How a startup is writing the playbook for content subscription businesses

By constantly expanding its target market

Subscription is being seen as the holy grail of businesses. It is not difficult to see why. When you get them to pay once and keep them hooked to your platform, you have a stable flow of revenues.

It helps you plan and budget for your business in a better fashion.

You understand the consumption patterns which again helps you in refining your offering.

When a customer begins to pay for your product, your company’s goal converges to one point- how to better their experience so that they stick to your platform.

In totality, it is a flywheel where the company improves its offerings to serve its customers and on-board new customers and they tend to stick with it because of the value they derive from it.

If executed well, the end result is a positive upward trajectory for the business as shown in this analysis commissioned by Zuora. Since the period of 2012, subscription companies have increased sales 15.1% versus 1.7% for revenues of companies in the S&P 500; around 9 times faster!

Source: Zuora

The rise in the subscription economy has made companies take a re-look at their business models. On the consumer businesses side, an upshot like Dollar Shave Club was bought out by Unilever to create a channel through which they would stay in touch with their end customer. The tech examples are dime a dozen, including Salesforce and Zendesk. Internet entertainment companies like Netflix and Spotify have perfected this game with the former being valued at $64 bn. by the public market.

A split representation of Adobe’s revenues

This has an implication for content and media companies in today’s age.

As advertising revenue dries up and with distribution companies like Facebook expecting ad revenue growth to come down, more content providers are finding themselves in a lurch. Medium has fired its ad sales team and has announced the launch of a subscription platform. Buzzfeed has missed its revenue targets by a huge margin for two consecutive years. Among the dozens of old legacy media companies, only New York Times and Washington Post have transitioned well into the subscription age with the former drawing more in subscription revenues than ad revenues.

But there are a couple of reasons why content subscriptions are different than your typical product/ SaaS subscriptions:

Massive availability of free data online (churn):

Any offering in this space will have to compete with a hundred thousand free resources available online and jostle for the user’s attention.

If you want to sell subscriptions for your news outlet, you need to compete with the instant news and get the most insightful scoops and opinion pieces.

The education industry has to compete with all the free content on YouTube.

When there are a ton of free resources available online, getting people to pay for it would to be a challenge. Considering Coursera’s depth and breadth of courses, only 0.4% of Coursera’s user base have paid for their offering.

No urgent driving factor:

There is a fundamental difference between subscribing to a company like RentTheRunway and a pure content player.

In the former, there is a definite use case and a time frame in which it has to be achieved. You need to go out at a particular time and you pick up a dress which suits you.

But say you are bored and want to browse through some content; you can listen to music, watch a movie or browse through cat videos- each of which have multiple providers as mentioned above.

There is no time frame based task that has to be achieved. It is the same reason why people sign up for tons of MOOCs online but don’t complete them.

Discoverability issue:

A search for mindfulness courses turns up 17 million results on Google. Page 1 includes offline centers, DVD courses and online tutorials.

In business terms, it is a commoditized market.

Similarly, independent content creators choose to upload their videos on YouTube/ Udemy rather than upload it on their own website.

In today’s age, it is tougher for quality content to reach out to the audience as creators have to cut through the noise.

The aggregator platforms relies on social scoring (views/upvotes) as a mechanism to promote quality material. But on the flipside, creators lose control. Managing to drive up subscribers while relying on your own platform to spike growth is an uphill task.

Personalisation as an art:

Netflix is said to be a perfect example of how personalisation can help businesses tailor their offerings better. But in other cases, this might prove to be a double edged sword.

When you pay for a news paper, you don’t want to read similar articles every day. You would need to be surprised.

Apple first realised this in the music business when they realised that owners of existing iPods had often left the music selection to “shuffle”. It led to the release of iPod Shuffle.

Lack of group activity:

Activities which allow people to partake in groups significantly increase user retention/ engagement.

The most common tip to stick to your fitness schedule is to find an exercise buddy.

Group discounts are about providing a network effect so that each user can stick to the offering for a longer period.

But content business in general lack this group activity advantage- in most cases, you listen to Spotify alone, you Netflix and chill alone, you read your newspaper alone, you play your mobile app game alone and you do your online courses alone.

All in all, if you want to lead the content race, your strategy should be bang on. And you can’t depend on only existing audience to change behaviour. You need to create your own tribe.

