Subscription Business Model: 10 Amazing Industry Examples (2022)

Table of Contents
What is a subscription business model? What is different about a subscription business model? The rise of the subscription economy Examples Of Subscription Business Models? 1. Cars As A Subscription Model 1. Audi Moves To A Subscription Business Model. 2. Nissan Launches Subscription Business Model 3. Porsche Subscription Model 2. Airlines As A Subscription 1. Flyline 2. Surf Air 3. In-home Fitness 1. Peloton 2. Fitbit 3. Mirror 4. Tonal 4. Gaming 1. XBox Game Pass 2. Playstation Now 5. Health & wellness 1. MDVIP 2. Happify 6. Education & professional development 1. Linkedin Learning 2. Code Academy 7. Home maintenance 1. Super 2. Handy 8. Consumables 1. Dollar Shave Club 2. HelloFresh 3. Barkbox 4. Birchbox 5. Cratejoy 9. Entertainment – Films, Shows & Documentaries 1. Amazon Prime 10. Fashion/Clothing 1. Renttherunway 2. Le Tote 11. Consumer Electronics 1. GoPro 12. Software as a Service (SaaS) Adobe Why Investors Love A Subscription Business Model What advantages does a subscription pricing model offer a business? How does a subscription business model function? The New Metrics – Contribution Margin, Customer Churn, Customer Lifetime Value, Cashflow Transitioning to A Subscription business model Why does moving to a subscription Business model initially decrease revenue and increase expenses? Why Use A subscription business model? How Do You Transition To A Subscription Business Model? Swallow the Fish 3 Keys to Transformation The rise of subscription fatigue Related Posts FAQs Videos

Subscription business models are everywhere. From Netflix to Apple Music to Salesforce.com. Recentresearchfound that subscription businesses are achieving 5x faster revenue growth than the S&P 500 (18.2 percent vs. 3.6 percent).

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What is a subscription business model?

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The subscription business modelis based on a customer paying a regularly recurring amount in exchange for the use a product or service. From Apple Music to Netflix, companies are moving from transacting with customers to building long term relationships and recurring revenues.

  • According to asurvey by McKinsey & Company, 46% of customers already pay for an online streaming service and 15% have subscribed to an e-commerce service within one year of the survey.

What is different about a subscription business model?

  1. Selling. Selling has to drive and demonstrate value to ensure renewals (and advocacy/referrals) – see growth marketing blueprint canvas.
  2. Buying. Buying changes for both consumers and businesses. The business needs to align partners and create digital services to deliver customer experience and build personalized services.
  3. The customer experience: The business has to focus on retention and referral rather than just focusing on acquisition.
  4. Investors/Company – more predictable revenue, deeper customer insights, and a scalable business model.

The rise of the subscription economy

The subscription business model is not a new concept.

What has changed is how digital technologies have made subscribing so much easier. Payments processes, customer relationship management systems and EPA have radically changed business capabilities.

Today, digital payments platforms such asPayPal,Stripe, andWePaymake it possible to set up and process recurring payments without massive investment.

Additionally, analytics platforms likeZuora,ProfitWell, andRecurlyhave given businesses better insight into consumer behavior, which companies can use to hone their subscription models over time.

As a result, the number of industries and businesses that now use a subscription business model have soared.

We associate the subscription business model with digital platform companies Netflix, Hulu, and Amazon Prime (see Amazon business model), Apple Music, Salesforce.com, Spotify and others.

But new subscription models are being created in every industry often radically shifting competitive dynamics.

Examples Of Subscription Business Models?

Magazines, newspapers, water, ice, grooming, clothing, groceries (in the form of replenishment), pet food, meals, wines and many other products have moved to subscriptions.

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  1. Cars
  2. Airlines
  3. In-home fitness
  4. Gaming
  5. Health & wellness
  6. Education & professional development
  7. Home maintenance
  8. Consumables
  9. Entertainment
  10. Fashion/Clothing

1. Cars As A Subscription Model

Instead of deciding which car to purchase, people can now use rental subscriptions and change what they drive, giving them access to different vehicles. Subscription models give customers the feeling of owning many different products without the cost, responsibility, and clutter of actually buying them.

