Weekly Column: What if Social Media Required Paid Subscriptions?

In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about the prospect of social media companies charging to access platforms and/or content through paid subscriptions.

You can read the full column below.

What if social media platforms required paid subscriptions to access content? It is a timely question to consider as YouTube and other content platforms recently changed their financial terms of service for paying content creators. Surely, user accounts would drop because not every user wishes to pay for social media access or content. It is also entirely possible that social media could have ad-based and non-advertisement based options. It could also be possible to have celebrities and users with over a certain amount of followers to charge to access specific content.

Of course, the problem with charging for social media access and content on those platforms is that by its very nature of being free to use, its use is and/or becomes exponential. The exponential use is better described as “network effects”. Network effects is a business and investment phenomenon where, according to Harvard Business School, “refers to any situation in which the value of a product, service, or platform depends on the number of buyers, sellers, or users who leverage it. Typically, the greater the number of buyers, sellers, or users, the greater the network effect—and the greater the value created by the offering.” Meaning, the more people who use social media, the more value it retains for its investors, advertisers, and users because more content is created and shared by users and therefore keeping users engaged and on the platform. As more people talk about what happened or what was shared, seen, or heard on social media, like a popular movie playing in a theater, the more users are attracted to join the platform (or go and watch the movie).

Unfortunately, a paywall to join a social media platform would discourage users from joining or subscribing even where exclusivity tends to peek interest in consumers. The foregoing is because being free encourages usage particularly where consumers find value. However, there is one glaring downside to social media and streaming for that matter, and it is a phenomenon called “multi-tenanting”. Multi-tenanting means just like it sounds—users taking up location or residence on multiple platforms. The multiple platform access and use creates user fatigue especially where there is a price to join multiple platforms to access wanted content.

Practically speaking, this means users can sell their products, share their pictures, stories, and content, and view entertainment on multiple platforms. As NFX describes it in the article linked above: “People can sell their products on eBay and Etsy at the same time. Landlords can list their apartments on Craigslist and Trulia, and renters can check both marketplaces to browse for inventory. It’s hard to lock out competition from new entrants when the members of your network can use competing networks as well as yours without a penalty.” In the social media context, a penalty might be forbidding multiple platform use through exclusivity clauses in the terms of use for users (very unlikely on the current market) or through charging a subscription/membership fee (also very unlikely unless for celebrity-sponsored content as an add-on to a free platform).

With social media and streaming, there are many platforms to choose from: Facebook, LinkedIn, Snapchat, TikTok, Instagram, Twitch, Twitter, and even more platforms internationally. Albeit each of those platforms offer different services, purposes, and even logistical capabilities. Meaning, consumers use the platforms in different ways and for different content. However, charging to join, consume, and/or engage on social media would change social media forever. For one, would charging a fee raise the stakes on free speech arguments and social media’s exemption from Communications Act liability? One thing is for sure, social media would need to change its namesake to “paid media.”

Streaming service options are growing by the fiscal quarter. However, as NFX puts it, “The goal of the marketplace is thus to design the product/service to add so much value or “lock-in”, particularly on the supply side, that members won’t be tempted to multi-tenant.” In a free world of social media that is difficult if not impossible currently, as users tend to use multiple platforms, but prefer one platform over another. With streaming, the availability of free, ad-based, and non-advertisement options and subscriptions means that the competition is steep and consumers are forced to make decisions as to what service(s) to purchase. Lastly, there is limited time in the day to consume content.

Will current social media platforms require subscriptions? Unlikely. However, other existing platforms and yet to be invented or introduced content options not named "social media" might.

About Jeremy M. Evans:

Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clientele in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.