Let us keep aside the entertainment content i.e: Video, Music, Games aside for the reason that this is a market which caters to people who want to consume and have been doing so through other mediums. Also, consumers are willing to pay for these services. Subscribing to Netflix over cable TV and Spotify over Pandora is a one-step increment. It largely depends on the quality being offered, ease of consumption and the price point.

Source: New York Times

But what about the other verticals?

There is a steep drop in people willing to pay when it comes to non-entertainment related content.

How do we get the customer to pay for niche digital products offerings?

How do you sell your product to someone who does not think he/ she can make time for it?

How do you introduce them to a product which they have no prior experience of using?

Here’s a wonderful line from an article by UserOnBoard:

People don’t buy products. They buy a better version of themselves.

A tweet by Jason Fried was also mentioned :

Now, there are two kinds of ways to get people to pay for such kind of niche content:

- If you notice an existing behaviour (online/offline) and make your offering competitive in terms of price/convenience.

- If you get in more users to adapt to what you are selling and convince them that it is for their own good.

The former is one of the fundamental rules of business and will get you revenues; the latter is what will tell the world that you have arrived.

Every discipline will have its loyalists, nay-sayers and fence-sitters; to tilt the balance in your favour, it is important to target the last set.

Around 2,600 years ago, Buddha, a prince, renounced the worldly ways of life and became an ascetic. He roamed the eastern part of India and promoted his teachings which formed the founding tenets of Buddhism. One of those was the concept of ‘Sati’ (Pali), a practice being in the moment to overcome suffering and attain spiritual enlightenment. It roughly translates into Mindfulness in English, something which Wikipedia describes as the psychological process of bringing one’s attention to the internal experiences occurring in the present moment, and can be developed through the practice of meditation and other training.

Founded in 2010 by Andy Puddicombe, a Buddhist monk and Richard Pierson, a marketing consultant, Headspace started off as an event company which conducted meditation sessions in London. They started selling meditation subscriptions bundled with The Guardian in 2011. Based on the positive feedback on the content and the growing demand by the attendees of the offline sessions, the founders decided to build an app with the help of freelancers and launched the first version in 2012. This didn’t work out and the founders came to the realisation that they had to be serious in the app based content business, and moved to Los Angeles. A move which would turn out to be a crucial one for their company.

A redesigned version of the app was launched in 2014 using a freemium model of 10 free 10 minute sessions, christened as Take 10 and monthly/ annual subscriptions. Within a span of 15 months, the startup raised 34+ million from an eclectic clutch of investors which included multiple PE firms, entrepreneurs including Linkedin CEO Jeff Weiner & actor Jared Leto.

It has been a steady upward trajectory for the company since then. It has around 16 million downloads — an increase of 10 million since the last year. Forbes estimates that Headspace’s revenue is $50 million a year and values the company at $250 million. It was in the news again when they completed another funding round this June.

It has largely grown by word of mouth and the brand visibility it generates online. The number of customers are growing year on year. The online world mostly contains positive words about the brand and the effect it has on people.

The rapid growth in the customer base is where Headspace has pushed the limit.

Its target customer is not the one who meditates on a daily basis but the one who wishes to meditate on a daily basis.

It does not speak to the people who know the advantages of meditation but to the one who thinks meditating is a good habit that has to be inculcated in his life.

It is not about making you meditate but about egging you to try out meditation.

Simply put, it aims focuses on making the pie bigger so that it can cut a big slice for itself. And boy, it has spun a story by executing on several fronts. And therein lie the points that other content subscription businesses can learn from.

Build Uniformity

‘Welcome to Headspace’ — an English accented voice is the first thing which greets you when you open the neatly designed app. From then on, it is the same voice which interacts with you, extols how to train your mind, acts as a background to the handful of animation videos and congratulates you as you move through modules.

Though the voice has an easily recognizable quality, I never gave much thought to its owner until I randomly stumbled upon him online. Andy Puddicombe is the man who has taken the concept of headspace or mindfulness far. He is author of the three books (all contain the word headspace!) which have been translated into 10 languages and are available in 25 countries, a TED talk on mindfulness- one of the first TED videos to be featured on Netflix, has appeared on top media shows and is a guest contributor to most of the top newspapers in the world.