In March 2019, tech journalist Kara Swisher published an article in the New York Times proclaiming that “Owning a Car Will Soon Be as Quaint as Owning a Horse.”

The average car spendsaround 90%of its life parked. A shift away from privately owned vehicles towards a service – owned and run by public or private ventures is the future. Autonomous vehicles, AI and smart cities will enable efficient solutions that revolutionize the way traffic flows through cities and how people pay for these services. However, the hotly debated future, which is ten to twenty years out, revolves around how soon driverless technology will be deemed safe and practical.

For now, the move to a subscription business model paves part of the way towards a future model.

1. Audi Moves To A Subscription Business Model.

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The slogan on Audi’s subscription service website captures this appeal: “All of the power. None of the responsibility.” Subscription business models offer consumers the promise of one less thing to worry about.

2. Nissan Launches Subscription Business Model

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Nissan launched a two-tier subscription business model. The first tier costs $699/month and allows access to theAltima, Rogue,Pathfinder,andFrontier. The $699/month subscription covers insurance, roadside assistance, regular maintenance, cleaning, and delivery.

The second tier has a few more interesting choices, one of them beingthe GT-R. For $899/month, Nissan will let you swap through theMaxima,Murano,Armada,Titan,370Z, Leaf Plus andGT-R.

3. Porsche Subscription Model

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Porsche offers a two-tier subscription business model – named “Launch” and “Accelerate.”

(Video) Subscription Business Models - 6 Types You Should Know

The Launch is the more affordable choice at $2,000 a month, and it offers eight variants of the718 Boxster,718 Cayman,MacanandCayenne.

Accelerate is priced $3,000 per month, but it offers a choice of 22 variants including the four models from Launch, as well as the 911 and thePanamera. Some of the variants are higher-performance versions of Launch cars.

2. Airlines As A Subscription

Subscription models offer two value propositions: 1. cheaper travel for frequent travelers. 2. The promise of less time spent in airports.

There are two types of subscription models on offer. The first offers flights and the second excludes flights but offers premium services and allowances. As an example, Delta SkyMiles Select offers a “travel benefits bundle” for $59-per-year which includes perks, drink vouchers, priority boarding, and guaranteed overhead bin space.

United, JetBlue, and Southwest also offer subscriptions, with perks such as priority boarding and overhead-bin access.

1. Flyline

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FlyLine focuses on saving subscribers money on tickets. For a $49.99 per year Basic subscription or $79.99 per year Premium subscription.

FlyLine promises “extraordinary flight deals you can’t find anywhere else.

The company reports that its customers save an average of 10-15% on domestic multi-carrier bookings, and anywhere from 20-60% internationally.

2. Surf Air

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Surf Aircalls itself California’s “private air travel membership,”. It offers members unlimited flights on its private planes for $1,950/month — and claims to be a more efficient service than commercial flying.

3. In-home Fitness

A global trend is towards wellness and health. The Health as a Service (HaaS) is rapidly growing as health tech shifts to the cloud and sensors make more of the data from multiple sources including wearables such as Fitbit.

Subscription fitness programs that allow customers to work out in their own homes are becoming popular.

1. Peloton

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2. Fitbit

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Fitbit Premium is a subscription service that offers personalized goals, challenges, coaching, and guidance for paid users for $79.99/month. They have yet to make the move though of combing the hardware ( the watches) with the subscription.

A more compelling value proposition would be to bundle the watches with a package at a higher price. However, typical of many companies, the fear of cannibalizing sales and revenue might prevent them. However, this could deliver a competitive advantage vs Apple.

Similar to Apple’s strategy of building services that are exclusive to owners of its hardware, Fitbit wants to build a service that keeps users loyal.

3. Mirror

Mirroroffers the smart mirror ($1500) as part of an ongoing subscription. The value proposition is built around personalization e.g. custom workouts, based on personal preferences and goals. The company has raised $72M at a $300M valuation and counts Lululemon among its backers.

4. Tonal

Tonalapplies a subscription business model to weight training. The offer is to provide a convenient in-home system that also offers fitness coaching. You get a digital weight system and interactive display with a library of personalized workouts available for a $49/month subscription.

