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The subscription gold rush has peaked

How many subscriptions do you have? I bet you have more than you think. Check it out. You will have subscriptions to on demand TV, to your phone, to apps, and possibly to deliveries of regular consumables such as razors, fresh meals, pet food, beauty products and the like. The subscription business model has been tremendously successful. Barclaycard reckoned that in 2020, 8 out of 10 British households were signed up to at least one subscription and put the average number per household at seven.


The subscription model is not going to go away but it is under threat. Netflix is the canary in the coal mine. Its shares are down 40%. Not only has it stopped growing, it has suffered a customer decline. When things get hard financially, people begin to look at the subscriptions and decide which they can do without. Some of the subscriptions will be life’s luxuries or consumers will have worked out it is possible to buy them cheaper in the open market.


In the US over 80% of customers underestimate what they spend on subscriptions each month and government regulators are trying to work out how they can hold subscription suppliers to a standard. It’s not unusual for a subscription supplier to roll forward the contract without explicit consent. In the UK the government reckons that payments to unwanted consumer subscriptions amount to £1.8 billion a year - equal to £60 per household.


From the subscription suppliers’ point of view this business model is a dream. It provides a recurrent revenue stream rather like software as a service. It is no wonder that subscription services doubled between 2016 and 2020 and then doubled again in 2021.


As dark clouds gather over the economic horizon this business model gold mine will surely crumble. I am reminded that the California gold rush began in 1848, reached its peak in 1852 and was in serious decline by 1855. That's about the same span as the subscription model.