Sign Me Up: Stoking The Subscription Economy

With word this week that Apple plans to roll out its own $10 a month music streaming service next week, the subscription economy grows yet another option. With ISP fees, cable and satellite, mobile phone, and discrete content services like Netflix, Hulu and Spotify already draining our wallets, one would think Americans had reached a media subscription saturation point. And yet our appetite for media only keeps expanding.  

Americans are getting much savvier and thoughtful about how they invest in the subscription economy, however. According to a new survey of user subscriber habits and shopping habits from Blackhawk Engagement Solutions, we are always on the hunt for optimizing our subscription load.

The survey finds that 89% of households have Internet service, while 83% have mobile phone service subscriptions. Cable TV is in 74% of households surveyed, while 38% subscribe to premium cable packages of some kind (36% are at basic cable levels). Interestingly we are now at the point where a majority (52%) are supplementing their TV viewing with a subscription video streaming service like Netflix or Hulu.



But the subscription model is quickly migrating from media services to other categories like products and delivery programs. This survey found that 18% of American are already using some form of product subscription (including shaving clubs or diaper clubs). The idea of automating some aspects of our shopping rituals is so appealing to us that 60% surveyed said they would consider a service like Amazon Dash, a device that adds household items to Amazon’s grocery delivery service list. The value of convenience and time-saving is apparent to many of us, with 32% saying they would pay $8 to get same-day delivery.

As subscription services compete for user wallets, however, the consumer is most likely to respond to incentives that create immediate cash value. When asked which incentives would be most attractive from competing ISPs, 59% preferred getting a $100 prepaid cash card to getting a $10 discount for seven months from their subscription fee (20%). In fact, they much preferred either of those incentives over getting a $100 gift card to a specific single retailer (5%) or getting a free tablet (16%). And for ISP customers on an extended contract, 64% would be motivated to switch if the competitor offered to pay for termination fees.

And digital delivery is quickly becoming the coin of the realm. When asked where they go first to find and watch a movie, 57% preferred streaming services to physical rental or purchase (29%) or online rental or purchase (15%).

And so let the bundling wars begin. Internet and TV providers will be looking to minimize churn and recapture cord-cutters and cord-shavers by offering packages that include content services like HBO Now, Spotify, etc.

According to this survey, even small incentives like a $10 prepaid card could sway 50% of potential customer to one streaming music service over another. Half of consumers used Pandora and 35% were on iTunes Radio, with others like Spotify (18%) and SiriusXM trailing far behind.  That may not be saying much for how the most popular services like Pandora and iTunes Radio are distinguishing themselves in the minds of consumers, however. In emerging categories for subscriptions, marketers will be struggling to differentiate, a situation that allows for a lot of incentivized purchasing but also perhaps a lot of churn. 

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