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Definition

subscription economy

A subscription economy is a model for trade of desired content, products and services in exchange for recurring, scheduled payments. Businesses offer subscription-modeled services in an effort to get a reliable customer base to and to better manage revenue. In exchange, businesses generally offer a discount or a claimed savings over individual sales of content, products or a service.

Subscriptions are familiar in many offerings, such as in print through magazines, newspapers and online content. Netflix is one of the most well-known examples of subscription based online content services. VMware, SalesForce and many other cloud services are subscription based, while other software offerings such as Adobe Photoshop have more recently moved to subscriptions. Physical products are also using subscription-based services, such as the leasing of cars and hardware-as-a-service (HaaS).

As the subscription economy expands, the preference for these services could be explained by cost. For example, leasing a car with no down payment may be more affordable than the initial cost of ownership. The maintenance requirements that come with ownership can also be a deterring factor. Other types of subscription models offer different tiers depending on a user’s needs and the ability to pause or cancel at any time.

The subscription-based economy involves trust as Netflix learned when it decided to change its subscription model in 2011. Though ultimately successful, the online entertainment vendor lost 800,000 subscribers when it made changes to its subscription models and increased its prices.

This was last updated in July 2019

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