Death of Subscription: Nothing to Fear but Fear itself

Today of course almost no one uses dial-up and greater and easier access to the internet has allowed many companies to launch online competing online services for free. For companies who got where they are through a subscription model it must be a terrifying prospect to go from having all your customers pay a small fee to you every month to restructuring an entire company in a way where the money coming in isn’t from customers. However, to let that fear of change dictate the direction a business moves in is a much greater mistake. Go ask all the companies in the 50's that thought television was just a fad if they think it was a good idea to stay the course. You have trouble finding them though, many of them went out of business. The simple truth is there isn’t a single right way to monetize a free service that will work for everyone, the service needs to be built from the ground up with the idea of free in mind, not tacked on to an existing product.

Death of Subscription: Looking back to move forward

To really understand why a subscription based business model is failing, one only need look at why it ever became popular. The idea started showing up back in the days when the internet as we know it was still in it’s infancy. Because everyone used dial-up online services charged by the minute. The subscription model was a way to simplify how people could use and pay these services and the businesses who used this model had a much easier time understanding their earnings, it was a simple solution to a bigger problem and was incredibly simple.

Death of Subscription: Activision’s hubris

The problem is no one asked the developers “how can we improve our game in a way that can make money after the game has been purchased?” but rather by someone from the publisher asking “how can Call of Duty continue to make money after it’s been purchased?” This is a real problem not just in the games industry but for any industry where business takes precedent over design. This isn’t to say that Activision was wrong to try to further monetize their franchise, they were simply wrong in not working more closely with the developers. The assumed that simply because they had a large and reliable audience that people would get the service. But in order to understand why subscription services are dying in general you have to look at their birth.

Death of Subscription

Recently there has been multiple news sources talking about the end of a variety of subscription services in the games industry, none the least of them is Activision’s Call of Duty Elite service. The service allowed players to look at in depth statistics about themselves to improve their play. While physical copies of the game have had the most successful launches of any video game in the past four years, after about a month after their release sale slow to a crawl. Elite was meant to be a way to make the game still provide revenue after it’s been purchased and wasn’t a terrible idea in theory. Elite would give player access to much more in-depth statistics about their play styles. It simply never caught on

In Defense of New

Truth be told I’m surprised that I feel the need to even write this post. Every investor group I've ever spoken to has always talked about how they’re looking for people who are breaking away from what's been done and really doing something new. It’s not difficult to figure out why either. Apple went from being a Niche computer company to a gadget company that changed the entire music industry, making a massive amount of money in doing so.

At the same time of course it’s easy to see why many companies shy away from doing something new. While new gives the chance for massive profits and growth it also comes with huge risk and for many there is no safety in case things don’t go well. The games industry in particular is incredible punishing if a new IP(Itellecual Property) isn’t a success. It’s pretty common for a studio that just a released a game that didn’t live up to expectations to expects some layoffs in the near future. This environment of course doesn’t come about without reason. The development budget of a AAA video game usually lands somewhere between 25 to 50 million dollars. To spend that amount of money and have a couple games be flops can quickly turn a leading publisher into a failing publisher. As a result of all this you get headlines like “EA no longer sees new IP as Priority”. Understand, thats the second biggest video game publisher saying that it doesn’t think it’s wise to focus on create new original content in a industry based around creativity.

So when you consider that a company like Microsoft who's not really know for trying new things was will to make massive strides with windows 8, you really have to give them credit simply for having the balls to do it. However when I read reviewer warning people that theres a learning curve, it’s as if there is something to be afraid of. A Lot of people from different industries have bashed the changes but many of their concerns really don't hold up. I’m not trying to argue whether or not windows 8 was a smart move for microsoft. I’m simply pointing out that the same people who are criticizing Microsoft for the changes are the same people who work in the industries that investors are desperate to invest in new and different. Microsoft invested 1.5 billion dollars windows 8 overall, even for a corporation of Microsoft’s size thats no drop in the bucket. Say what you will about their OS, but at the very least give a respectful nod to a large corporation that had balls when many others didn’t.

From Wii to Wii U: The Evolution of the most successful video game console in history

With the Wii U set to launch on November 15th I thought I'd take a look at how the system is poised to do. When the system was first announced at E3 2011, many were confused by it. Nintendo's promo for the Wii U focused heavily on its new controller, and because of this many weren't sure if Nintendo was showing a new system or a new controller and massive software update for the current Wii. While Nintendo has corrected the confusion from this, it has caused them to have difficulty generating a lot of buzz about the product. The same day that Nintendo made it's launch announcement for the system was the same day the iphone 5 was revealed. The announcement was almost completely overshadowed by the iphone 5. Furthering Nintendo's difficulties with building hype.

One of the goals Nintendo set for themselves with the Wii U was to recapture the hardcore gamers(hardcore gamer: a gamer who spends a significant amount of time playing games). This is one of the problems that plagued the Wii later into it's life. Many of the more casual players never bought anything for the Wii other than a Wii fit and maybe another first party title for the system, leaving many third party developers little reason to make anything quality for the system. This combined with nearly no online services for games made many hardcore gamers simply abandon the system. The Wii U has addressed both of these problems. Nintendo has completely revamped their online services and has lined up third party games with some them being exclusive to the system. The question is will it be enough? A recent statistic shows that 85% of people who try Facebook games will only play them for one day. If these are the same casual players who bought a Wii and never really used it again, will they really want to spend $250-$350 on a new Wii U. Whether this will be enough to win some of the hardcore audience remains to be seen but these are strong steps in the right direction.

Apple's maps collapse

After one of the most financially successful years of any American company, Apple's astounding success may be slumping. One week ago the company released their new iPhone to mixed reactions. While the phone was a drastic improvement over the outgoing model, it suffered from a lack of refinement in certain areas. For most companies this would be little more than just a mediocre product. However for a company like Apple which has always promoted their products as being a step above the rest, it seemed very out of character.
There were a few factors that people felt fell short of their standards but the two main concerns of consumers were the maps app and Apple's new charging port, which rendered many of the old accessories unusable. Apple's map received so much criticism after it's release that CEO Tim Cook made a public apology for the poor quality. Now in actuality these two factors haven't impeded many of Apple's users in any significant way, however, the fact that their CEO needed to apologize on a matter of quality at a company whose slogan is "It just works" has shaken confidence. Over the past week the company's stock has fallen twenty points in a less than uniform trend.
These events haven't so much shaken investors confidence in the company so much so as their confidence in Tim Cook. When Apple had begun to recover after years of poor performance, one of the leading factors in that was CEO at the time Steve Jobs and the direction he took the company. While Jobs took steps to prepare the company for his leave people were still skeptical. It was well known that Jobs was an integral of the design and development process and many people were unsure of whether Tim Cook would be able to fill those shoes and have the same vision that Jobs did. Enough time has passed now where the products that Apple is coming out with have been overseen by Cook with no guidance left from Jobs and for a start to his reign, Tim Cook has in some aspects fallen short of apple’s standard of excellence.