The boom in the subscription economy and how the RBI made this difficult in India

Subsciptions have boomed in the last few years - why has this happened and what are the challenges?

Amazon Prime
Disney Hotstar
Netflix
NBA League Pass
Swiggy One (now stopped)
Zomato Pro
The Ken (I’m not counting physical newspapers like Mint here)
Amazon Audible
Youtube Premium (yes, you read that right)

My wife and I counted the number of subscriptions/memberships that we had between ourselves - are we see ourselves as not-so-savvy people in terms of our subcriptions.

I came across this article recently which stated the following trend (probably in the US):

Wow, 17 subscriptions per person - that number is just mind boggling even if a few of these are your actual essentials like milk, bread etc (which in India are very rarely in the form of subscription - something which the A2 cow product companies and companies like Country Delight to name a few are trying to change)

The reason for this insane number of 17 is that there is a “subcription"-ization” of hundreds of traditional business models as well - restaurants, cafes, carwashes, co-working spaces, services and so on. The article that I had linked further states how the pandemic has made people opt for more such subscriptions for convenience and to suit the WFH era.

In India, the target market for companies to get “subscribers” is relatively small (some say 10 million while others quote anything from 5-50 million) but the total number of internet users are almost 500 million. We in India are not as evolved in terms of the variety of subscipions that are on offer but its booming rapidly and startups are tapping into this as much as possible. As an example, I recently met a friend who works at a healthcare startup called “Clinikk”. The companies is attempting for the “subcription"-ization” of your regular healthcare services - an important but tall ask given how Indians underrate preventive healthcare insurance and care until it literally comes knocking on the doors. This report by Razorpay is a nice short read on the growing Indian subscription economy.

There are MANY such examples of emerging models of the “subsciption economy” in India and I list down some areas and companies offering subcriptions in one form or another.

Media and Entertainment - Hotstar, Voot, Sony Liv, Alt Balaji, Zee5 (all mass market targetting far beyond 10 million customers), Audible, The Ken and even traditional newspapers like Business Standard and ET Prime, NBA League Pass etc

Shopping - Amazon Prime, Flipkart Plus

Delivery: Big Basket Daily, Swiggy One, Zomato Pro

Food: Eatfit and niche local options such as Food Darzee, Zomato Pro, Diner Out, Easy Diner Ootabox etc

Fitness/Self Care: Cultfit, HealthifyMe, Ultrahuman, Fitpass, Urban Company etc

Healthcare: Clinikk, Even etc

In fact, similar to the concept of “fund of funds”, the Times Group has added an option of "subcription of subsciptions”!

There are hundreds of other examples you can add here.

Why has the subsciption economy boomed so much?

1. Evolving customer demands: As the number of choices grow, consumers want to identify and stick to products and services that provide them the consistency that would make the subsciption worthwhile and reduces the dilemman of choices. Consumers are also now digitally savvy and making use of various options to reduce the number of transactions they are dealing with. They also want to own fewer assets and would rather buy “XYZ as a service” not too dissimilar to what SaaS is for companies. As per a Mckinsey Report “Indeed, the average US consumer now has four subscriptions. “I like that I know exactly what I’m getting, how much I’m paying, and it’s convenient since it’s all on autopay,” said one consumer. Another highlighted the novelty: “It saves me time and also encourages me to try new things.”

2. Companies and their investors want stickier avenues of revenue and lower customer retention costs even if it means that it sacrifices some short term unit economics for this. They also take advantage of this to enhance customer experience and build a loyalty with customers and product targetting as per the data around the customer. Amazon Prime is the prime example here (pardon that forced pun)

3. The same Mckinsey Report puts the following reasons as the motivation for customers signing up for subsciptions.

   

However, there have been headwinds and brakes on this boom in subsciptions in the last few months after a dreamlike boom in 2020-2021.

1. Customers are heading back outdoors and cancelling subsciptions be it due to having too many of them or purely due to inflation

2. Customers who probably loaded up too many subscriptons also probably realized that
- they can live without the subsciption no matter how much it claims to save (I cancelled Swiggy One as an example)
- the “offering” is something vague and “add-on” like and not good enough
- most importantly, I feel customers are also understanding that the convenience offered by subsciptions and memberships are only eating into their money in the longer run by making them spend more

3. Regulators like RBI have also kept an eye on this boom and given their primary job is to have the best interests of the public in mind, have even come up with radical (And damaging) rules. I quote this fantastic article by the Ken

Now, while this was aimed at protecting customers from that recurring bill payment that eats into your savings little but little for a service you might have even forgotten about - it has hit merchants and companies big time -forget the fancy startups, even individual entreprenuers giving coding or music classes to kids across the globe or that media or marketing agency that depend on these subsciptions had to scramble to get their customers to comply and lost out on many customers in this process.

I recommend this article and this article for the same.

Anyway, no matter what, subscriptons are here to stay. And given the number and length of ads that YouTube that one sees these days, I think a lot less people will make fun of me for having a subscription of Youtube Premium.

#subsciptions #subsciptioneconomy #amazonprime #youtube #ads #youtubepremium