Subscription Services Mode of Economy

Companies like Netflix, Spotify and Amazon are ubiquitous today. In fact, it’s difficult to imagine what life was like before they arrived on the scene. Chances are you have an account with at least one of them. So how did they come to exercise such an influential role in our lives?

The Subscription based Economy is a new business landscape in which traditional pay-per-product (or service) companies are moving toward subscription-based business models, according to Tien Tzuo founder of Zuora. The Subscription Economy has increased the intimacy between software vendors and their customers. In the Subscription Economy, every company must better manage a direct, complex, responsive, multi-channel relationship with its customers. Customers are absolutely key in this relationship and rather than putting the focus of the business on the “product” or the “transaction,” subscription economy companies live and die by their ability to focus on the customer. Now, the formula for growth is focused on monetizing long-term relationships rather than shipping products.

Well, subscription access to music, movies, and video has grown enormously over the last few years. The internet and the arrival of file sharing sites like Napster kick-started that growth spurt around the turn of the millennium.

It was a panicky time for big film studios and record labels. Worried about having the rug pulled out from underneath them, they went on a legal offensive and tried to have their upstart competitors shuttered. What they failed to notice, however, was the huge potential of this new market. Start-ups were much quicker on the uptake. They calculated that if they found a way to enter this market, they’d be able to compete with and possibly even dominate established companies.

It was a savvy gamble. Netflix began streaming films in 2007. Over the next decade, it went from zero to 100 million subscribers!. Spotify meanwhile went from zero to 500 million subscribers in under nine years. It now accounts for around 20 percent of global music Industry revenue. Subscription services have also changed the way people shop, thanks to e-commerce another market that’s growing rapidly. Its annual expansion is estimated at around 15percent and e-commerce now account for 13 percent of the total retail market. Commerce is increasingly taking place online, Amazon has over 90 million Prime Members that’s just under half of all American households adding up to $9billion annually in subscription fees and $117 billion in Sales.

What makes it all work is the advantages companies like Amazon have when it comes to data retention. Because they know what their customers buy, they can guess which other products they might like. That means they can tailor their service to individuals and make shopping a much more personal experience… We as Africans we need to think on our own how are we going to utilize this huge potential brought by the internet, what about African amazon where someone in Lagos Nigeria could buy a fresh organic Onions from Arusha Tanzania? The possibilities are promising.