In today’s world, consumer needs and wants are rapidly changing. And that means business models expire just as quickly.
Today a physical product being sold by a large corporation may be profitable, but tomorrow a digital product can easily displace it. Today one sales channel works, but tomorrow a more convenient one can pop up and take over.
Over the past few decades, there have been many stories of companies failing to adapt their business models to the changing times. What worked for them in the past will most likely not work for them in the long run without any change.
Here are three business models that seem to be expiring, and evolving due to new technology and market demands.
In a single transaction, players can usually gain access to a game’s complete content and future updates. However, many game developers have started to move away from this model in recent years.
Now, more and more game developers offer additional content for their games behind a paywall or subscription. Additional paid content targets players who want to customize their gaming experience or gain access to premium items and functions.
This business model evolution is most likely the future of gaming as single-purchase games do not produce sustainable revenue. Future updates, additional content, and developer support were provided for free for years in the single-purchase model.
Additional content, microtransactions, and subscriptions give game companies a sustainable source of revenue to finance future updates and developer support for their games.
But not all games have followed the trend. Interestingly, Minecraft is one of the games that hasn’t followed the trend, with all of the game’s content and features available after a single transaction. It was released in 2011 and has sold over 238 million copies worldwide.
However, its spinoffs like Minecraft Dungeons have additional downloadable content behind a paywall.
Some game developers have gone all in and rely solely on additional paid content for revenue while making their previously paid games free-to-play.
Media outlets report that Sims 4 game developer Electronic Arts’ decision to make the game free-to-play in October 2022 may have been influenced by the potential revenue the company can make from paid additional content. Currently, the Sims 4 has 59 paid additional content packs that are collectively worth around USD 985.
In CS:GO’s case, its developer Valve faced backlash from fans who paid for the game before it became free-to-play in 2018. Yet, CS:GO made the company USD 414 million in the same year. And its monthly active users grew from 12 million players in January 2018 to over 24 million worldwide in February 2020.
Over the 2000s, newspaper companies have begun to look more like online news outlets. Newspapers traditionally earn from both newspaper sales and advertisements, but this seems to no longer be viable because newspaper circulation has been in decline for decades, according to data from the Pew Research Center.
Daily newspaper circulation in the United States has been in decline since it reached its height in 1984, with over 63 million newspapers. In 2017, daily circulation was only 30 million copies.
Ad revenues were also declining, with American newspapers only earning USD 8.8 billion in 2020. This figure is 30% less than the USD 12.45 billion they earned in 2019.
Some credit the rise of online news sources, most of which are free, as the reason for the decline. Online news sources give people the ability to consume only the news they want to read when they want to read it.
This trend has left newspapers scrambling for new ways to monetize their content and generate revenue. Many legacy newspapers like the New York Times, the Washington Post, and the Wall Street Journal have shifted to online subscriptions where non-subscribers only have access to only a limited number of articles.
The move was only logical for the New York Times.
Statista’s data shows that the newspaper’s print ad revenue has been declining for many years from earning USD 1.7 billion in 2008, down to USD 497 million in 2021. Its revenues from circulations, which include online subscribers, have been increasing from USD 910 million in 2008 up to USD 1.3 billion in 2021.
Physical media rentals and purchases
If you wanted to watch a film at home, just a few decades back you would have had to travel to a store to rent or buy a VHS, CD, or DVD of the film. This was the norm back then, and it was lucrative for media rental companies.
Blockbuster, one of the most successful media rental companies at the time, made USD 5.9 billion in 2004. Its core business rented out and sold VHS, CDs, and DVDs of films. These had to be picked up and returned by customers at their stores or by snail mail.
Despite seeing many years of success in this business model, the company filed for bankruptcy protection in 2010. And in 2020, only one store survived the years, out of the thousands they had just a decade before.
How did it go downhill so fast? Its business model died as technology advanced and more convenient means of watching films were made available.
The internet made it easier and more convenient for consumers to access media online, making it the preferred channel to watch films at home. With this shift, online subscription streaming services like Netflix and Amazon Prime quickly rose to prominence.
While Netflix started as a media rental business that sent DVDs to subscribers by mail, it moved away from this business model when it introduced its online streaming service in 2007.
Instead of operating thousands of physical locations, Netflix operated one digital location. Netflix’s online streaming site made it more convenient for customers to watch films. Its subscribers could access its entire media library on-demand directly through their devices.
Consumers preferred this over traveling to a physical location to get and return a DVD of a film. Netflix reported it had 200 million subscribers worldwide in 2021.
Evolving your expiring business model
The companies that survived the changing market understand that they cannot find comfort in sticking to their current business practices. They successfully anticipated how consumers are changing and how their business model should evolve alongside this change.
All companies need to innovate, or else they risk being replaced by their competitors. While no one can accurately predict the future, there are solutions to mitigate risk through innovation and foresight.
Evolve ahead of the future. Explore how you can grow your company and succeed in the future with our experts. Schedule a FREE strategy session here.