4. Gaming

GameSpot called 2019 the “Year of Subscriptions”for the video game industry. In a similar move to films (Netflix, Amazon Prime…), gaming has now shifted to a subscription business model offering access to a variety of games rather than buying individual ones.

The disintermediation of the gaming industry follows the same path as the music industry. Owning a video game doesn’t make sense when subscriptions can offer players variety and novelty while still allowing platforms and publishers to maintain control of their products.

1. XBox Game Pass

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Xbox Game Passoffers subscribers access to over one hundred games for just $10 per month. Although Microsoft has not disclosed subscriber counts, some reports place monthly players as high as 65M. There are now 64 million active Xbox Live users across all Xbox gaming platforms, including Xbox One, Windows 10, iOS, and Android.Xbox Games Pass is reported to have over 9.5M subscribers.

2. Playstation Now

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PlayStation Nowhas a library of 650 games available for $9.99 per month or $59.99 per year. Sony placed PlayStation Now’s subscriber count at 1M at the end of October 2019 — a 40% increase from 700,000 subscribers 6 months earlier.

5. Health & wellness

The idea of access vs ownership and staggering payments is not new in health and wellness. Headspace was one of the first apps to develop a subscription model that gave access to meditations and to a community of wellness enthusiasts. It now has over 60 million regular subscribers around the world.

As pressure on health systems increases both governments and private companies are looking for more effective and efficient ways to personalize services while lowering costs.

According to Market Research, The Global Smart Healthcare Products Market was valued at USD 35.55 Billion in 2018 and is projected to reach USD 69.68 Billion by 2026, growing at a CAGR of 8.8 % from 2019 to 2026.

(Video) Subscription Affliction - Everything is $10/month

1. MDVIP

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MDVIP members pay a flat yearly fee (ranging from $1,650 to $2,200) that covers preventive care and diagnostic tests, as well as a variety of value-added services like meal plans, fitness plans, and 24/7 physician availability.

2. Happify

Happify provides personalized programs aimed at improving users’ emotional health and happiness. Like Headspace, Happify is targeting companies with its Happify Health program.

6. Education & professional development

The pace of change forces employees to regularly renew their skills to be relevant in an ever-changing work environment. New technologies, agile practices and an ever-increasing need to solve complex problems are just some of the pressures facing employees and organizations alike.

The global eLearning market has swiftly grown and consolidated with many companies addressing the needs of both individuals and organizations.

A number of learning platforms such as Cousera , offer courses for free but then require payment for certifications.

1. Linkedin Learning

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The social network for professionals acquired e-learning startup, Lynda,in 2015 for $1.5B and rebranded it as LinkedIn Learning.LinkedIn partners offer LinkedIn Learning courses to companies and reports that78% of Fortune 100 companies offer LinkedIn Learning.

2. Code Academy

Codecademy, a learning platform offers many of its courses free of charge; however, a subscription to the platform’s Pro service gives learners a more focused learning experience that includes exclusive content.

7. Home maintenance

Saving time is a powerful value proposition for many customer segments. The home maintenance space appeals to people who simply have little knowledge and time to deal with home repairs. A growing number of companies are exploring ways to tap into this segment using a subscription business model.

1. Super

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Super charges either a monthly or yearly fee. The subscription covers the cost of home maintenance and repairs which save the home owner moneycompared to the cost of a full replacement for a product plus the time saved.

2. Handy

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Handy offers a range of home maintenance services, from tree removal to furniture assembly. The startup has also partners with retailers such as Walmart. Walmart shoopers can add Handy’s in-home installation services at checkout.

8. Consumables

1. Dollar Shave Club

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TheDollar Shave Club launchedin 2012 with a revolutionary viral video that generated 12,000 new customers in the first 48 hours, growing to 330,000 customers by 2013. It is estimated to have annual revenues of over $260M.

2. HelloFresh

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HelloFresh passed Stitch Fix to become the largest subscription e-commerce company, with $1.4 billion in 2018 sales. TheBerlin-based startupthat offers recipe boxes as a service though is expected to hit total earnings of over $2,000M in 2020.

3. Barkbox

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Since BarkBox is privately held, it does not disclose details of its financials.It reportedly has over 750,000 subscribers and has pivoted to now offer pet toys as a subscription as well as food.

