subscription based business models

Filed in archive Venture Capital on July 8, 2004

Paul Allen seemingly likes subscription models:

"I have concluded that the best and fastest way to build another billion dollar company (assuming, of course, that MyFamily.com gets a billion dollar market cap someday) is to create a subscription product that one million people will eventually pay $10-20 per month to use. A million customers paying $15 per month would generate $180 million in revenue. If the company had a profit margin of 25% and a P/E ratio of 20, the company's market cap would be $900 million."

"Netflix just passed 2 million subscribers and is worth $1.86 billion.

XM Satellite Radio reached 1 million subscribers last October, less than two years after its launch. They are projecting 2.8 million by the end of this year. Market cap: $5.2 billion.

RealNetworks reached 1 million subscribers to its content service by April 2003. Market cap: $1.1 billion.

Classmates.com had 1.6 million subscribers two years ago. (It's privately held).

American Greetings, I believe, got a million subscribers (to its $11.95 per year greeting cards subscription) in less than one year.

There are many more examples of successful subscription services. The question is, is it possible to create new ones that have the potential to generate a million subscribers, or have all the good ideas already been taken?

I'm working with two startup teams on two pretty exciting ideas, both completely unique, that might eventually generate a million customers each. (Especially if Jim Ericson gets involved!)"