The Subscription Bubble

A Subscription for Everything

I am subscribed to a few strange things that I don’t use anymore and probably won’t use ever again. Thirty years ago, this first-world conundrum was probably a little less common. To subscribe, you paid with cash or by mailing out a check before the deadline. The whole process was harder. You had to really want a subscription.

I think back to when I was a ye’ young lad who subscribed to magazines. When my subscription to Sports Illustrated For Kids was about to end, my mailbox, the physical one in my front yard, would get bombarded with daily reminders. “Send your check in now if you want to keep reading about Ken Griffey Jr!”

Subscription Tech Changed The Game

Subscription services today have never been easier to run and manage. That’s true from a payment perspective and a bill collector perspective. I mean, there are automated platforms that run everything for you in seconds and show cool charts and graphics about your account as you go. Poof money gone! Ka-ching money deposited! You get notifications in real-time like it’s a video game.

Subscription technology has come a long way since my day, and probably yours. The ease of creating a subscription, maintaining it, and delivering it is seen everywhere. The biggest company on our planet, Apple, is squeezing itself into the subscription economy with music, cloud storage, and now a TV network of sorts. Something tells me, more of this is coming.

Subscription Competition On The Rise

As most of you know, I spend my time in financial markets. So naturally, when I’m standing between eight other people on a Manhattan subway, I find myself in deep thought, “What exactly is going on with all these subscriptions?”

I recently read that 3 of every 4 Americans now have a subscription to something. And the numbers are trending up for those who have multiple subscriptions. Most subscription services right now are doing great, especially when you consider what many of these services offer and their price point. Maybe it’s we’re living in a subscription enlightenment, not a bubble.

Perfectly timing a bubble call is hard. Probably impossible. I have tried a few times, even with my own money on the line. In each instance, I was wrong. The thing about bubbles is no one ever really knows there’s a bubble until after the fact.

I currently think the subscription economy is trending toward more competitive times. And no one is considering the implications of that. The subscription economy’s explosive growth has entered all stages of our day-to-life. I see it on the enterprise side, the consumer side, the health side, and the entertainment side with no signs of slowing down.

The Unraveling Risks

Economists like to tell a joke. A cheesy one. It goes like this:

“A hundred-dollar bill is lying on the ground. An economist walks past it. A friend asks: “Didn’t you see the money there?” The economist replies: “I thought I saw something, but I must’ve imagined it. If there had been $100 on the ground, someone would’ve picked it up.”

Economists believe the world is so efficient, large, and random that there’s no likely scenario where they would find free money. Over the last 10 years, several subscription companies have proved their joke wrong. Netflix, while enjoying a first-mover advantage, was once the only digital video subscription service in the world. They were the game changer picking up bags of $100 bills. Today, I can barely fit all the subscription based digital video companies into a single tweet.

The subscription economy, in its current form, is perplexing because of its understated maturity. There also seems to be double and triple counting happening when subscription-based companies make forecasts and then sell those forecasts to investors. It’s one reason why I still don’t fully understand certain subscription companies and their valuations – everyone is counting the same potential subscriber into their model! But people don’t have infinite money. With each passing day, more potential customers are spending on new competing subscription-based companies coming to market. The customer base in the subscription world is spreading thin over time. That once $100 bill on the ground that Netflix was picking up daily is gone.

The subscription economy has yet to be tested by a real slow down. Its resiliency should remain questionable. For one, it’s really easy to cancel a subscription. You go to your account and press cancel. It’s one thing that actually made their success in the first place – the ease to cancel was so friendly. However, that may also be the downfall if groups of people ever need to suddenly mass cancel their subscription to a service or because they are squeezed for money. A company could disappear overnight.

Final Thoughts: Let’s See What Happens

If the day ever comes, where markets or money gets tight on a macro level, it will be interesting to see the subscription services that make it out unscathed. Going forward, I’ll be keeping a close eye on the subscription economy and its growth.

One response to “The Subscription Bubble”

  1. […] As an emerging industry becomes mature, with each passing day, another sales call is made by a competing company and the market begins to shrink, not expand. I think several industries are approaching this point. Read more on my thoughts here. […]

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