4. Birchbox

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Birchbox is active in six countries with more than 1 million subscribers and 500 brand partnerships including marquee names like MACand Lancome.

5. Cratejoy

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Cratejoy is actually an aggregator business model. The site aggregates all the subscription box companies in the market and makers a commission from any referred sales.

9. Entertainment – Films, Shows & Documentaries

Entertainment is a broad category but includes films, videos and other forms of online streaming services. This highly competitive market has large players in it like Netflix, Amazon and Apple.

There were tens of millions of people using video streaming services a decade ago, but that figure surpassed 1 billion for the first time in 2018.

The market though has seen the entry of new competitors like Disney that traditionally would license their content to Netflix.

1. Amazon Prime

Amazon Prime: Gives you access to selected TV streaming products, 2 million songs, playlists, thousands of books and magazines (a smaller subset of the Kindle Unlimited subscription), online storage andsaves you the delivery costs for your other purchases. All this comes at a reasonable monthly subscription (or on annual basis at lower cost).

10. Fashion/Clothing

1. Renttherunway

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Renttherunway was the first major fashion platform that offered a subscription service for clothes. It validated that “access instead of ownership” model was possible for fashion. The clothing rental service became a unicorn in 2019.

2. Le Tote

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Le Tote is a fashion rental service for women’s apparel and accessories. Customers simply complete a profile and then three garments and two accessories are delivered to users. Each time items are returned, a new tote is chosen and mailed.

11. Consumer Electronics

1. GoPro

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GoPro PLUS is a subscription product that includes damage replacement and a deep discount on accessories plus replacement.

12. Software as a Service (SaaS)

Adobe

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Adobe moved from an annual licensing model to a monthly subscription model in 2013. The company used to have spiked transactional earnings every 18 months, but a less predictable revenue stream in interim periods. This was a critical factor in making the decision to switch from a boxed-licensed software model to a monthly cloud-based subscription model, culminating in the launch of Adobe Creative Cloud.

Why Investors Love A Subscription Business Model

A subscription business model provides a predictable revenue and a scalable model. Once the model is running it starts to create a flywheel effect and gains momentum. Plus the network effects from a large customer base delivers efficiencies e.g. with delivers.

Once a company acquires subscriber, it shifts its attention from customer acquisition to customer retention, customer lifetime value and churn rate.

(Video) Subscription Revenue Model (Netflix)

A subscription business is easier to track and predict revenue, profits and growth.

Plus, companies get to know their customers a lot better, acquire more data across their customer base. Subscription models can also offer deeper customer insights.

When interactions with customers are restricted to one-off purchases, it’s difficult to develop a nuanced understanding of consumer behaviors and preferences.

Consequently, the data improves profiling and targeting for customer acquisition.

Because they’re based on recurring payments, subscription models offer predictable revenue that business leaders and shareholders can count on for strategic planning and investment purposes.

Those insights inform a company about innovation opportunities – from product alterations and new products to marketing decisions.

Consumers also tend to stick with a subscription service once they’ve signed up. As investor Eric Stromberg notes:

“Subscription is a powerful business model because it creates an environment where the default customer behavior is retention, as opposed to one where the default behavior is churn.”

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What advantages does a subscription pricing model offer a business?

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Subscription-based business models are more attractive because the recurring revenue is more predictable and, hence, more valuable than on-demand purchases which can fluctuate.

Providing monthly services also enables builds stronger customer relationships since the providers has more reasons to communicate on a regular basis.

As a result, the customer benefits from a lower threshold barrier e.g. subscriptions are lower in cost than full annual payments. Also, there is reduced risk in most cases because a customer can cancel a service easily at any time.

How does a subscription business model function?

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The principal idea is to switch from receiving a fixed transactional cost to a recurring charge for a product or service. For digital products or services this is easy because of the low or near zero marginal costs. However, many large organizations that sell physical products have also moved to a subscription business model.

As an example, Rolls Royce developed a “subscriptionmodelcalled “power-by-the-hour”instead of selling jet engines.

A subscription business model works by moving from transaction costs to recurring revenue. Initially, this may incur a drop in revenue referred to as the Fish Model (see diagram) as revenue is captured in smaller amounts but expenses remain high prior to realigning resources and costs. In the long run, the situation reverses.

