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Problem: Matthew Ball wrote in February 2020 that:
The “subscription economy”, by definition, presumes that the overall “economy” – from products, to services, content, transportation, labor and more – is shifting over to “subscriptions”. Thus, to claim that consumers have “subscription fatigue” is to say that they have “spending fatigue”.
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Of course, the “subscription economy” does mean that step one of a recession will be to “re-evaluate all subscriptions”. However, this does not mean subscription fatigue should be considered a real “thing”, let alone a defining element of modern-day competition. Furthermore, payment model – upfront v. recurring, subscription v. á la carte, online v. offline – is irrelevant to what’s “re-evaluated” and not. Some subscriptions are “necessities”, like toilet paper, while others are concerned with discretionary spend, such as Office 365 or Netflix or Tinder. This latter group isn’t competitive because they’re “subscriptions”, but because there is, as always, finite spending money for non-essential items.
I actually disagree with Matthew’s argument here and actually find a deep problem in “choice fatigue” where consumers are not willing to make the choice required to subscribe to a product(s). This business would attempt to solve “subscription choice fatigue” through bundling.
Solution: A service where customers can answer a variety of survey questions (demographic data, geographic location, budgets, etc.) and receive a “bundled life package” according to their needs. This would include subscriptions to everything: furniture, home essentials, cook ware, electricity, garbage, water, clothing, electronics, etc. It would be the bundling of everything you need in a lifestyle to essentially pay monthly to live. Perhaps it could also include housing to be a complete living package!
This model has been iterated upon for centuries through the concept of a mortgage. Rather than paying for a house up-front, consumers “subscribe” to a service over many months and eventually become an “owner” of the property after fulfilling their full subscription contract. This business could take a similar approach by allowing people to own their subscriptions after a certain number of months of consistent payments.
Another example of this model in history is the bundling of television. As described by the Wall Street Journal in their article “Why Does the Cable-TV Bundle Exist Anyway?”
For four decades, the number of channels on the cable-TV dial has risen with seemingly unstoppable momentum, bringing consumers more choices than ever before.
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Bundling scores of networks together has endured in large part because the programmers and distributors both made huge profits from new channels, rising numbers of subscribers and steadily higher cable bills. Plus, until recently, it would have been a logistical nightmare for distributors to sell channels individually.
Perhaps one of the most examples of bundling for business success is Comcast. Fusebill explains, arguing that: “The Comcast Corporation generated more than $ 84.5 billion, with over 21 million subscribers, as of March 2018. How does a company get this large and stay fiscally healthy, particularly after the growing trend of ‘cutting the cable cord’? Because Comcast isn’t just a cable company anymore. Nor has it been for a very long time… but the largest cable company in the United States started looking beyond the realm of the television four decades ago. It made investments in the cellular business in 1988 and expanded its focus 11 years later when it began making investments in technology and the internet.” This bundling of cable, technology, and the internet has helped Comcast weather the storm and in the iteration of this company could help startups to survive unexpected black swan events.
This business would play heavily in the world of “Subscription-as-a-service.” According to McKinsey, “The U.S. subscription e-commerce or box market continued its strong growth in 2018. Based on our analysis, the largest subscription e-commerce companies generated $7.5 billion in sales in 2018, up about 30 percent over the prior year. We estimate the total market size for subscription e-commerce services is about $12 billion to $15 billion.” The Subscription Trade Association has similarly high numbers about market size which you can read here. Some other fun stats below courtesy of FuseBill:
By 2022, 53% of all software revenue will be generated from a subscription model
All new software entrants and 80% of historical vendors are offering subscription-based business models
63% of publishers say turning audiences into paying subscribers is a key challenge when creating subscription products
69% of households now subscribe to one or more video streaming subscription services
41% of households subscribe to one or more streaming music services
53% of senior finance executives say at least 40% of their organizations’ revenues are recurring
The average subscription billing vendor is growing 30%–50% annually
Monetization: A small fee for offering bundling as a service to these companies.
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)