The Subscription Model Surge
A Bright Spot for the Tech Industry
Companies that offer subscription services, from music streaming platforms to food delivery apps, have seen their subscriber numbers skyrocket over the past several months. The transition to subscription-based business models in the tech industry had been happening for some time before coronavirus. However, stay-at-home orders have significantly ramped up the trend.
At a time when so many industries face an uncertain future, the success of the subscription model, which provides businesses with a steady, recurring revenue stream, is reassuring for tech companies and investors. Though tech companies have struggled during the pandemic with falling ad revenue numbers and drops in sales of physical products, subscription revenue is picking up the slack.
By the Numbers
Last Quarter, Netflix (NFLX) subscriptions spiked by 15.8 million. Not to be outdone, Disney+ (DIS) added 22 million subscribers. YouTube subscriptions also rose, resulting in Google’s (GOOGL) non-advertising revenue increasing 23% from last year.
Microsoft’s (MSFT) commercial cloud and Office 365 also saw a boom in subscription numbers, as did its subscription gaming services Xbox Live and Game Pass. “As COVID-19 impacts every aspect of our work and life, we have seen two years’ worth of digital transformation in two months,” explained Microsoft Corp. CEO, Satya Nadella.
The recent subscription spree has also given Apple’s (AAPL) menu of services a welcome boost. The company has been working to establish itself as a service provider with Apple Music, Apple News, iCloud, and others, but has struggled with intense competition. The tides have turned recently, as Apple reported that its paid subscriber base has grown from 125 million to over 515 million in the past year.
Amazon (AMZN), Instacart, and other food delivery services have also seen overwhelming growth. Instacart reported that its grocery order volume was six times higher than it was a year ago.
How to Be a Smart Subscriber
Companies are looking ahead and wondering if their subscription numbers will dwindle when customers are no longer stuck inside. Perhaps habits formed during quarantine will hold on, but it’s also possible that consumers will cancel some of their subscriptions once more entertainment options are available again.
As a consumer of subscription services, it can be helpful to do a quick virtual spring cleaning to make sure that you’re aware of what subscription services you’re paying for. SoFi Relay can help you track your spending and keep an eye on subscription costs—all from the SoFi app.
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