Revenues increase as customers can be added at scale, and the lifetime value of ongoing subscription customers is higher than one-transaction customers. Expenses decrease once the main SaaS infrastructure is completed, and it can be cheaply scaled.

The New Metrics – Contribution Margin, Customer Churn, Customer Lifetime Value, Cashflow

Transitioning to A Subscription business model

  • Invest in customer experience and analytics: Develop AI/ML capabilities, both on the front end (voice/AR/VR) and the back end (predictive models). It will also likely mean IoT in many cases, to more accurately detect, predict and serve patterns among increasingly larger groups of customers/subscribers/members.
  • Work with and help business units: Determine the best areas/modes of investment for subscription products and services as well as to optimize fulfillment and logistics.
  • Consult with your technology and service providers (TSPs): Ensure that you obtain value from your subscriptions. Switching costs may be relatively low, and renewals are critical to health.
  • Investigate new direct selling models (such as marketplaces and app stores): Reduce purchase and implementation friction.
  • Ensure Unity Across the Organization: IT, marketing, operations, strategy, advocacy and other areas of the organization need to work together to create a successful subscription business model.

Why does moving to a subscription Business model initially decrease revenue and increase expenses?

In a business model, revenue is recognized all at once from a one-time sale. In SaaS, however, revenue is recognized in smaller increments (e.g., monthly amounts) over the life of a contract. Expenses increase as the company invests in its SaaS offering (e.g., software development, hosting, customer success teams, etc.).

In the long run, the situation reverses. Revenues increase later as the customer base increases and the business model starts to scale. Expenses decrease once the main transformation is completed.

On a graph, the interplay of revenues and expenses looks like a fish.

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Developing a subscription business model involves defining how and what new value can be created by shifting the current business model to the subscription model.

Sourcing, procurement and vendor management (SPVM) elements of the organization need to be assessed and how they fit to the subscription licensing model. This may involve a transition to new procuring new resources, activities and partners.

Organizations need to conduct a full P&L analysis

Why Use A subscription business model?

Transitioning to a subscription business model starts with the customer. Understanding customer trends and behaviors are crucial to success.

  • Consumer trends are shifting tooutcomes over ownership. As an example, people want transportation,but they don’t care about owning a car if they have ready access to a ride via Uber or Lyft. This is often referred to as the sharing economy.
  • Successful subscription businessessell on customer experience and relationships instead of transactions. Experiences and customer relationships combine to create long-term value. This requires reducing friction across all touchpoints and developing an omnichannel strategy.
  • Subscriptions generaterecurring revenue. In other words, if customers are satisfied and don’t churn, subscription businessesstart every year with revenue already locked ininstead of starting at zero. This recurring revenue baseline makes planning easier and valuations higher.
  • Product companies can be subscription companies. It is easy to see how subscriptions work for digital products. But physical products can generate subscriptions when a service is wrapped around them.
  • Income Statementexpenses can be thought of as Recurring Costs (COGS, G&A, R&D) and Growth Costs (Sales and Marketing). A larger recurring profit margin results in more money to spend on growth. Trading today’s profits for revenue growth can be worth it because of the ability to rapidly scale.
  • Customer experiences are a critical way to create a sustainable competitive advantage.

How Do You Transition To A Subscription Business Model?

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There are four stages involved in transitioning to a subscription business model. The first involves developing a strategy that can create a strategic advantage – how will this allow the firm to compete?

The first phase involves exploring what new value can be created? What strategic advantage can be created? The second phase concerns scoping what changes are needed across the firm to deliver the customer experiences and build the relationships? The third stage involves scoping the capabilities, technologies, resources…Finally, the final stage is executing using an agile to optimise the market fit and value for the firm.

While cloud models make it easy to get customers onto your new platform, it’s just as easy for them to off-board.

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Swallow the Fish

Whether you’re a traditional company making the pivot to the Cloud or a born-in-the-cloud business, there’s a financial “fish” in your future that you will need to swallow.

In the case of the former, it’s the fish created by the dynamic of the revenue trough you’ll experience as you transition to the subscription model where revenue is realized over the life of the contract, coupled with the investment you need to make to stand up your cloud business.

