Netflix, Disney, Hulu, and the State of the Subscription Economy
Over the years, consumer needs have been evolving because they are looking for new ways to engage with businesses. Current modern consumers have different expectations of products and services they love. As a result, companies have been changing to meet their needs.
The term "Subscription Economy" is a phrase coined to describe the new era that companies, especially those in music and video streaming, are adapting to. The previous popular model centered on ownership of a product. Acquiring and keeping a new customer base for an extended period using the strategy was difficult.
What Is the Subscription Economy?
The subscription economy is a concept from Zuora that shows the growth metrics of different subscription companies. The business models in the subscription industry are based on the plan of selling a product or service and receiving revenue monthly or yearly. Most companies that use this model focus more on the retention of customers so that a single customer pays multiple payments.
According to Aluma’s research, streaming company giants such as Netflix, Disney+, and Hulu are among the essential software as a service (SaaS) companies that most households consider a vital utility. These companies have recorded considerable growth each year, while traditional solutions have little to no growth.
Multiple media companies are making a transition to the subscription economy. The shift brings with it a different business approach. The essential operational and foundational changes when companies transition include:
Pricing
The pricing models implemented by different companies in the industry are more complex than it seems. They have to evaluate direct revenue and costs per product that needs to make them profitable. The next step is determining the billing period. Because of different packaging strategies and pricing options, you must be ready for complexity.
User Adoption
There is more to customer onboarding than signing up new customers. It requires planning about payment gateways, user accounting, and more. As a business, you will have to offer customers comprehensive tools to manage accounts over their subscription period.
Operations and Growth
You will make many difficult conversations and decisions to run a successful subscription model. Some of the common questions in the discussion can include:
- How do I keep my clients?
- How do I compensate my employees?
- How do I work on customer comments and complaints?
How It Is Changing How We Buy
With the world suffering from the coronavirus pandemic and people stuck at home, a great opportunity presented itself for streaming companies. The New York Times analysis shows a significant change in how we use the internet. Streaming media companies had a high growth rate over a short period.
Though subscription streaming media platforms existed for about 20 years, the virus was the best opportunity for the companies. With movie theaters closed, it pushed consumers to their devices to get entertainment and news.
In a subscription economy, buyers have more control over the products they want from the business. With the subscriber at the center of the business model, the streaming company's products will revolve around satisfying them so that the customer has a sense of relationship and loyalty to the brand.
How to Succeed in the Subscription Economy
The streaming industry is booming because consumers who shift to subscriptions will rarely revert. Unlike other traditional platforms, it is here to stay, as stats from popular streaming platforms tell it all.
Over the next few years, we expect the industry to become valued at around $300 billion. If you want to set up a subscription company to gain market share, you must embrace its uniqueness. There are crucial elements of the industry that you will need to emphasize. They include:
1. Uniqueness and Quality
If you are running a new subscription company or starting, marketing quality products will go a long way to make your platform successful. A great marketing campaign will turn your weaknesses into strengths and be able to capture a new audience. The most significant selling point is emphasizing your uniqueness.
2. Simplicity
The simplicity of your product is the key to success in this tough subscription economy, especially when you are new in the industry. Many companies in the industry have a ‘How it Works’ campaign in their marketing campaigns to help onboard new subscribers.
3. Variety
Successful streaming media platforms offer multiple products to consumers to capture different demographics. Variety is the spice that helps in a new subscription company's success as it shares the unique key benefits of its service.
4. Convenience
The biggest selling point of SaaS products is the flexibility and convenience of accessing them. The marketing campaign needs to sell the idea of freedom to access at any time. Some of the most popular companies in the industry, such as Netflix, have a clear message of convenience in their ads to attract new consumers.
The New Business Model of Subscription Economy
Multiple media companies are making a transition to the subscription economy. The shift brings with it a different business approach. The essential operational and foundational changes when companies transition include:
Pricing
The pricing models implemented by different companies in the industry are more complex than it seems. They have to evaluate direct revenue and costs per product that needs to make them profitable. The next step is determining the billing period. Because of different packaging strategies and pricing options, you must be ready for complexity.
User Adoption
There is more to customer onboarding than signing up new customers. It requires planning about payment gateways, user accounting, and more. As a business, you will have to offer customers comprehensive tools to manage accounts over their subscription period.
Operations and Growth
You will make many difficult conversations and decisions to run a successful subscription model. Some of the common questions in the discussion can include:
- How do I keep my clients?
- How do I compensate my employees?
- How do I work on customer comments and complaints?
What’s in It for the Subscriber?
The subscription economy has enabled easier access to content at a lower price. In most situations, consumers can access free versions of different products on a trial basis by just signing up with an email. With different streaming platforms around the globe, all you need is a software tool that will bypass geo-blocks that restrict certain content.
What’s in It for the Business?
The bottom line for a business to join the subscription economy is to earn recurring revenue. It is the primary driving force for the company to maintain profitability and make informed future operational decisions.
Embrace the Changes From the Subscription Economy
Streaming media is not only a product but also an experience. Your strategy to capture new markets should reflect your consideration for your customers and market base. Companies such as Spotify and Netflix are a success because of their personalized services and transparency.
By putting the focus on how consumers use your products and their response to updates, you can create recurring increasing revenue and better customer relationships. You will evolve with your customer throughout the relationships to ensure a high retention rate.
Author Bio: Mauricio Prinzlau is the CEO and Co-founder of Cloudwards. He is at the helm of the company and steers a team of editors, writers and designers from all around the world.
[Editor's note: This is a contributed article from Cloudwards. Streaming Media accepts vendor bylines based solely on their value to our readers.]
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