For months I’ve considered canceling my Netflix subscription, struggling to justify its value proposition. While I might not be interested in the platform’s steady stream of reality shows, the sheer size of its catalog continues to win me over. There’s always something to watch even when “there’s nothing to watch”.
This feels like a hangover of the COVID era, when consumption of digital content soared and the streaming services, digital publishers and social media platforms all cashed in. Easy access to content was of paramount importance to consumers with little else to spend their time and money on.
With the world firmly in the post-pandemic phase, I’ve begun to wonder whether a slump in the subscription economy is coming; especially considering central banks’ predilection for interest rate hikes as a means of quashing inflation.
And yet, that doesn’t seem to be the case, according to FIPP and Piano’s Snapshot Global Digital Subscription Q4 2022 report
Robust Numbers
It turns out that the 140 publishing titles that participated grew their digital-only subscriber count by 3.64% in the quarter to 42.1 million. Highlights include Substack boosting its subscriber count by 50% to 1.5 million and Argentine daily Clarín’s subscriptions climbing nearly 45% to 600,000.
With plenty of signs of strong growth, the report endorsed projections from FIPP’s sister body INMA that publisher subscription numbers would continue growing this year.
INMA expects digital subscriptions to climb by 52% in July-September 2023, compared with the first quarter of 2021. Digital subscription revenue, meanwhile, will expand 47% over the same period. INMA has, however, cautioned that the increase in cancellations observed in 2022 may continue.
Minimizing subscriber churn has always been a concern for publishers, but now it seems that the subscription economy has entered the retention phase.
Retention Phase
Consumers are increasingly aware of their subscription bills, according to a report by FT Strategies and Minna Technologies, which found that 93% of those surveyed claimed a greater awareness of the amount they spend on subscription services, up from 86% a year earlier.
The cost-of-living crisis and growing concerns over the global economic outlook have made consumers more financially conscious. Indeed, the survey of UK and US consumers found that 75% of subscribers were interested in having one app to manage all their subscriptions. In fact, 50% consumers aged 18 to 44 would consider switching bank accounts to have access to in-app subscription management. A sentiment echoed by a third of all age groups
A centralized subscription management would certainly make it easier for consumers to axe services they didn’t feel added value. While this seems like a somewhat redundant observation, I still felt it was worth making considering the next survey.
Wake Up Call
A C+R Research survey of US consumers found the overwhelming majority underestimated how much they were spending on monthly subscriptions. Almost a third underestimated their monthly costs by $100-199, while nearly 25% underestimated by $200 or more.
This survey casts a new light on the above figure of 93%, suggesting that while consumers think they’re aware of their subscription spending, there is a gap between perception and reality. If financial pressures continue to mount that gap is likely to narrow.
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And it’s here that I think it wise to acknowledge the growing doubt over whether interest rate hikes will work in slaying the inflation monster. There are several global economic factors at play that suggest that we could be in for a prolonged period of inflation, as nicely highlighted by the ABC’s Ian Verrender this week.
If central banks are mistaken in believing that higher interest rates are the silver bullet to inflation, it would mean both a decline in real wages and a pressing need for households to become more frugal.
With this in mind, now is not the time for publishers to become complacent over their subscription offerings. Great value propositions now could save a lot of headaches further down the line.
