Speaker 1: Services like Spotify, Netflix and Xbox game pass have transformed their collections into commodities where anyone can easily access more albums, movies, and video games than could ever fit in their homes. Not too long ago, people had to buy CDs for 15 to $20 each, if they wanted to hear a band's latest hit now for less than $10 a month, subscribers have accessed unlimited music podcast and other audio products. And a basically unlimited library offered by Pandora, Spotify, and apple music.
Speaker 2: People [00:00:30] expect to be able to have access to everything, whether it's by signing up for a subscription service or by going out and finding it even for like, as a digital download this idea that you could rent something, subscribe to something that's sort of the expectation now, uh, rather than the exception,
Speaker 1: The subscription economy has been steadily growing for a while, but in the last decade, it's [00:01:00] exploded more and more industries are starting to lean into subscription models and are no longer promoting their single use pay. As you go offerings. The days when a company had a one time deal with a customer will soon be in the past. That's because consumers are gravitating more towards flexibility products and services that provide a better value if fewer hassles true. We don't own as much stuff anymore, but according to a 2019 study by the Harris group, that's not necessarily a bad thing. Think about it. Photo and video sharing platforms like TikTok, [00:01:30] Instagram, and YouTube have put the emphasis on experiences rather than things. The value of an experience is based on our screen time now worth more than outright ownership of any physical item. More than half of the people in the 13,000 person Harris group survey said, they wished they could own less stuff
Speaker 2: Over the past 10 years. We've sort of watched this transition, especially in [00:02:00] music and in video of going from a land where you owned things, whether it was a CD or a DVD or a digital download or an MP3 to where you just subscribe to a service, you have like a gigantic library at your fingertips. The great thing about it though, is that you have so much more access to other things without having to pay discreetly for every single thing you wanna listen to or watch.
Speaker 1: In other words, subscriptions provide consumers unlimited access without commitment, [00:02:30] something furnished Harabi host of CNET. So money podcast says is a growing trend
Speaker 3: That there's also this human tendency to not wanna commit to things. Um, we have a fear of commitment and sometimes it's more appealing to opt into a service that is really just giving us access. Uh, we don't have to store anything. We don't have to keep anything
Speaker 1: Subscriptions, give consumers the option to show up to a party, then leave whenever they want without having to deal with FOMO or [00:03:00] the fear of missing out. But in exchange for a lack of commitment, consumers give up control over what we have access to at a given time. We're also at the whims of what a service allows you to do. And sometimes privileges can disappear at a moment's notice in
Speaker 3: Some ways it's freeing and we like that. But at the same time, you know, it, it may not be Mo the most valuable thing because we don't actually end up exercising our rights, uh, as much as we could to be able to optimize the cost of what we're
Speaker 1: Paying [00:03:30] for businesses. Subscriptions are one of the fastest ways to grow revenue and help with cash flow predictions, but it's also a play on consumer psychology.
Speaker 3: Partly what makes it really successful is that it pokes at, um, part of our human nature, which is that we tend to be pretty optimistic about our own habits and capabilities. I mean, think about it when you sign up for, I don't know, a subscription to a gym, right? And unlimited membership versus maybe a pay as you go, the businesses are very [00:04:00] good at creating this marketing allure. They, you know, they make the math very compelling. They'll make throw in some V I P perks some bonuses. So you feel like you're getting the deal of the century,
Speaker 1: But those deals of the century can quickly add up in 2020 consumers had an average of 12 paid media and entertainment subscriptions. Millennials had the most with 17, according to a new study by market research firms, CNR research, more than half of consumers underestimate their monthly subscription bills. By at least $100.
Speaker 3: [00:04:30] Subscriptions are very easy to sign up for and very easy to forget about. And that's what businesses are hoping you'll do to some extent. I mean, they don't really wanna service all of these customers to the fullest extent every single month. They're hoping that a bit of their customers will sign up, but maybe not use the subscription that much. Um, you know, they, they're looking for balance and they're most importantly looking for consistent revenue that they don't [00:05:00] wanna lose. It gives them this sort of continuous customer base that they can test products on and services on. Uh, they can get to know really well and that can help down the road, build other offerings for the marketplace.
Speaker 1: Consumers can sometimes sign up for subscriptions unknowingly, like opting into a free trial or taking advantage of a one month low fee. But you have to pay attention because if you don't cancel by a certain deadline, then you're on the hook for a monthly subscription. First service you [00:05:30] may have forgotten. You had subscriptions are often automatically charged on a debit or credit card. So it's easy for users not to notice the cost and the CNR research study nearly 42% of people forgot. They're still paying for a subscription. They no longer use. There are financial tracking apps you can use to get a better handle on your subscription spending. And in some cases, these apps can cancel subscriptions for you for a small fee.
Speaker 3: There are definitely a lot of useful apps out there that can help you keep track of your subscriptions. For example, there's true bill, [00:06:00] which is very popular. And, and in some cases, even if you just have an app that looks at your spending, could you just be your credit card app? It could be your bank app. Uh, just having this habit of looking at your spending every few weeks, every month, just to see what's going on.
Speaker 1: The growing subscriptions economy means subscriptions now exist for audiobooks, cosmetics, furniture, groceries, meals, wardrobe, and so many other products and services. Some like grocery delivery subscriptions make sense because [00:06:30] they're solving problems and creating a more convenient lifestyle for consumers, but not every product or service needs to be a subscription. For instance, Tesla offers a tiered subscription service for supercharging features. BMW also offers a monthly subscription for heated seats, but this type of subscription service often creates more problems than it solves.
Speaker 2: But I think that's where you're gonna see a lot more backlashes in those industries, or you're not really solving a problem or creating a convenience for people. It's just a [00:07:00] way to find more money out of your
Speaker 1: Customers, whether or not a subscription makes sense for you really depends on your lifestyle and habits.
Speaker 3: I would caution consumers before signing up for a subscription to try out that service for a month or two. Um, normally, you know, just pay as you go and see what your habits actually are, track your behavior. And then you'll have a better sense of whether or not a subscription that is unlimited. That gives you an average price for an unlimited monthly subscription, um, actually is [00:07:30] worth it to you, but it really comes down to knowing yourself truly knowing your habits, knowing your goals and knowing your budget. Because again, I wanna say that while these subscriptions can seem very nominal, um, monthly, it, they really do add up. And especially when you look at the average number of subscriptions, somebody has, it's not just one. They might have six, they might have 10. So this is potentially hundreds and hundreds of dollars a month that you could be putting towards something more meaningful.