Over a period of time, the reduced revenue and high initial expense phases diminish and your financial model transitions period to being profitable.

3 Keys to Transformation

Some key points to swallow these fish with minimal impact.

  1. Model your fish carefully. This means setting a plan in which you identify the approximate timeline, revenue, and cost impact of your transition.
  2. Company-wide input. Announce that you’re starting a business model transformation based on customer demand. Declare that the clock is ticking and that you’re setting investor expectations by sharing milestone dates for your transition. Although this may seem counterintuitive, this strategy has been proven by companies that have made the transition using this plan, notably Adobe, Autodesk, and Intuit.
  3. Model the transition. First, model the transition, and then announce well in advance that you are entering a period where you are executing the pivot from high growth, no profit, to lower growth with a focus on profitability.

If you’re contracting out the production of a good or service, negotiate with the maker or supplier to guarantee a steady production line and availability.

Additionally, you will also negotiate what percentage of the subscriber fee the maker or supplier will receive.

Often this payment system takes the form of a per unit, per minute or per click sale based on the number of subscribers, time or amount of service or product used, and other factors unique to your industry.

The rise of subscription fatigue

Despite the many benefits, there is a word of caution. There has been a rise in recent years in a consumer condition known assubscription fatigue. With so many businesses trying out this recurring revenue sales strategy, some consumers are becoming overwhelmed with managing the multitude of subscriptions.

Scott Stein—an editor at CNET—recently left an Apple-services event dismayed at the different ways Apple Inc. is looking to charge customers, including iPhone services, Apple News Plus, Apple Arcade, Apple TV Plus, Apple Music, and iCloud.

Suddenly, or more than ever, we’re subscribing to everything…We rent the world we live in.

Scott Stein – CNet

It is a question of whether your customers will find it a great option to receive your offering on a recurring basis, or whether it will encourage them to look elsewhere to fill their needs.

Before transitioning to a subscription business model do the research!

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FAQs

What is an example of subscription model? ›

In a subscription business model, customers pay a fee on a regular basis to get access to your product or service. Netflix and Spotify are both great examples of subscriptions businesses.

What businesses use a subscription model? ›

Growing companies like Netflix, Dollar Shave Club, and Microsoft have been using a subscription-based revenue model for years with much success.

What is the most popular subscription service? ›

According to the latest data on the most popular subscription services among adults in the United States, Amazon Prime currently tops the list. Nearly two-thirds (61%) of consumers there pay for it.

What is an example of a good business model? ›

For instance, direct sales, franchising, advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA.

What is the business model of Netflix? ›

Netflix is one of the current pioneers of subscription-based content. It runs on a Subscription Video on Demand (SVOD) model. Subscribers pay for a monthly plan and are given access to a vast library of media—any time, anywhere. Thus, subscriptions are Netflix's main source of revenue.

Why is subscription model so popular? ›

Subscriptions become popular for one main reason: convenience. Whether they're associated with a streaming service, SaaS product, or DTC retail brand, subscriptions allow companies to realize recurring revenue, while also providing customers with regular and predictable deliveries of content or products.

What are subscriptions on YouTube? ›

You can subscribe to channels you like to see more content from those channels. You can find a Subscribe button under any YouTube video or on a channel's page. Once you subscribe to a channel, any new videos it publishes will show up in your Subscriptions feed.

What are the types of subscription? ›

Types of subscriptions
  • Fixed usage subscription. The fixed usage subscription model offers a set price for a fixed quantity of goods or services over a set time frame. ...
  • Unlimited usage subscription. ...
  • Pay-as-you-go-subscription. ...
  • Freemium model.

What is a subscription product? ›

A subscription product is when a customer pays to have access to a product as a subscription and get billed on a recurring schedule. Subscription products are on the rise, and they will gain more popularity over time as more customers adopt this model.

What are subscription businesses? ›

Subscription businesses involve selling a product or service and collecting recurring revenue for continuing to provide that service or product. Most subscription businesses charge either monthly or yearly. One of the first and easiest to understand subscription business models is magazine subscriptions.

