The subscription model isn’t just for streaming services anymore. Companies across a wide range of industries are adopting the model in search of consistent, recurring revenue over more traditional one-time sales. And as consumers demand convenience and value, the industry is expected to continue growing.
As businesses embrace the model, however, it raises questions about what is considered a proper transfer of ownership of property. Traditionally, when a purchase is made, ownership of the property bundle (e.g., intellectual, physical and moral) is transferred to the buyer. With subscription services, the property bundle remains with the owner of the service and users merely have a license to use the property. While the fox hunting example may seem outdated, ownership in property rights is still a fundamental principle of the law.
In addition to the recurring revenue model, companies using subscription services can also provide customers with a more flexible experience by allowing them to upgrade, downgrade or suspend their service at any time. This flexibility satisfies consumer demands and yields valuable business insights on customer behavior.
Subscription services are not only transforming how consumers interact with products and services, but they’re changing the way some of our most iconic brands operate as well. For instance, in the medical and healthcare sector, subscriptions are helping doctors manage their patient loads while offering patients more personalized care. This has allowed many physicians to see a sixth of the amount of patients, while still earning the same amount of money.
On the consumer side, subscriptions have ushered in a new age of on-demand services. From food delivery to transportation and even legal services, companies are now able to offer a wide array of services that can be paid for on an ongoing basis. This is known as the “subscription economy” and it’s causing major disruption.
While on-demand and subscription-based models offer the potential to transform numerous industries, the most disruptive applications are likely to be those that combine subscriptions with other products that would otherwise be sold as stand-alone goods. For instance, BMW has been implementing subscription fees for some features in its cars, such as the ability to activate seat warmers, a feature that has raised concerns over whether or not it infringes upon buyers’ property rights.
The benefits of the subscription model are clear: businesses can better predict recurring inflows of cash, leading to increased stability and profitability. It also allows them to focus on retaining existing subscribers, which is key given that it can cost 5-25x more to acquire a new user than retain an existing one. Moreover, by maintaining constant contact with their subscribers, businesses can develop a more nuanced understanding of their product, enabling them to make informed decisions around everything from pricing to new products.
