The biggest media story of the week has been how Netflix lost subscribers for the first time in more than ten years. The second biggest was probably that Warner Bros. Discovery is shutting down CNN+ on April 30, just weeks after the stand-alone streaming service launched.

Both stories represent the difficulties of running a successful subscription business. Both provide lessons for others. But neither should be understood as signs of doom for the rest.

Still, both stories, especially Netflix losing subscribers, produced many takes from media analysts about rethinking paywalls. Both stories came out less than a week after Quartz, the business news site, announced it will be dropping its paywall.

In a way, all three were put together to create a strong case for rethinking paywalls. And I agree. Although, I think we need to rethink our strategies and not get rid of subscriptions.

What went wrong with Netflix

Netflix reported in its Q1 earnings a net loss of 200,000 subscribers globally and expects to lose a further two million over the next three months. As an immediate result, its stock tanked resulting in wiping out more than 50 billion off its value.

Watching an industry leader stop growing made investors nervous and reflected on others such as Disney also negatively.

The film industry has been reorganizing itself in past few years to become streaming first which meant creating streaming platforms with all-in-one offerings via subscriptions.

For a long time, there was only Netflix. But today the competition is quite tight with industry veterans joining the race (Disney, Paramount) and also tech giants like Amazon and Apple with bottomless pockets.

One of the best analyses of what went wrong with Netflix (and don’t take this as an absolute statement, I don’t think the company is doomed) that I read came from Josef Adalian at Vulture.

Adalian lists three reasons why Netflix’s growth stopped at this point.

Number one: content. The streamer lacks big hits and its franchise-building power is weak compared to how much content it produces.

Number two: streaming competition. For a long time, Netflix made headlines by citing sleep, Fortnite, or TikTok as its main competition. Turns out streaming competition is the biggest competition.

Number three: the binge model. The company disrupted the industry by giving audiences what they wanted – not to wait another week for the next episode. Unfortunately, that also renders the hype cycle around any hit show much shorter than the competition.

In a recent episode of The Town podcast media analyst Rich Greenfield suggested that Netflix should rethink its binge model, not go into weekly releases but maybe split each season into two and have a new series every six months.

Of course, Netflix lost 700,000 subscribers because of the war in Ukraine when it pulled out of Russia in March. With those subscribers, it would be “just” slow growth.

What went wrong with CNN+

The shutdown of CNN+ was inevitable almost from the start when the Warner Bros. Discovery merger was announced and then after Jeff Zucker, CNN’s president and the mastermind behind the service had to resign, there were even more reasons to shut it down.

CNN+ was a weird project from the beginning. As a streaming service, it wanted to offer “plus content” but not the current broadcast which is what the station got famous for. With CNN+ new subscribers didn’t get CNN channels, only new original programming.

I’ve had a couple of conversations about this strategy and no one really got the value proposition. And it wasn’t a success.

The new Warner Bros. Discovery CEO David Zaslav plans to eventually build one giant service around HBO Max.

As Axios pointed out, the overall failure of CNN+ could be blamed on bad timing, limited communications, and misaligned incentives for how CNN and Discovery got strategically misaligned on such a massive product rollout.

The outcome is not a great look as many journalists and media executives will lose their jobs and the CNN brand will also suffer damage to its reputation.

CNN+ had roughly 150,000 subscribers and planned to become profitable in four years by investing $1 billion into the service.

Lessons learned

The end of CNN+, the end of growth for Netflix, and Quartz’s paywall drop all happening within a few days paint a gloom picture for the subscription economy.

In The Rebooting newsletter, Brian Morrissey wrote that news publishers will need to come up with new models for direct reader revenue, and only a very small percentage of a publication’s audience will pay.

Morrissey explained that to executives the choice of ads vs. subscription seemed binary, yet the two can co-exist, also Netflix announced it will explore ad-supported tiers and Quartz also wants to rebuild its advertising business (that’s why the paywall dropped so that the reach of its articles is not restricted).

At the moment it’s true that only a small percentage of a publication’s audience is paying for content but there are examples in the world where that is not the case. Take Norway, media analyst Thomas Baekdal explained how Norwegian newspapers can convince 42% of the public to pay.

Beakdal wrote that it’s a combination of many different factors, some of them are about Norwegian society and culture, but there are lessons to be learned about the editorial focus and how Scandinavian publishers use technology.

The analyst also recently tweeted that the culture around news in Norway is extremely community-based with the news sites offering also other content than just negativity and drama.

The point is, that a publication with the right strategy can aim to turn more readers into subscribers. In other words, it’s about the right content for your audience. Of course, that’s the basics.

Netflix is famous for its constant experimenting. Though it’s stubborn clinging to the binge model which many cited as one of the reasons for its slow growth shows even big tech companies can have difficulties moving on. 

When the UK-based Independent stopped printing its newspaper it became profitable. In 2016, The Times of London stopped publishing live-blogs and put less focus on breaking news. The Times surpassed 400,000 digital subscribers earlier this year.

There are many paths to building a successful news subscription business and the recent stories of failure shouldn’t be a turning point for the whole industry. 

Sure, let’s rethink subscriptions in a way they can better serve the audience (what is the right value proposition) and at the same time build a sustainable business model.

But all these stories serve mostly as a reminder that running a successful reader revenue business is hard. It needs long-term strategy and focus.

Within the digital news business, the transition from ad-first to subscription-first is still ongoing.

Yet, the wider creator economy already counts 200 million creators who are using their “influence, creativity or skills” to make money from their audiences, according to a recent report by Linktree.

That’s just another sign that direct support from the audiences is on the rise and it’s a healthier relationship to have than with advertisers. 

Photo by Tim Mossholder on Unsplash