Subscription Businesses in the 20th Century: A Look Across Industries
From Colourful Beginnings
Back in the 17th century, when the subscription model was imagined into existence, it was a form of crowdfunding in which subscribers made payments to support new ideas and products. Insurance companies were the first to pioneer it, followed closely by public corporations, book publishers, educational institutions, and even charities. (I discuss this early history in Part 1 of this series; read it here.)
By the 20th century, things began to get better. As transport infrastructure and logistics improved, delivering products regularly to the farthest corners of the developed world became easier. This meant that subscriptions could now move from annual to monthly or even weekly. Businesses began to recognize other advantages of the subscription model: convenience for the customers and revenue stability for them.
Every few decades in the last 100 years, a new industry has taken to the subscription model and worked it to suit their product and customer base. It is also interesting that each offered a particular advantage to its customer base, and in later years, multiple of these. Did these businesses taste success? Let us find out.
The early 1900s: Newspaper publishing
Offering: Affordability & access
Remember the scenes in retro Hollywood movies in which newspaper boys stand on street corners shouting the day’s headlines to entice passersby? In those days, subscribing to a newspaper was too expensive for the average person. They preferred to buy single copies from newsstands on their way to work. Once mass publishing became cheaper, the story changed. Newspapers multiplied and expanded locations and niches.
By the 1920s, enough newspapers had established their own identity, editorial principles, and loyal reader base that they could move to a subscription model. The takers for each paper, depending on its political leanings, cut across classes. Blue-collar workers, middle class working men, ladies of leisure, bankers…everyone had their own preferred newspaper subscription.
The late 1920s: Subscription clubs for connoisseurs
Offering: Expert curation
In 1926, an American ad copywriter named Harry Scherman hit upon a way to market books by new authors. With a couple of publisher friends, he established the Book-of-the-Month Club which would send subscribers one hand-picked book chosen by a judging panel every month.
According to him, “[The BOMC] establishes itself as a sound selector of good books and sells by means of its own prestige. Thus, the prestige of each new title need not be built up before becoming acceptable.”
The club started with 4000 subscribers and in the next 20 years, reaching 550,000 members. The club is still active, having shifted to an online platform.
The same model was followed by wine and cheese clubs, where a special would be chosen periodically and sent to subscribers by an expert.
The 1970s – The birth of PayTV
Offering: Better viewer experience
It was the 1970s. Cable TV was popular but replete with ad interruptions, limited content, and censorship for objectionable material. Viewers were pretty much at the mercy of the broadcasters’ preferences. That is when television executive Charles Dolan hit upon an idea: what if he could license unedited movies directly from Hollywood studios and broadcast them to homes, without any advertisements, for a monthly fee? The idea clicked and HBO, the pioneer of PayTV, was born.
The 1980s – From Blockbuster to Netflix
Offering: Customer convenience
Blockbuster was the biggest player on the block in video cassette rentals in the 1980s and upgraded to DVDs in the 90s. But they were not particularly customer-friendly: they had a pay-per-rental model, along with deposits, shipping & handling, and late fines. The story goes that Reed Hastings had to shell out $40 for being overdue with a copy of Apollo 13 and that motivated him to establish Netflix, the world’s first online video rental store.
While Netflix started out on a pay-per-rental model, in 4-5 years, they switched to a flat-fee, unlimited rental subscription model, one that they have stuck to (with the introduction of different pricing plans) even after pivoting to OTT. This became the cornerstone of their popularity and was instrumental in their success while the Goliath aka Blockbuster collapsed.
The 2000s – The rise of SaaS
Offering: Ease & flexibility
By the 1990s, the world had begun to realize that software tech was an integral part of, well, pretty much everything. At first, this software was bundled along with the hardware — think early mainframe and microcomputers. Later came on-premise licensing of software. Both meant physical hosting, maintenance, high upfront costs, and less flexibility for the user businesses.
Application Service Providers (ASP) were the first to offer a subscription-based solution. With ASPs, users would subscribe to a suite of computer applications that could be accessed over a network. Some early examples include Great Plains (enterprise applications provider, now Microsoft Dynamics), Concur (travel and expense management software), BMyPC (virtual computing space) and Agiliti (ASP aggregator). However, ASPs were not particularly successful because they catered to a limited, specific number of users.
It is with the advent of Software-as-a-Service that the subscription model really came into its own. SaaS is pretty much any application that you can access via a website or app and pay for monthly or annually. Take, for example, Dropbox, which gives you storage space on the cloud or Salesforce, which lets you manage your entire sales cycle. There is no physical or on-premise requirement; access is practically instantaneous, and pricing is offered in tiers, depending on the user’s needs.
The mid-2000s – Unboxing the subscription box
Offering: Curation & surprise
Convenience, flexibility, affordability…by the 2000s, the subscription model seemed to tick every box for customers. How then could it be scaled? As it turns out, through subscription boxes, in a way reminiscent of the subscription book and wine clubs of the 1920s.
“Surprise is like crack for your brain…people are designed to crave the unexpected.” Scott Redick, Digital strategy veteran.
We live in an age where much of life is predictable because of easy, almost instant, access to information (no more steering ships with a compass or waiting weeks for letters!) This is probably why an element of surprise or unpredictability delights us. Early subscription boxes took advantage of this emotion and made it even more potent by adding an element of curation.
Take the example of Blue Apron, which pioneered DIY-meals-in-a-box in the US in early 2012. They promise customers not just ingredients and recipes to quickly put together meals — but variety. And this variety is not boundless — you get to decide your boundaries or rather, preferences, within which the curation will happen.
By 2018, a whopping 55% of subscriptions had become curation-based as more businesses followed suit. There’s BarkBox (curated products, services & experiences for your dog), BirchBox (monthly surprise boxes of 4-5 makeup samples), Dollar Shave Club (personalized, top-shelf grooming essentials), and dozens more.
As I trace the history of subscription businesses, what strikes me the most is how the model has evolved to reflect changing customer needs and preferences. What does the future of the subscription world look like? I have some fascinating theories, which I will share in Part 3 of this series.