The Digital Future: The Subscription Economy

Our digital future will likely see the continued explosive growth of the subscription economy.  The key driver is that, as the world becomes more complex and fast-paced, people will increasingly opt to have access to what they want, but not necessarily own it.  In so many cases, the time, space, and money needed to own something – for example a pool, a swing set, or a car – may exceed the benefits of owning that thing. This same concept spills over into services, including digital services such as access to versus ownership of software (think TurboTax).  This article looks at the picture of our increasingly subscription-oriented lives and economy.

This is the first of a series of four articles on our digital future, where we explore the opportunities and impacts of digital technologies in a few areas.  This article, Part 1 in the series, looks at the digital future as it relates to the subscription economy – where increasingly consumers subscribe to rather than buy goods and services.  Part 2, focusing on the financial services industry, looks at the evolving ‘fintech’ sector and how it is changing industry structure in financial services – and changing the very structure of how money flows.  Part 3 focuses on how our digital future may impact our individual and collective health – and how that may have ramifications in other areas of life and community. Finally, Part 4, on digital government, dives into how digital technologies are transforming the delivery of government services, and how this transformation might affect the very way we are governed.  

Consider three types of subscription services:

  1. Major consumer providers – These are major players like Amazon (through Amazon Prime) and Netflix.  Amazon Prime charges an annual fee for the ability to shop through Amazon and obtain Prime member only discounts.  Netflix charges a single monthly fee for unlimited access to its content – primarily TV shows and movies.
  2. Software services – This refers to Software as a Service (SaaS) vendors such as salesforce.com.  Many – probably most – applications in Customer Relationship Management, Project Management, Human Resources and more can be ‘rented’ for a monthly fee and discontinued at any time.
  3. Offline services – These are the older and more familiar local services that have monthly fees such as cleaning service, car wash, and health clubs.  While these types of things have been around a long time, they are an area of growth based on the effect of digital technology and other societal factor, even when they are not directly touched by digital technology.

What does the future hold for the subscription economy, especially as relates to digital technologies?  

A great source of information on this is the book “Subscribed”, by Tien Tzuo.  Tien is known for his expertise in this area and is runs Zuora, whose software helps businesses launch subscription-based services.

There are other enablers of the subscription economy that are ‘assisted’ by digital technology but not necessarily driven by it…

One such example is the growing tendency to partner, which seems to work well with a subscription-based model.  For example, health clubs can partner to form a larger network of facilities for customers to gain access to via subscriptions.  I have also heard of this happening with comedy clubs.

Another enabler, which is very digitally driven, is digital advertising.  Since subscribers to a specific product or service tend to be a very well-defined group, digital advertising provides a means to closely target those customers with marketing messages.

Can you think of consumer or B2B segments that are ripe for subscription services?

This Post is Part of the Series: Digital Future

This series of four articles explores the opportunities and impacts of digital technologies in a few areas.

  1. The Digital Future: The Subscription Economy
  2. The Digital Future: Fintech
  3. Digital Future: Digital Health
  4. Digital Future: Digital Government