’s why we’re calling it Walmarting,” says Edward Wytkind, president of the Transportation Trades Department of the AFL-CIO, which represents airline industry unions. “This could dumb down labor standards to the point where it’s hard to make a living wage in the airline industry.”

It will be interesting to see who wins. My money, in this case, is on the airline pilots association who will likely make the case to regulators and lawmakers that this model raises huge safety concerns and lack of accountability.

But if they don’t win the argument, (as the pilots fear?) will we start to see US airlines, especially the ones like Spirit, adopt the same business model?

Coke To Bet More On Sugar Water With Bubbles

Consider two things (paywall):

1. Global soda sales and coke’s soda sales are steadily declining:

The pace of Coke’s global soda volume growth slowed to 1% last year from 3% in 2012 as concerns about health and obesity spread. Last month the World Health Organization suggested that individuals limit consumption of added sugars in food and drinks to 6 teaspoons a day—less than the 9 teaspoons in a 12-ounce can of Coke.

Soda volume in Mexico, Coke’s second-largest market, have fallen an estimated 5% or more since the country introduced a tax on sugary beverages in January.

The new drag on Coke’s U.S. business is diet soda. Diet Coke volume has been down for eight straight years, accelerating the decline in the past three. Diet Coke sales plunged 6.8%, in volume terms last year, according to Beverage Digest.

2. But instead of focusing only on diversifying into non-soda beverages,

…the Atlanta-based company plans to double down on its namesake brand. The company is boosting advertising, introducing new products, and using singer Taylor Swift as a pitchwoman. Chief Executive Muhtar Kent has said that last year, when Coke’s U.S. soda volume dropped 2%, was an anomaly. Soda can return to healthy growth, even in the U.S., especially if it is a brand name like Coke, he said.

“Coca-Cola remains magical. We need to work even harder to enhance the romance of the brand in every corner of the world,” Mr. Kent told investors in February. He regularly refers to flagship Coke as the company’s “oxygen” and “lifeblood.”

For starters, he plans to increase global advertising by $1 billion over the next three years. The company spent $3.3 billion last year. Much of the increase will be devoted to soda, including the Sprite and Fanta brands.

But with even Warren Buffet saying “I’m 100% in accord with Coca-Cola’s business strategy and regard Muhtar Kent as the ideal CEO for Coca-Cola” it’s probably a safe bet that Mr Kent (and Mr Buffett) can see the future of Coke’s bubbly sugar water in a way no one else can.

Sampling – The Real World’s Freemium Model

In the software world, the “Freemium” model exists to get users to try out a new service, hopefully like it, get hooked to it and then ultimately start to pay for it because their continued usage triggers some kind of threshold.

So what’s Freemium’s offline counterpart? In some sense, “Sampling”.

That’s what purveyors of new products – shampoo, candy, toothpaste, cereal, etc. – do when they want to introduce something to the public, are not sure if the public will actually like it and pay for it, but want to test the waters beyond focus groups and such. (But it differs from the “Freemium” model in that sampling is a once or twice kind of thing, unlike a Freemium service which could well go on forever. Consider a Dropbox user today that’s might always stay under the 2GB threshold…)

How importance is it, to the rise of new brands and products?

Consider the now-ubiquitous Kind bars. Caroline Fairchild, writing about their rapid spread across the US had this to say:

in 2008, private equity firm VMG Partners invested in the company, although it will not disclose the amount.

Kind bars were sold in just 20,000 locations when VMG got involved. The investors immediately put their capital to work to get the product into more people’s hands with free samples. (CEO) Lubetzky’s sampling budget was $800 in 2008, and he was reluctant to increase it, but by 2009 that budget ballooned to $800,000. Today, Kind spends upwards of $10 million in efforts to get people to try Kind bars. The company has a full-time field marketing team in 25 U.S. markets that organizes sampling in stores, sponsoring sporting events, taking free samples into corporate offices and putting them in gift bags at company events.

The full article touches on other aspects of Kind’s rapid growth – and for anyone (interested) in the CPG space, should make for an interesting read. 

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