Subscription based Buisness18 Aug 2018 09:59
Interesting article from the Daily Telegraph. Subscription model is the way forward!
If you want your business to get ahead, get a subscription model
What is the biggest trend shaping global business? The growing dominance of the smartphone over everything we do and buy? The incredible rise of China? Or the emergence of artificial intelligence? You can make a decent case for all of them. But actually, it might be something that hardly anyone is paying much attention to. The development of the subscription economy.
From Netflix to Amazon Prime, to Spotify, Apple and Microsoft, subscriptions are not only powering the world’s most successful tech companies, they are increasingly starting to get some traction in old economy markets like razor blades as well. As we increasingly switch from buying things to buying experiences and services, their dominance is only going to grow. But very few companies have yet mastered how to build those relationships. The trick for investors may be to identify those that have – because they are going to be the biggest winners over the next decade.
Take a look at the most successful companies over the past few years, and they nearly all have one thing in common. Not only are they tech-based, innovative and creative, they mostly have subscription either at the heart of their business or as a major part of it. Netflix and Spotify are the two most obvious examples.
Netflix has turned itself into the biggest media company in the world with its huge range of high-quality programmes for a single set price, while Spotify persuaded people to pay for music again with its vast range of music. Netflix now has an astounding 130m subscribers, double the population of the UK, while Spotify now has 83m.
‘If razors can be sold by a regular fee, then there probably aren’t many products that can’t be’
Amazon Prime is a form of subscription, and now has 100m members, while Apple is increasingly driven by sign-ups to its services (Apple Music, for example, is already up to 40m people) and Microsoft has revived itself as much by building subscriptions as selling software.
In Subscribed, a new business book making waves in the US, Tien Tzuo, the founder of the software firm Zuora, describes it as the one key trend that is reshaping the way businesses operate. “We’re in a pivotal moment in business history, one not seen since the Industrial Revolution,” argues Tzuo. “The world is moving from products to services. Subscriptions are exploding because billions of digital consumers are increasingly favouring access over ownership, but most companies are still set up to sell products.”
Of course, there might well be some hype in all that. Not many things can genuinely equal the Industrial Revolution in their impact on business history. Even so, Tzuo is making an important point, and one that traditional companies need to take on board. Subscription may have made its biggest impact so far in technology, but it has already started to
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