December 5, 2018
Posted by: Andy Simmons
Subscription-based businesses are everywhere now.
Do most of your home-cooked meals revolve around Blue Apron or Home Chef? Have you created a playlist on Spotify? Do you read The Athletic daily?
All of those businesses are just a few of the leading catalysts for today’s model of paying for access to content and product.
Book publishers and periodicals in the 17th century were believed to be the first to implement this model. Today, there are a bevy of businesses and websites that follow this standard, and it continues to be a way for businesses to capitalize on revenue growth. In 2016, the subscription-based market boomed by more than 100 percent over five years. The biggest retailers who followed the model produced more than $2.6 billion, up from $57 million in 2011.
So, why have businesses who abide by this standard suddenly become so prevalent and successful?
For starters, clients are mostly tantalized by the recurring business model most of these businesses offer. The chance to pay a monthly premium instead of all at once permits consumers to be flexible with their budgets, allowing them to control their spending while also being able to plan for the future with their expenses.
There are also some companies, such as our clients at Time Miner and our Kernel Equity company Tempo Music Software who provide customizable payment plans. For example, Tempo’s monthly payment plan for their publishing software is based on the number of gigabytes artists need to store their songs. The higher the number of gigabytes, the more the premium costs. That flexibility could be enticing for potential clients, as opposed to paying for one flat rate no matter how many songs they wish to release.
On the business side, companies who are subscription-based can easily calculate and predict their revenue based on their subscription count and the recurring price (or prices, as mentioned earlier) they’ve set for their consumers. It’s also a great way for customers to be engaged with the products, while also being offering exclusive benefits for those subscribed.
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