Which companies have the most subscriptions? ›

Leading subscription services used by consumers in the United States 2021. In early 2021, the number one service most subscribed to by consumers in the United States was Amazon Prime: in the first quarter of that year, approximately half of the country's population used this subscription service.

What is a digital subscription? ›

A digital subscription provides access to all or a set of content on a publisher's website, and may also include exclusive content for subscribers, as well as access to the publisher's mobile app. Some subscriptions also unlock unique experiences, like ad-free content, exclusive access to journalists, and more.

What is the business model of IKEA? ›

The business model of IKEA revolves around the manufacturing and selling of Ready-to-assemble furniture, home-ware, and food products. IKEA is a Dutch-based Swedish company established in 1943 as large and renowned furniture retail globally recognized and was set up by Ingvar Kamprad in Sweden.

What is the business model of Amazon Prime? ›

It generates most of its revenue through product sales. Amazon also offers the service of Kindle Direct Publishing and Amazon Publishing. According to this model, Amazon can earn between 30-70% of the royalty from sales. Amazon earns most of its profits through Amazon Prime, AWS and Amazon Advertising Services.

What is Spotify business model? ›

It uses a freemium revenue model that offers a basic, limited, ad-supported service for free and an unlimited premium service for a subscription fee. Spotify relies heavily on its music algorithms and its community of users and artists to keep its premium experience delightful.

What is the business model of YouTube? ›

YouTube's main source of revenue is advertising. Additionally, we earn money from our monthly subscription businesses such as YouTube Premium. We've also developed tools to help eligible creators earn money in a variety of other ways, such as Super Chat, channel memberships and merchandise.

How do subscription models make money? ›

The subscription revenue model generates revenue by charging customers a recurring fee that is processed at regular intervals. Subscription revenue is built on establishing long-term relationships with customers who will pay regularly for access to the product or service, also called recurring revenue.

Why are subscriptions good for customers? ›

Subscription-based pricing attracts more customers

Subscription payments lower the barrier to entry for products and services and allow more potential customers to purchase your product. While they may pay a larger amount over the long term, they can get immediate access to the product.

What are the benefits of a subscription service? ›

From increased lifetime value (LTV) to lower customer acquisition costs, subscriptions can help your bottom line and ensure a steady revenue stream.
  • Reliable recurring revenue. ...
  • Increased customer loyalty & strong customer base. ...
  • Reduced churn & better customer retention. ...
  • Increased LTV. ...
  • Higher customer engagement.
27 Jul 2022

Does subscribing cost money? ›

Is Subscribing on YouTube Free? YouTube subscriptions are 100% free. You can subscribe to as many channels as you like for as long as you like without paying a single penny. All a subscription means is that you're following the channel.

How do you ask someone to subscribe to your channel? ›

The most effective way that you can make someone subscribe to your channel is either to give them so much value that they will automatically subscribe to your channel thinking that they will learn a lot from you or give them a reason that why they should subscribe to your channel.

What are the benefits of a YouTube subscription? ›

With YouTube Premium, you can watch millions of videos without interruptions by ads before and during a video, including video overlay ads. You will also not see third-party banner ads and search ads.

What are the three types of subscription market? ›

There are three broad types of subscriptions: replenishment, curation, and access. Replenishment subscriptions allow consumers to automate the purchase of commodity items, such as razors or diapers.

What is the subscription box industry? ›

Subscription boxes are a recurring delivery of niche products as part of a marketing strategy and a method of product distribution. Subscription boxes are used by subscription-based ecommerce businesses, referred to as "subcom" for short, which follow a subscription business model.

Are subscription models profitable? ›

Are B2B subscription boxes profitable? Yes. The B2B subscription business model provides a way for businesses to cater to their customers' ongoing needs. That equates to a reliable stream of recurring revenue.

How do I create a subscription product? ›

Create a simple subscription product for recurring payments
  1. Sign in to WordPress.
  2. Click on Products > Add New.
  3. Find the "Product data" box, click on the dropdown and choose Simple Subscription.
  4. Go to "General", provide a subscription price and specify the frequency of the recurring charge.

