Subscription Services Are Disrupting Industries Around the World
Cable TV is a rip-off.
Even as a kid, I remember seeing commercials for cable TV and thinking: “What’s the point of having 1,000 channels if none of them are good?” (Except for Cartoon Network, of course.)
Really, though, does anyone actually sit there and listen to all of the 200 music channels?
The lack of good channels is just one of the many reasons why millions of people are canceling their cable service.
Another reason is the price.
The average cable TV bill is over $100 per month. Why would you pay $1,200 a year to get a bunch of stuff that you don’t use?
These problems have given way to services like streaming and on-demand content.
A Giant World of Content
One example is YouTube TV, where you pay $40 a month for over 60 channels (the “important” ones).
The price is good. But the best part is the huge database of content you get with the service.
In addition to the channels, you can record and store an unlimited amount of shows that you can watch anytime.
Plus, you get access to all YouTube content as well. Of course, that’s free anyway, but it’s convenient to have it all in the same place.
There’s also Netflix, which is becoming its own giant world of content.
With new “Netflix originals” coming out seemingly every day, there’s always something new to watch. And it’s far cheaper than cable.
Netflix now has over 60 million United States accounts, and over 30 million people in the U.S. have ditched cable.
That’s no coincidence.
So, in short, cable providers are being disrupted in a huge way.
The Subscription Economy
These services all fall into the same type of movement in how companies do business.
It’s called the subscription economy. And it’s affecting all sorts of industries across the world.
This isn’t a new concept, as people have been paying for newspaper subscriptions since the 1600s. However, it’s become much more prominent in today’s society.
With Amazon Prime, for example, you pay $119 per year for shipping benefits. You still have to pay the regular price for everything, but this extra convenience brought in an extra $12 billion from United States customers alone in 2018.
That number is going to keep growing, especially since members get Amazon Prime Video as well. And it clearly shows the magnitude and reliability of cash flow that subscriptions can bring in.
Regularity and Security
The subscription model has also been widely adopted in the software and storage industries.
Services like Dropbox and Office 365 are used by hundreds of millions of customers, creating billions of dollars of sales every year.
And the regularity and security of these cash flows are appealing to investors.
The market values companies with subscription-based sales about two to three times higher than competitors with a typical transactional sales model.
For example, you might be more inclined to pay more in the long run if you pay lower monthly payments versus a few bigger payments for individual items.
And of course, it’s more helpful for businesses because they can have a better idea of how much money they will make at any given time.
The Competition in India Heats Up
Subscriptions have become a huge hit in the United States. But these companies are beginning to make an impact on the entire world.
We’ve recently seen competition in India heat up in the music streaming industry.
India’s average music streamer, of which there are 420 million, listens to about 20 hours of music every week. With a population of 1.34 billion people, that’s a huge market that all of these companies are going to want to lead.
Spotify, the global leader in music streaming, officially launched its service in India on February 26. Then, less than three weeks later, YouTube Music followed.
But it won’t be an easy market to capture.
There’s already plenty of local competition going on, with Indian services like Gaana fighting for the No. 1 spot. Gaana currently has about 80 million users, a number that it expects to grow to 200 million by the end of 2020.
Gaana and Spotify have a variation of the subscription economy, in which they offer “freemium” content. That is, anyone can sign up to use their services for free, but there are incentives to upgrading to a paid subscription.
With Spotify, you can pay $10 a month to not have to listen to advertisements. And with Gaana, subscriptions start at just $1.44 a month and include a much wider music selection, as well as unlimited downloading capability.
The Netflix of Emerging Markets
The growing global demand for streaming has also given rise to iflix, which has been dubbed the Netflix of emerging markets.
Founded just five years ago, iflix has already spread to 28 countries in Asia and Africa and amassed 15 million subscribers.
2018 was its biggest year yet, during which iflix saw its subscriber count grow by 250% in just the first half of the year!
And it has established itself as a leader in Asia, where it has more subscribers than Netflix despite its brief existence.
The Bottom Line
Of all the areas of the subscription economy, streaming has become the most popular so far.
And while it’s established itself well in the United States already, the emerging markets of the world still provide huge opportunities for newer businesses.
Editor, Rapid Profit Trader