The Puddicombe you see in the TED talk speaks the same language as the one who writes the book and coaches you on the app. He is the same character in all of his interviews online- he communicates that meditation is for people of all ages and being mindful has the capacity to change your life.

Sample what a user has to say about him:

Here is a guy that is legit. He’s been celibate. He’s done the work, done the training and now his presence within the Headspace app has been described as ‘Having a monk in your pocket’.”

In short, Headspace has a uniform language- it is Puddicombe.

What is important to note here is that it is essential for businesses to convey what they stand for. And this communcation stream should be aligned across whatever you do. Design can be a good tool but it cannot be the only weapon in your armour. It can draw people to your app but it wouldn’t give them a purpose to stick to it.

You need to have a higher plane of value for your customer to identify with.

In a world which is inundated with all of views and opinions on all matters under the sky and even beyond it, it is essential to make sure that your user/reader/subscriber stands to benefit from the relationship. And in the process, presenting your content with uniformity brewed into it becomes a key trait.

To elaborate on similar lines, the black and white format coupled with the intersection of minimalist design and high quality pictures gave the NYT a uniform language. Walter Lewin’s lectures are known for the practical application of physics. Wait But Why is known for its long form reads coupled with its rough illustrations. When you subscribe to Ben Thompson’s Stratechery, you know that you will be reading about a view which you have not thought about before.

All of them have set an example in the mind of the reader. In cases of surprise, you know that you are about to be surprised.

In the content business, uniformity and familiarity beget loyalty.

Can someone pick off from where they left about a month ago and still feel comfortable?

After a busy day of work, can I incorporate a regular habit that makes me feel at home?

Can you inculcate a routine, easily understood option in an otherwise unstructured world?

Validation sells

The way our society is structured, any aspect of spirituality, religion or the working of our mind, will be met with the cry to provide validation.

People need re-assurances that their habits are scientific and that their beliefs are true.

Our de facto stance is to distrust things we can’t see.

Whether it is about research on response of the human mind to stimuli, teachings of spiritual gurus or age-old traditions, there is a skepticism layer that meets advancements or offerings in this field.

What piqued interesting when digging deeper into Headspace was that it employs neuroscientists with designations range from Chief Medical Officer to Science Communications. Not surprising considering that the company was a part of several independent researches.

One study examined the impact of mindfulness on workplace stress in MNCs. A BBC science documentary had the host using the product over a period of 8 weeks and found that it significantly reduced negative outlook and helped him overcome insomnia.

The message was clear.

It was a company which put a lot of effort into identifying the efficacy of meditation from a scientific view-point. The Science tab sits prominently on the website with the section saying that ‘a number of studies have already tried to answer this question and have initially found that online mindfulness training does produce results similar to in-person training.’ Supporting links leading to a handful of research papers are featured.

What Headspace is trying to do is to reach out to the ones’ who are skeptic and tell them that theirs is a trusted product. Though a company in its early stage, it is the only one among its peers who is going the extra mile to ensure that it is making its core offering acceptable.

The result?

It has come to be known as a symbol of its ilk and has a mindshare in its field.

And it does not matter if it is not in sync with the founder’s belief. As long as it increases the subscriber pool , it is worth doing it.

“I don’t get excited about science. My own experience has been sitting down and seeing it work in direct way. But for a lot of people, knowing that something is happening to the brain is really important, and I think it’s right that we pay attention to that. Part of demystifying [meditation] is giving people confidence and trust and science is a key way of doing that.”

Undoubtedly, Headspace has positioned itself as a thought leader in this space. And it has done this so well that even critics have to refer to it while damning the trend of technology led meditation practice.

An article about the problems with meditation apps is worded as ‘the problem with headspace and all those mindfulness apps’.

Someone testing out popular meditation apps tend to use it to understand the impact.

And what does it mean for an end user who is deciding whether to get on the bandwagon or no? Will he be biased to feel uplifted after the initial sessions are done? Can that bias motivate him to take up a subscription?

We can only guess but there definitely seems to be some amount of correlation if not causation.

Sample this quote from Catherine Kerr, a researcher in the cognitive neuroscience of meditation (interesting division!) as told to the New Yorker -

“I’ve talked to several people using Headspace, and they’ve all reported these hard-to-quantify benefits that have to do with attention, equanimity, alertness, and being able to deal with daily life.”

