Although the subscription-based model originators were actually ‘60s TV channels in the USA, Netflix spearheaded the market in the digital world. Stylers Group Co-Founder, Péter Tiszavölgyi and Levente Korponai, a Stylers IT project manager, reflected on the path that brought us to today. We outline their points below:
On stable internet:
Péter started by speaking about the early days of Netflix:
“At first, they worked with physical copies of DVDs and customers could watch a specified number of movies for a fixed monthly fee. The DVDs were delivered to their door and they had to leave them at a specific place after watching the films. This solution wasn’t good news for the then-popular Blockbuster, the market-leading video store system.”
In order to run a streaming service, clear technical conditions must be met. Some of you may remember the dial-up internet days – can you imagine trying to binge-watch a new series as the internet disconnects every minute? With this in mind, you can see that it’s not a coincidence that Netflix launched their new business direction around 2007.
Even if DVD rentals were still popular in 2011, the market confirmed the legitimacy of subscription-based streaming. At the same time, more smartphone users were able to afford unlimited mobile internet data. This paved the way for similar subscription-service providers such as Spotify.
Subscription-based models attract users in two different ways: commercial-free content consumption (as applied by Spotify and Youtube) and a continuously-expanding repertoire (as applied by Netflix and HBO GO’s company-produced content).
Furthermore, users must also receive personalized recommendations for which an AI system may be necessary.
On meditation and patient transport:
Péter then moved on to describe Stylers’ first subscription-based products:
“Subscription-based products appeared not only in the field of music and movies but also in other areas. Both Headspace and Gaia were meditation applications which appeared on the market around 2011-2012. The reason I give them as examples is because our first subscription-based solutions happened in this field.”
“We worked for Deepak Chopra, who is a well-known person relating to alternative medicine. In this case, the idea hadn’t come from him – we saw the opportunity and he was open to this concept. In addition to that, we built a minimal AI solution into this product which was able to recommend exercises based on the user’s age, gender, location or other variables.”
In addition to a consumer-focused subscription model, Stylers gained useful experience in B2B operations, as the Journey application served an additional need in different field. Patient transportation and retirement homes in the USA are governed by a set of very strict rules. The Journey app connected homes and service providers, so everyone benefited from it. One side could work constantly and the other side could transport patients for their medical examinations more easily.
Does experimenting abroad create an advantage in the domestic market?
The Stylers group has worked on subscription models in the USA, but what advantages do these abroad experiences provide in Hungary?
Levente provided an interesting perspective on this question:
“The knowledge acquired abroad provides a basis for local sales processes, because for big clients it’s reassuring to know that we can serve high-traffic portals if needed. In addition, it is also a considerable advantage that the team that works on foreign projects sits here at the office. Some members often work on Hungarian projects too, so knowledge sharing happens on a daily basis.”
Péter also added that the experience gained from using AI-based recommendation systems also has a great advantage in attracting domestic customers. Because the USA has a more experimental approach, the idea that finding and adapting the right solutions will cost money and time is more widely accepted. By contrast, the Hungarian market prefers clear solutions, preferably on the first try.
This difference in business attitudes has created an advantage for Stylers. While working on foreign projects, they can experiment with several solutions, then assess each solution’s advantages and disadvantages. With this experience, they make better offers than companies that only have a second-hand experience.
Both Péter and Levente also pointed out that these established patterns work well because a subscription-based model remains the same, whether the product is text content or meditation. There is no danger of starting every project completely from the beginning because of drastically different client needs.
Moreover, customer needs often sound like, “Just do it like Netflix.” On top of this, developers often need to adapt to the client’s already existing systems. Many times, they must repeat tasks again and again in a different programming language with a given know-how.
Success came ten years later:
Although Nemzeti Sport (a Hungarian sports daily) attempted to introduce subscription-based content in the early 2000s, their readers didn’t understand why they should pay for something that was already available on the internet. Nemzeti’s readers were not the right target audience, and the company’s methods and timing were off. On the other hand, Hvg360 was the first service to successfully introduce the subscription-based model in the media. They also created a sales model, which is subscription-based but has fixed-price product add-ons.
The ten-year delay between Nemzeti Sport and Hvg360 was realistic because of the price sensitivity of Hungarian market and the lack of online infrastructure:
“Today, integrating PayPal is a 10-minute process. But, creating a credit card payment option could take months back then. Microsystems, which make the development process faster and cheaper, are established now,” Péter explained.
Levente added to this, emphasizing the role of foreign pioneers:
“The Hungarian service providers waited to see whether the Hungarian market would accept this type of content consumption and whether Netflix and Spotify could become successful Although many Facebook comments show that many people do not understand why they need to pay, the aforementioned service providers are still firmly established in the region.”
On big data and AI:
What type of developers are capable of creating these subscription content systems?
Péter and Levente both agree: they need to be good. A good developer can build the base. but if we there are recommendation systems, the solution is more nuanced.
To create AI systems, which recommend content based on preferences and behavior, the skill for performing Big Data analysis and the knowledge of various matrices and AI machine learning are essential. Stylers Group certainly has this skillset. It isn’t just luck – they earned it with continuous learning.