RWA Series – Subscriptions

Vector subscription business model concept in flat style – pricing plan for app or website service

A few weeks ago I started an adulting series called RWA (Reading, Writing, Arithmetic). The first post focused on Writing using a technique called Bullet Journaling. Today’s post is the second in that series, focused on Arithmetic and Subscriptions.

Subscriptions are those things you sign up and are automatically billed for each month. You don’t even have to think about renewing the service because the company automatically does it for you (by way of an invoice or more frequently an automatic payment from your bank account or credit card). Items that fit this category are: Spotify (music), Netflix (movies), Audible (books), iCloud Storage and the recently popular subscription boxes (wine clubs, book of the month, beauty products). Just about every company has a Subscription model these days and why not, it’s easy cash for them!

The subscription model is a booming field. In recent years, this market has grown by more than 100% a year, increasing from $57 million in sales in 2011 to $2.6 billion in 2016. This is from a recent article in Stanford Business Journal that also predicts that, “Everything you purchase — from transportation to entertainment to groceries — will soon come with a monthly plan.”

Sure, the costs are nominal; but, this discussion is not about being able to afford the service or not. I’m sure most people reading this could sign up for 10 or more of these monthly services and still be ok financially. I say JustSayNo because once you get sucked in, it’s hard to get out. Gym membership anyone? 🏋🏽‍♀️🏋🏽‍♀️🏋🏽‍♀️

Do you remember that infomercial from back in the day about a popular cooking device that had the popular slogan, “Set it and Forget It.” That’s EXACTLY how I think about subscriptions. Often times we sign up for products/services and either use it VERY SPARINGLY or completely forget about it altogether!

When it comes to expenses, they can of course be need vs want; but, the actual payments themselves can also be PUSH vs PULL. When expenses are PUSHED, you consciously send your money somewhere for something you decide you want. For example, I saw Michelle Obama on the Today Show and decided I would like to read her new book, Becoming. As are result of that conscious decision, I purchased her book. Under this scenario, I have just given my money to someone for a product I chose.  Conversely, when expenses are PULLED you unconsciously send money to someone for something you may or may not want to experience/enjoy or chose. Sure, the monthly charge appears small (i.e. $9.99/month for Spotify); but, the real question is are you using the service and getting value from it or do you keep it around as a nice-to-have or because of a “just-in-case” philosophy.  As in, just in case there’s a new movie, book or album I want to partake in this month…

For needs (rent/mortgage, long term disability insurance, student loans, car insurance), I’m completely ok with the PULL technique – it saves me time and energy on things I know I have to pay anyway; however, when it comes to wants (entertainment, luxuries) I prefer to PUSH at intervals I consciously choose.

Didn’t there used to be a time when people wanted to decide where their money went and for what? Now, we’re ok letting complete strangers decide for us?? 🤔 Are they smarter or more in tune with our actual needs, wants and desires than we are? A popular finance blog, MoneyCrashers lists the cons of popular product-based subscription boxes this way:

  • Overbuying – While a subscription box usually costs less than buying all the items in it separately, there’s a good chance you wouldn’t buy all those items if they didn’t come in your box.
  • Unclear value – You get a different assortment of products every month, and you don’t even know what they’re going to be.
  • Problems With Returns – Sometimes companies won’t return/exchange items you don’t use. Most often people just don’t bother.
  • Difficulty of Quitting – As long as the fee is low enough to make it seem like a good deal, it won’t seem worthwhile to cancel the service.

There is a such thing as a subscription hoarder. According to GQ magazine, people spend more than twice as much on subscriptions as they think they do. The average initial estimate was $79.74 per month. The actual average was a whopping $237.33 per month. When companies uncouple your payment from your enjoyment of their product, it’s easy to forget you ever paid.

I currently have one monthly subscription- Netflix – and that’s because we actually use it. On everything else, I consciously choose to pass. Don’t get me wrong, all subscriptions are not bad; however, the adulting tip of the day in this RWA series is that when it comes to subscriptions, choose wisely!!!

What are you paying for every month?

All You Can News

a69fad3b-089a-4507-a6af-70abae36fd87-620x372I love the NetflixSpotifyNextIssueOysterMoviePass business models even though I don’t subscribe to them all –  you pay one flat fee and get “All you can consume.” Kind of like Golden Corral’s All You can Eat buffet. This trend continues to grow and sooner or later anything and everything you can buy will have this type of option.

To add to the fun, Reuters is launching a ‘Netflix for news-like‘ app called, Reuters TV. The app is, “Powered by over 2,500 journalists in 200 countries, offers on-demand news programming and live, unfiltered video feeds of the world’s great events.The cost is $1.99 a month or $23.88 per year. You can also sign up for a free 30-day trial.

Check out the video below.

 

Movie Subscriptions

step-cardWe live in a wonderful world of subscriptions. There’s magazines (Netflix), Music (Spotify), Books (Oyster) and now Movies, thanks to MoviePass. For $45 a month (or $540 a year) you can see unlimited movies at AMC theaters, which has a reach that includes 3,700 theaters (33,000+ screens) and there are no blackout dates. Because AMC is the 2nd biggest retail chain in the US (behind Regal, NYTimes), the service may actually take off. MoviePass will initially launch in Denver and Boston with the ability to see films in any format, including Imax and 3-D.

If there is a way to “legally” share the service it may be worth it. If you tend to visit theaters often and like seeing movies more than once, it may be worth it. If you like to binge watch multiple movies on a lazy Saturday or Sunday (watch back-to-back movies) as a way to disconnect or relieve stress, it may be worth it. If the services includes reserved seats (those run about $15 a pop here in Atlanta), it may be worth it. Whatever your rationale is, you’d have to see 36 movies per year to break even : $540 / 15 = 36… math is such a beautiful thing! That’s an average of 3 movies each month. And at 2 hours each (conservative estimate), you’ll be spending a whopping 72 hours a year sitting on your bottom, probably snacking on less-than-healthy food. Who has time for that??!

Another way to look at this is to weigh the opportunity costs (the value of the best alternative forgone, say a trip to California or interest earned from a savings account). What else could you do with that $540 dollars? We’re not talking < $10 per month here (Spotify, Netflix, NextIssue, Oyster) – MoviePass is (in some case more than) 3x the individual cost of each of those services.  You could actually have unlimited music, movies, magazines and books for less that the cost of this unlimited movie service alone and you’d never have to leave your home. As I think through this and focus on my goals for 2015, even if this service was offered in my area, I shall pass.

In any event, the business model for all these subscription services pretty much work the same: To make money, the service depends on traditional subscription-service economics: More people pay than go (or listen or watch or read).