Placebo effect? Maybe.

Discountable? No.

Grab ’em first

According to a Microsoft consumer study, the average attention span of a human when measured in 2016 was 8 seconds- one second less than that of a goldfish. In short, bite sized content sells.

Starting off with a ’10 minutes per day’ concept, perhaps the most significant move headspace has made since its inception was to include mini sessions of 1–3 minutes on the app and an SOS feature — a special meditation designed to calm you down during ‘sudden meltdowns’.

This was done after listening to a lot of feedback from people who were already users — free or paid, we never know. But let me put my head on the line and say that this will help them in retaining a user.

“We’re basing it on anecdotal feedback, and data. We see how people use the product in an anonymous way. There’s a lift in engagement the shorter they get. Ten minutes is still far and away the most popular, but we’ve just launched more of that shorter content.”

This trend is visible across industries. The earliest I can think of would be the rise of HowStuffWorks, an information site which provides details on the working of many things in a short format (short for the early 2000s’!) . In today’s day and age, the rise of web- series and listicle journalism prove this point.

Furthermore, shorter videos are played more on YouTube. Players like Google have revamped their mobile app to provide bite sized answers. CNN’s coverage of the fire in the Grenfell tower in London is an example of how existing companies are aligning their work to cater to these short attention spans.

What is more important here is to let the user get to know you as a brand. They need to understand and identify what you stand for. This is more important for the kind of content that the user is not inherently pleased to buy but the one which needs him/ her to adapt to.

Once you build the trust, you open up the plethora of offerings built into your product.

At an approximate of 5% of paid subscribers, the original 10 free sessions might have given users too much of runway to try the product for a while and keep looping through the same set. With the new version, users get to demo 1–3 minutes sessions across categories- apart from showing the plethora of options available, it subtly quickens the decision making process of the user.

The key is simple. Headspace has a good product. All they need is users to stick to it. And if shorter formats widens its market, it is going to go after it.

You can almost imagine them saying this:

It’s great that you visited our app. Don’t think you can meditate for 10 minutes? Do it in one? — Whatever it is, stick to our platform.

Package as a complimentary offering

A review of Headspace would not be complete without referring to how they effectively put a strategy for market expansion. And we are not even talking about the core meditation sessions but all the spin and expanding use cases they have managed to weave around it.

The blogs, videos and other SMM material tries to find a use case for meditation in anyone’s lives. And it is directly linked to their other passions and interestingly, worries. It is totally focused on getting you as a user to try meditation, irrespective of whether it fits into your world view.

If you are prone to a breakdown- meditate; if you want to have a sense of calm- meditate; want to be a top performer at work- meditate; Alcohol recovery, acidity, belly fat, better workout, better parenting- the mind has an impact on all the activities and meditation can help you become a better version of yourself. A catalyst which can accelerate your goals and an inhibitor which can lessen your worries.

This fits in well to identify the fence-sitters mentioned above.

When you sell your product as a standalone item, the prospective subscriber has to evaluate the cost-benefit relation.

But when you position yourself as a tool that compliments your user’s progress in obtaining/ overcoming something, he/ she is more inclined to listen to you.

The approach might not give you a lot of mindshare at first but once you start growing on the mind of the user and successfully find yourself on his daily schedule, you have the licence to take advantage.

When you begin to drive user behaviour, the opportunities are abound. One of the major benefit that the subscription services has to offer is to up-sell/cross sell to the customer — make them spend more for the same product or buy similar products . The way businesses go about it is to strengthen core business, build loyalty and start opening up horizontal offerings, which was also a view voiced by Puddicombe.

“In the short term, we want to build most comprehensive guide to meditation. Certainly we’re not there yet but well on our way. Potential through the brand and platform for it to go beyond meditation.”

The company has hired a few key people for different functions recently.

Will they look to establish partnerships like the ones’ with Spotify and Nike?

Will they branch into offline centres?

Would they be inclined to make it more of a community activity to get in network effects?

Nike stands for top athletic performance. Apple stands for innovative design. Zara is about the latest designs in the market. Can Headspace be synonymous with mental health and happiness?

There remains a lot to be seen about Headspace’s growth and how it keeps its subscribers hooked to wellness but if his words come true and if its execution till now is a sign of the future to come, it has only started in its mission.