If it seems like much of your life now has a subscription – your TV, your car, even your white noise machine – then you’re right.
Take Eleanor Lewis, a 35-year-old software engineer from Brooklyn who pays for a video game she’s no longer interested in. She has subscribed to D&D Beyond – a companion to the original role-playing game – for what feels like “forever.”
“I haven’t played Dungeons & Dragons in about five years,” Ms. Lewis said. “I literally don’t even like Dungeons & Dragons, but I’m stuck with this stupid Dungeons and Dragons Beyond and have a subscription that I don’t know how to get rid of.”
This is just an example of products or services that may appear on credit card statements over the long term. There are your streaming channels. Shopping sites like Amazon Prime. Wholesale home goods clubs, such as Costco. The ink for your printer. Cloud storage and the tools that make your computer useful, such as B. Image editing software.
It could even be your underwear. Car washes. The bed you sleep in. The networks you watch professional sports on. Earthworms to feed your salamander. Dating apps. Exercise bike. Your child’s math games. Fitness trackers like Oura rings. Pet cameras. Your pet robots. And don’t forget subscriptions to certain products, like toilet paper from a company called Who Gives a Crap.
There are subscriptions for some of your subscriptions – there’s Hulu and then there’s Hulu Premium. And of course there are subscriptions to manage your subscriptions.
Subscriptions have become so ubiquitous that they have become the target of ridicule from people like Joe Fenti, a Boston-based comedian. On a recent trip to New York, he tried using an exercise bike at his hotel. The bike, a Peloton, required him to create an account to use it.
In a sketch widely shared on Instagram, he presents the new way of doing business. He portrays a modern-day salesman who shouts, “This product is for a subscription that consists only of advertising, and you have to pay to make it stop. You have no choice.”
In an interview, Mr. Fenti, 29, added: “I’m seeing more and more things becoming service products that should really just be hardware that you buy and then use.”
According to a new study from Bango, a British subscription platform provider, the average American has 5.2 subscriptions and spends $69 a month on them – but other research puts the numbers higher. In some of these analyses, including one from Chicago-based C+R Research, the average subscription bill per person could be more than $200.
A significant number of products – including physical goods, software and everything in between – have moved to a subscription model. According to a 2023 Harvard Business School study, nearly 75 percent of companies that sell directly to customers offer subscriptions.
Subscriptions have been around for decades – for cable, newspapers, car leasing and cell phones. (And yes, The New York Times also relies on reader subscriptions.) The explosion of this model is a recent phenomenon.
A pivotal moment in the history of subscriptions was the success of the Netflix model, introduced in 1999, and Amazon’s launch of Amazon Prime in 2005. The moves helped turn these companies into corporate giants, and other companies have been bundling subscriptions ever since: Phone and Internet companies like Verizon now offer packages that include Netflix.
Some customers experience fatigue.
“I don’t think there’s anything you can sign up for right now without trying to get a subscription,” said Shonit Kaluri, 27, who works in New York as a lender for a bank that specializes in health care. “You end up wasting a lot of money on subscriptions because you think you’re saving money up front.”
Mr Kaluri bought a subscription to Club Pret from the Pret A Manger cafe chain, paying $50 a month for up to five barista-prepared drinks a day.
“If I bought $3 coffee twice a day, I would actually have come out ahead. But at the end of the day, I didn’t really get $50 worth,” Mr. Kaluri said.
For businesses, subscriptions bring reliable cash flow, providing a steady flow and reassuring investors. Additionally, a customer is more likely to remain loyal with a subscription. Both factors strengthen a company’s measurement of customer lifetime value, an assessment of how much money each customer generates, marketing experts say.
Customers may feel more comfortable with smaller payments rather than the upfront cost, said Giles Tongue, vice president of marketing at Bango, which operates a subscription management platform.
“If you make it a subscription product and imagine getting a recurring payment over several months, that reduces the initial sense of obligation,” Mr. Tongue said.
Some automakers are looking for ways to make more money after the purchase. Tesla once charged a one-time price of $10,000 for its full self-driving capability. In 2021, the company introduced a monthly subscription for the package. Earlier this year, as Tesla’s profits shrank, the company moved some of its basic Autopilot features behind a paywall.
In recent years, BMW drew ridicule for offering subscriptions for heated seats, although the company later questioned that decision. (This feature was mocked by “The Daily Show.”) In 2022, Mercedes-Benz began offering a subscription for more horsepower, and the company continues to sell data packages that offer some of its cars’ features as subscriptions. (Volkswagen has also been offering a PS subscription since last year.)
“If I could go to the supermarket and sell you just the plain yogurt and then at another stand send you the fruit that you put in the yogurt and take apart all of those components, I would be happy to do that,” said Gil Appel, an assistant professor of marketing at George Washington University. “You can’t do that in the supermarket. You can do that in every other app.”
As technology has advanced, it has also become easier to track consumer behavior. Subscriptions allow companies to collect more information over a longer period of time. And they represent a greater opportunity for brand loyalty and an increasingly important source of revenue. A study by Capital One Shopping last year found that 87 percent of consumers will pay more for products from a brand they trust.
“If I have a subscription or membership model, I have access to data that those customers intentionally provide to me,” said Jennifer Cline, chief marketing officer at SubSummit, an annual conference for companies in the recurring revenue industry. “I have first-party data that I collect from them passively about their behavior, their purchasing habits, and the items they buy.”
Another reason for this change is generational: older customers were more used to owning things and were more afraid of becoming over-indebted. Millennials and Gen Z-ers, not so much.
“A baby boomer would want to own a car. They would wait to buy a car until they had enough money to pay for it,” said Scott Fay, a professor of marketing at Syracuse University.
There’s another frustration associated with consumer subscription models: the difficulty of canceling some of them, as Ms. Lewis, the software developer, discovered at D&D Beyond. It can mean long waits on the phone or navigating busy websites just to get out of a dormant or unwanted subscription.