At a social TV conference I chaired earlier this year, a speaker from Screen Digest said, “Subscriptions don’t work.” I asked other speakers if they thought this was a viable business model for any area of online video, or even digital media as a whole. Most agreed there was a lack of consumer appetite to pay.

Even the speaker from Sky was sceptical about the subscription model, despite James Murdoch’s recent announcement that many of News Corp’s 110 increasingly video-rich newspaper sites would start charging for access on a subscription basis, a move inspired by the online success of the Wall Street Journal’s paywall model.

While much of the subscription discussion centres around the newspaper industry, there’s room to expand into other areas, such as online video and audio. I’m not ready to accept that live sport and news sites with loyal, affluent readers will be the only ones to profit. Surely as online video steadily improves in quality and reaches the TV screen through IP-enabled TVs, broadcasters and rights holders will want to review ad-supported free models, especially at a time of advertising downturn.

Amazon and Netflix in the US have got into the subscription business. But in most cases, such as Slingbox, these services require additional hardware. Most consumers aren’t eager to have another box in the living room, though. In fact, I’d value my LoveFilm subscription as an online video service as much as I do the DVD in the post. Unfortunately I don’t have as much choice of what to watch from its online library.

So perhaps the subscription model of the future is bundled media. Next week Sky launches its unlimited music streaming service Sky Songs, but it could also bundle exclusive video or programming that can’t be accessed on my Sky+ box. This model could work for print magazines too: if you subscribe to the magazine you gain access to content online that isn’t available to all who visit the site.

It appears that Hulu may be attempting to do this. It has built an impressive and adoring audience by providing free premium content over the internet using a free-to-consumer advertising model. However, Laura Martin, an analyst at Soleil Securities, projects Hulu will make a loss of around $33m (£20.9m) this year on $164m revenues (£103.7m). NBC Universal executives and other shareholders have to believe this loss can be offset by subscriptions, and perhaps even profit if the content mix helps to convert viewers to paid subscribers.

While audio companies have yet to show demonstrable success doing both (think Last.fm and Spotify), other online music subscription services did manage to build revenue quickly, even with limited libraries, by sticking strictly with subscriptions. Someone other than Apple, with its á la carte model for iTunes, must be able to show that there’s a business in online video. Let’s hope people are willing to pay for something other than dating and porn sites.

This post was kindly shared with TMV by NMA.co.uk. Do feel free to check out their great site.

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