“A confluence of events has propelled subscriptions into the forefront.”
Whether a restaurant meal, an obscure cereal, a parking spot, travel services, a box of cosmetics or osteological specimens (a.k.a. bones), nowadays, you can buy just about anything by subscription.
The regular payment approach is hardly new. For instance, if you lived in the United Kingdom in the 1860s, chances are you had milk delivered by subscription.1In 1865, the famous sewing machine company, Singer, took a bold step offering customers the opportunity to deposit $5 and rent a machine for $3 a month.2
While the number of subscription-based businesses climbed over decades, it is today’s statistics that are staggering. The subscription economy has reportedly grown 400% in the last decade.3 In 2021, UBS research projected subscription business models could grow from a $650-billion market to a $1.5-trillion market between 2020 and 2025.4 The United States dominates the global subscription economy, with research showing that in 2020, consumers had an average of 12 paid media and entertainment subscriptions.5 Such subscriptions are particularly popular with Millennials, Gen Z and Gen X. With that US trend in mind, it is easy to see why Netflix and Amazon Prime video are in heated competition for market share, with Amazon’s service edging ahead in early 2023.6 Here at home, one study reports that four in five Canadians have at least one streaming service with 17% of us having four.7
Timing Is Everything
A confluence of events has propelled subscriptions into the forefront—the Internet’s evolution and e-commerce growth, the introduction of smartphones, the advent of rapid home delivery, and the expanding scope of payment options ranging from digital wallets to buy-now-pay-later to biometric or crypto payment.
For businesses, the subscription model advantages include predictable revenues, a larger average spend by customers, and ongoing data-gathering opportunities, enabling companies to learn more about their customers and better serve them with current and future offerings. Consumers gain convenience, predictable spending and the ability to regularly enjoy something new.
Certainly, the COVID-19 pandemic boosted subscriptions as businesses and customers sought new ways to connect and continue shopping. It raised the profile of a shift from a transactional economy to a relationship economy where subscriptions create an opportunity for companies to have ongoing client contact. But even these relationships can experience headwinds and, in today’s world, reasons for unsubscribing include the realities of inflation and higher interest rates challenging disposable income, and customers questioning the value of the product or service they have chosen.
In keeping with the innovation that has shaped the subscription economy’s growth, there are now numerous new “apps” designed specifically to help manage subscriptions. Some financial services firms such as banks and credit card companies are also getting involved, adding subscription management features to their services.8
Such options may come in handy as new offerings continue to emerge, and while over time the pace of revenue growth may fluctuate, it is clear the subscription business model is here to stay.
1. Dana Dunne, “The Origin Of The Subscription Model,” Forbes, December 3, 2021, https://www.forbes.com.
2. Jeff Wilkins, “The Rise Of The Industrial Subscription Economy,” Forbes, April 29, 2019, https://www.forbes.com.
3. Anna-Kaisa Walker, “Explaining the appeal of subscriptions to Canadians,” Pivot Magazine, November 23, 2021, https://www.cpacanada.ca.
4. Heather Long and Andrew Van Dam, “Everything’s becoming a subscription, and the pandemic is partly to blame,” Washington Post, June 1, 2021, https://www.washingtonpost.com.
5. Sara O’Brien, “Consumers spend an average of $133 more each month on subscriptions than they realize, study shows,” CNBC, June 2, 2022, https://www.cnbc.com.
6. Madeline Garfinkle, “This Streaming Service Beat Netflix as the No. 1 Market Leader in the U.S.,” Entrepreneur, January 23, 2023, https://www.entrepreneur.com.
7. Rosa Saba, “How to take stock of your subscriptions,” BNN Bloomberg, December 29, 2022, https://www.bnnbloomberg.ca.
8. Jody Bhagat, “Subscription Management: An Opportunity For Banks To Delight Customers,” Forbes, January 7, 2021, https://www.forbes.com.