How do I create a subscription service? ›

How to Start a Subscription Box Business in 8 Simple Steps
  1. Start with a great subscription box idea.
  2. Price your subscription box.
  3. Put together a prototype subscription box.
  4. Begin your prelaunch phase.
  5. Set up your website, Marketplace listing, or both.
  6. Start taking orders and ship your subscription boxes.
  7. Success!

Are subscription services growing? ›

This represents an impressive 18% compound average growth rate. New technology now enables businesses from virtually all economic sectors to offer membership services to their customers.

What is subscription based revenue model explain with few examples? ›

Definition of the Subscription Revenue Model

Subscription fees are one of the major revenue models in which customers pay a fixed amount, usually monthly, to get some type of service. An example would be the fee you pay to an Internet access provider (fixed monthly payments).

What is SaaS subscription model? ›

A SaaS subscription is a method of purchasing online software services where payments are made on a periodic basis, usually monthly, quarterly, or annually. This definition includes a couple of key components: Software is being purchased as a service hosted and delivered online rather than hosted locally.

What are subscriptions in accounting? ›

Subscriptions are the membership fees paid by an organization's members annually. Subscription is the main source of income for Not-for-Profit Organizations. Total Subscriptions received in the accounting period is shown in the Receipt and Payment Account.

How do subscription models make money? ›

The subscription revenue model generates revenue by charging customers a recurring fee that is processed at regular intervals. Subscription revenue is built on establishing long-term relationships with customers who will pay regularly for access to the product or service, also called recurring revenue.

What is a subscription product? ›

A subscription product is when a customer pays to have access to a product as a subscription and get billed on a recurring schedule. Subscription products are on the rise, and they will gain more popularity over time as more customers adopt this model.

How do I create a subscription business? ›

How to start your own subscription business
  1. Choose your subscription idea. The first step is deciding what type of subscription model your business will use and what product(s) you'll offer. ...
  2. Select your subscription products. ...
  3. Price your subscription options. ...
  4. Build your website. ...
  5. Market your new subscription business.
1 Oct 2021

Is subscription model good for a digital business? ›

The subscription model creates a predictable future revenue stream. This recurring revenue can ensure the viability of your business in times of turbulence and financial fluctuations. It also helps in keeping your business operations up and running.

Is Netflix a SaaS? ›

Yes, Netflix is a SaaS company that sells software to observe permitted videos on demand. It follows a subscription-based model whereby the user selects a subscription plan and pays a stable sum of money to Netflix monthly or annually.

Is Gmail an example of SaaS? ›

A simple example of SaaS is an online email service, like Gmail. If you use Gmail, you are not hosting your own email server. Google is hosting it, and you are simply accessing it through your browser-as-client.

Is Facebook a SaaS? ›

Of course Facebook, Twitter, etc. are software-as-a-service, provided over the internet. But the definition / line for “SaaS” is applications whose business model is primarily a subscription fee for software. Similarly, ecommerce companies are generally not “SaaS”.

What are the types of subscription? ›

Types of subscriptions
  • Fixed usage subscription. The fixed usage subscription model offers a set price for a fixed quantity of goods or services over a set time frame. ...
  • Unlimited usage subscription. ...
  • Pay-as-you-go-subscription. ...
  • Freemium model.

What's a monthly subscription? ›

What is a monthly subscription? In a monthly subscription, a customer enters into an agreement with a business where they pay a recurring monthly fee in exchange for products or services.

What is paid subscription? ›

A subscription is an amount of money that you pay regularly in order to belong to an organization, to help a charity or campaign, or to receive copies of a magazine or newspaper. You can become a member by paying the yearly subscription.

How big is the subscription box industry? ›

Revenues have continued to grow at an exponential pace, with subscription boxes reaching $22.7 billion in 2021. Projections show that the market will increase to $65 billion by 2027. This exhibits a compound annual growth rate (CAGR) of 18.3% for the 2022-2027 period.

Are subscription services growing? ›

This represents an impressive 18% compound average growth rate. New technology now enables businesses from virtually all economic sectors to offer membership services to their customers.

What is subscription-based model? ›

A subscription-based pricing model is a payment structure that allows a customer or organization to purchase or subscribe to a vendor's IT services for a specific period of time for a set price. Subscribers typically commit to the services on a monthly or annual basis.

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