Welcome to the Hotel California
Previously dominated by the likes of newspapers, magazines, gyms, utilities, and telcos, more products and services are being offered to more people through subscriptions.

In the B2B world, the likes of Adobe now have a monthly subscription model for Photoshop and Amazon Web Services for its cloud model. You cannot buy a perpetual licence or boxed copy. You could argue that WeWork is a subscription model (and I am sure it did!).

Even the world of sex toys has got in on the (ahem) act. For example, Teaser Box offers a variety of options based on gender and sexual orientation with the contents remaining a mystery until you unbox them. Not that I knew this myself of course – a friend told me!

Royal Mail forecasts that the value of the subscription box market in 2022 will be up 72% versus 2017. Some 27.4% of shoppers are apparently currently signed up to a subscription service – skewed heavily towards 25- to 34-year-olds.

The biggest news in the subscription services game is that Disney is now taking on Netflix and Apple TV with Disney+. The launch was a success by one metric: signups. In little more than a day, Disney Plus registered more than 10 million people.

Why I love and hate subscription-based businesses
As a marketer, I would argue that subscription-based businesses are a tad easier than, say, most retail or FMCG businesses, where each day is a new one. Not for these folks the Monday morning meeting with all eyes staring at you wondering what you are going to do about sales that week.

Sadly for me, I have only worked for businesses where every day is a new day, without a guarantee of revenue from subscriptions. So, yes, I am jealous!

Subscription business are attractive to investors for one reason: predictable revenue. Here is the proof: Disney shares are at an all-time high since Disney+ launched.

Why do investors love them? Three letters – ‘CLV’ or customer lifetime value. This is when you know the revenue of a customer and margin, and the number of people who stay, you can calculate their full value.

CLV is also more technically known as the net present value of the future cash flows attributed to the customer during their relationship with a brand. Conveniently, this also happens to be very close to the description of one of the ways that investors work out the value of a company: operating free cash flows.

I appreciate that for many people they’re convenient. You don’t have to worry about your service or membership lapsing. That’s not a bad thing.

But let’s look at this another way; here’s a list of brands. Think about how you feel about them:

Netflix. Spotify. Amazon Prime. Audible. Your gym.

Here’s another list of companies. Think about how you feel about them:

Your water utility. Your mobile operator. Your mortgage bank.

My guess is you love the first set of companies; you might not hate the second, but they are something you would discard if you could.

‘You can check out any time you like, but you can never leave!’

Sourced through Scoop.it from: www.marketingweek.com