In April, Netflix lost more subscribers than it gained for the first time in a decade. This surprised investors who actively supported the subscription model over the pandemic. It caused the video streaming company’s shares to plunge almost 40 percent. But it’s not only Netflix. Data from Lloyds Bank found over 1.2 million subscription payments have been canceled since 2021. Half a million of which are because of consumers feeling the financial pinch. Take a closer look at the rise and fall of subscription models.
“As we’re approaching post-pandemic, we’re seeing everybody’s scaling back. “There has been an upsurge of cancellations recently that’s been affected by several external factors and dominance of the streaming industry.” – said Erica Katsambis, VP from Minna Technologies.
The Rise and Fall of Subscription Models
The Rise
Data from Motion Picture Association say that worldwide streaming subscriptions surpassed one billion during the pandemic. The trend is attributed to people wanting at-home entertainment while locked inside their homes.
Similar growth was seen across other subscription services, from productivity software to razor blades and meal kits. ING research found that the average European household spends €130 a month on subscription-based products and services.
The Fall
However, the cost of living has increased. Alexander Engels of fintech Anyfin says this has allowed consumers to evaluate how many subscriptions they’ve acquired over the years.
“We’ve noticed users have accumulated a number of different subscriptions during the coronavirus outbreak. For the majority, it’s a wake-up call when they get to see what they’re paying for each month without even noticing.” – Alexander Engels.
Katsambis agrees that rising inflation and energy prices have impacted the nature of the cancellations. For example, many have been canceling their subscription to the so-called luxury entertainment.
Now, consumers have gotten smarter with how they manage their money. Katsambis assumes that 50 percent of people will limit themselves to one streaming subscription service at a time. In addition, managing subscriptions well is one way of reducing spending habit-related stress.
The Future
The increase in cancellations doesn’t always seem that way, says Katsambis. She attributes Netflix’s sudden flip to price hikes due to trying to keep up with production costs. This likely caused spontaneous customer decisions, Katsambis said.
She considers them the lost, the confused, and the angry. Katsambis believes that the angry group has canceled immediately as soon as they’ve seen the price increase. But a few days later, they are calling back to re-subscribe to their service because they realize they want to watch the newly-launched series release.
Engels says consumers are pickier but predicts that subscriptions will continue to rise. Meanwhile, Alexandre Louisy, co-founder and CEO of Upflow, says that subscriptions will remain.
Louisy says subscriptions are undoubtedly the future,” says Louisy. “When you think you would buy a CD in the past to listen to some music that costs them $20, they will reconsider paying for Spotify instead.
However, to help big and small subscription companies survive, Katsambis says they need to focus on customer retention and stay in the industry.
For instance, Minn offers other opportunities and actions to users, like comparing offers, changing plans, and canceling subscription plans.
“We provide a retention plan that’s been well received by merchants,” she says. It changes the script from” making cancellations as frictionless as possible” to “offering consumers choice and flexibility” in managing their recurring spending.
And for other stories, read more here at Owner’s Mag!
