How did we accumulate so many subscriptions?
Although the subscription model has seen a boom in recent years, it is far from a modern invention. The subscription model in fact had its start in media, with the spread of books and periodicals in the 17th century. Publishers were some of the first movers to realize the benefits of the recurring revenue provided by a periodic service. Nowadays, more and more brands have applied this business model to a range of industries.
Aside from the continuous revenue stream, the subscription model has other benefits for companies as well. One of them is the breakdown of large payments into smaller, easily digestible payments customers have to make every month. Customers may believe that they are not spending a lot of money, because it comes in such small doses, but in the long term these payments accumulate. For example, a new Waterstone Management Group study found that 84% of the 2,500 Americans surveyed underestimated their spending on subscription services.
While this model has been adopted by industries across the board (socks, healthy snacks, beauty products, fitness, etc.), the biggest shift has occurred in telecommunications. Recently we have witnessed a huge increase in the number of media streaming services available. While Netflix used to rule the realm of digital streaming content, other media companies have expanded their offerings to compete in this space. One example is Comcast, who released their own streaming service, Xfinity Stream. Another is Disney, which announced their launch of the Disney+ streaming service in November 2019, and, in an effort to compete with Netflix even more directly, they have ended their licensing agreements on their content with other streaming services.
According to Deloitte’s 13th edition survey, 69% of respondents report subscribing to at least one streaming service, while 65% report subscribing to traditional Pay TV. As primary media ingestion migrates from traditional televisions to the Internet, will customers be forced to subscribe to each company’s unique streaming service, accruing several different bills each month? Or will they choose the one that suits them best and discontinue the other subscriptions offering similar, if not identical, content? On the other hand, in this model, companies are now forced to be continuously innovative and adapt to customers’ tastes, in order to keep them engaged month after month.
What is subscription fatigue?
From these phenomena, we arrive at the term subscription fatigue. The wide variety of options offered in the market could understandably overwhelm consumers. It is in fact a double edged sword: the more subscriptions we have, the harder it is to keep track of what we already own and the harder it is to choose which new services we want to acquire among all of the similar products available.
At some point, and perhaps for some this point has already arrived, customers will become fed up both with paying for so many different services each month and for needing to constantly reassess which services they actually use (essentially, which subscriptions are worth continuing).
According to some recent research, we are still not in a position of complete subscription fatigue. The subscription platform Zuora and The Harris Poll conducted a study in which a third of respondents reported that they were likely to increase their number of subscriptions in the next two years. The majority of respondents surveyed would keep their number of subscriptions the same, while 7% reported a planned decrease in their subscriptions. Experts may disagree on whether we have already reached a tipping point on this issue, but nearly everyone can understand the moving forces behind the trend towards increased frustration with countless subscriptions.
How are companies responding?
Companies are aware of the issue, and those trying to stay ahead of the trend are not passive. For example, many streaming services have already enacted some solutions to reduce the number of subscriptions a customer needs to be satisfied.
One of these solutions is the bundling of different streaming services together in order to give customers more content and more diverse content for a single price. An example of this is the bundling of Disney+, Hulu and ESPN+ as one subscription. Another solution is simply offering the best product, and hoping customers will be willing to forgo other options, satisfied with perhaps the higher quality, though lower selection. This concept also includes heavy personalization, creating products tailored to different kinds of customers in order to incentivize the switch from other subscription providers. We also have the Freemium model, for services such as Spotify, LinkedIn, etc. Users are drawn in to sign up for another subscription by giving them a free taste of just how good the product is, and how much better it could be if they paid just a little bit extra per month. As customers express increasing dissatisfaction with more and more subscriptions, companies will be forced to innovate new business models, product offerings, and personalization techniques in order to accommodate a changing customer attitude.
Alexa Vainstein, Business Analyst