Challenging times for the tech and consumer industries have caused a lot of buzz around ‘subscription fatigue’. The model that business and consumer platforms have relied on for growth and predictable revenue appears to be under threat in a changing economy.
There’s one problem with that idea, though: it’s not true. Subscriptions don’t die; they are just evolving.
Smart companies are repeating the subscription model with variations such as usage-based billing. Here’s what we’ve learned from supporting more than 4,500 subscription businesses with subscription billing and revenue management as they respond to changing times.
A Brief History of Subscriptions
The current generation of subscription models has boomed since the rise of Salesforce in the mid-2000s, and shifts by major companies like Adobe and Microsoft have normalized them in B2B.
If you’re already offering a subscription-based model and see subscribers drop out, making assumptions about why they’re doing this is a recipe for failure.
In B2C, company after company strove to replicate Netflix’s success. A long-tested model that sounded like a holdover from the world of newspapers and “book of the month” clubs dating back to the 1600s, it became the hottest trend in technology and e-commerce. And the digital infrastructure has opened up a wide range of opportunities to innovate.
But in 2022, the conversation has shifted. When Netflix reported that it had lost 200,000 subscribers in the first quarter of 2022 and was projected to lose 2 million more in the coming months, a new story was born in both B2B and B2C. Many industry commentators saw it as a signal of a much more profound shift, with customers cutting back on spending and abandoning subscriptions as a category.
What’s really going on?
The facts, however, tell a very different story. Netflix’s Q2 reporting included a loss of 1 million subscribers. The results suggest that “subscription fatigue” is not what it appears to be. In addition, new businesses are still building entirely on subscriptions, and traditional businesses are still adopting subscriptions at an astonishing rate.