When we’re researching how to grow our business, we often focus on success stories. We hope to emulate those winners by adapting their successful growth models. The problem with this strategy is that it fails to highlight telltale signs of potential failure.
Every failure is a chance for us to learn. So today, we’ll look at some of the biggest flops in subscription commerce. Consider this a lesson in what not to do.
The 3 biggest digital subscription losers
The Daily (the world’s first iPad-only newspaper)
The iPad hype was enormous in 2011, after the tablet launched just one year prior. All eyes were on Apple, and the company wanted to disrupt yet another market.
The iPad’s larger screen made it seem like a perfect device to replace print media. In fact, there are still many people today that use iPads and tablets to read news, magazines, and comic books.
Combining this new screen size and the incredibly successful Apple App Store seemed like a home run. But the plan to infiltrate the news media sector wouldn’t pan out quite how Apple imagined.
On the face of it, it’s easy to see why this venture failed. A news media outlet specifically built for one device seems like a crazy idea in 2022, but that wasn’t the only issue The Daily had.
The project was doomed from the get-go with an incredibly steep $25 million per year cost. At just 99 cents per subscription, it would have taken a lot of users for The Daily to break even.
Then there was the product itself. The app’s dismal user experience immediately turned off users. Slow download speeds, counterintuitive navigation, and surprisingly large file sizes meant that the few people who did try the platform didn’t stick around for long.
It’s also worth remembering that, at the time, subscriptions for news outlets weren’t that common. Today many news outlets now offer subscriptions and many legacy media companies have successfully tackled digital transformations. But back in 2011, The Daily was up against a massive range of free news outlets with very little extra to offer.
Would the platform work in today’s market? It’s possible, but given the enormous budget and poor user experience, it never stood a chance.
Blockbuster
While there were plenty of nails in Blockbuster’s coffin, there was one huge one that is often credited as the key reason for their demise: Netflix. Netflix took Blockbuster's rental model and made it easier for customers by sending movies through the mail. This also meant the company didn’t have the massive expenditure of brick and mortar stores.
This type of subscription service could have been a brilliant way for Blockbuster to continue as the online boom saw their sales decline. Yet, Blockbuster refused to pivot away from their in-store rental model. In 2004, six years after Netflix was founded, Blockbuster finally launched a similar service, dubbed “Blockbuster Online”, but by that point it was way too late.
Netflix also had another trick up its sleeve — no late fees. After being stung with a $40 late fee for Apollo 13, Reed Hastings knew that late fees were anti-consumer and eliminating them would be a huge driver in new customers. This was disastrous for Blockbuster, who were forced to remove their late fees to stay competitive. Blockbuster’s main income source was late fees, bringing in roughly $800 million in 2000. This also meant that customers had no incentive to bring back rented products, leaving the company with far less inventory than they used to have.
The saddest part of the Blockbuster saga is that it could have all been avoided. In 2000, just two years after Netflix’s inception, Blockbuster had the opportunity to buy out Netflix at just $50 million. Unfortunately, Blockbuster management was too stuck in their ways and passed on the deal, claiming the price was too high. Netflix’s former CFO Barry McCarthy even went on record saying Blockbuster “laughed us out of their office”.
This incredible show of arrogance and unwillingness to change ultimately doomed Blockbuster, while Netflix currently has a net worth of over $136 billion.
Google Stadia
Given the success of Microsoft’s XBOX Game Pass, the idea of a subscription-based video game platform seemed like a great idea. Being able to play games without waiting hours to download 50GB+ files was also something gamers were extremely excited for. But come January 2023, Google Stadia will be gone.
You can’t fault the Stadia team for trying their hardest to make the platform a hit. They created dedicated controllers that connected to the internet directly and built a vast network of servers across the globe to ensure gamers could play with minimal latency.
The platform worked great, so what went wrong?
The answer is pretty simple. The platform relied on subscribers to bring in money, but Stadia never managed to attract enough subscribers to stay afloat.
Google had to face the gaming giants and they simply didn’t have enough features to convince gamers to switch from their consoles. The situation was made worse by XBOX and Playstation introducing their own version of cloud gaming at no extra cost to their subscribers. PC gamers were also catered for with Nvidia GeForce Now, which offered the same features as Stadia without needing to buy new hardware.
Stadia managed to secure some big titles — like Destiny and the Assassin’s Creed franchise — but overall, their game catalogue was seriously lacking. Customers were also unhappy paying for a subscription to the platform and needing to purchase games which cost between $20 and $60 depending on the title and membership level.
Stadia is a perfect example of a business trying to enter a market with no room to operate. The advantages of Stadia weren’t something gamers were looking for, and the confusing pricing model meant they couldn’t attract enough interest to make the project viable. Customers are now being fully refunded for hardware and software purchases, and Stadia joins Google Glasses in tech purgatory.
Keep learning from the subscription commerce winners and losers with Limio
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