Promo Traps and Spending Caps

In a world plagued by an abundance of timeworthy content, the money pie is dealt to increasingly disproportionate piles with the tiniest of slices – one subscriber at a time. But where does this lead?

As tech matures, so does the software it is used for. Now that smartphones, tablets and gaming consoles have arguably reached their functionality zeniths (at least for the foreseeable future), we are beginning to see how software and content providers are trying to secure their piece of the consumers’ time and money. And it’s looking like a mad gamble. Like the countless companies that fell into the promo trap in the 1900’s, businesses in the digital age are trying to figure out ways to serve their product as a subscription. By cutting their product in small chainable pieces, or by promising an endless stream of new content, companies are scrambling to fullfill their fiduciary duty to their shareholders: to create a mytical, gold spewing sampo – a source of continuous revenue.

Promo traps

Falling into a promo trap is quite simple: create extra demand by temporarily reducing prices, see sales dwindle when the sale ends, rinse & repeate until your clientele begins to expect the price cut. In Finland, the best promo trap examples are probably furniture and magazine businesses. It’s so easy to purchase the desired product below their normal rate, that it’s actually the norm. In the gaming world, Steam’s sales are iconic in their ability to create demand, but they have also taught gamers to wait for the inevitable price drops before pulling the trigger. Lord knows we have enough backlog to carry us over the wait. Getting out of a promo trap is painful, requires deep pockets, and might not even work! If you’ve devalued your product, there is no telling if your clientele is willing to pay premium anymore. And don’t pretend it’s not devaluing to sell your 3-year project for 0,99 € on the eShop just to get on the top-sellers list.

Spending caps

On the other side of the same coin we have subscription models. Like with the promo trap, the road to fiscal growth is paved with good intentions – lowering the barrier of entry for the customer. Why pay 16,90 to own a movie, when you can pay 9,90 a month to have viewing rights for a thousand? The proposal is of course very beneficial for the consumer, but the devil is in the long run.

Now we have Spotify, Apple, Microsoft, Sony, Nintendo, Disney, Netflix, EA, Audible and a plethora of other suitors, both global and local, that are trying to woo you into a subscription or a season pass of some sort. That’s a lot of services to pay for regularly, and a shit-ton content to consume – more than anyone is capable I’d wager. This creates a problem. Consumers will (and already have) start optimizing their spending and media consuming according to current trends and the size of their wallet. “This month I’ll watch The Boys, the next I’ll go back to Netflix for The Witcher.” How can you tackle that? Well you can try by creating an ungodly amount of unmissable content, an artificial zeitgeist if you will, that binds the consumer trough fear-of-missing-out. Disney is doing this by acquiring every intellectual property there is worthy of the green screen treatment. Netflix is flooding its service with new shows, and the Oscars with its movies – no matter the cost. Epic, Sony and Microsoft give out free games for peanuts. Spotify is trying to cement its value by securing a foothold in the podcast business. Most AAA games pretend to be services with their battle passes and DLC deals. All this is accomplished with money, ridiculous amounts of money.

At the end of the rainbow

What happens when you eventually run out of juice? Your audience moves away from Star Wars? RDJ retires and the Next-Big-Thing-Man doesn’t gain traction? Battle pass season 3 sales dip?  Brand face lift goes awry? Subscriber numbers begin to fall? Your shareholders are in a mad panic?

How to avoid the losing subscribers to your competitor? That is the billion dollar question. Netflix is pumping money to keep the flow of Originals steady, but I’d be surprised if that’s sustainable in the long term. Microsoft’s Game Pass and Sony’s Playstation Now are ever expanding and adding newer and newer games to their libraries, but I’m sure at least Microsoft has ulterior motives besides game profits for its spending. Sony on the other hand is very much dependant on their gaming revenues, so it’s a must-win battle. A little closer to home, magazines are being bundled creatively so that the main product becomes ancillary. Furniture businesses are still riding on seasonal sales like nothing’s changed. All this seems risky and expensive, and some of these methods might spiral the whole market into a race to the bottom.

So, let’s take advice straight from the top. Pokémon is the highest grossing media franchise of all time with approx. 100 billion dollars. How? By doing virtually nothing but the bare minimum. Even the fiercest Pokémon fans admit that the franchise has become quite stale and stuck in the past, but when the newest iteration hits the shelves the very same people cough up.
What about Star Wars then, surely the household sci-fi franchise is executing its strategy ingeniously? Well about that… It’s a small miracle that The Rise of the Skywalker stumbled itself beyond the billion dollar mark, and that The Mandalorian launched to such high praise, when the franchise seems to lack any sort of creative vision.

So stay put, do nothing and hope for the best. Or scramble everywhere in a desperate effort to please absolutely everyone.

Welp.

 

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