A Subscription Dystopia — Are We Already In It?
Rumors came out in the last week that Apple may be considering a hardware subscription model for iPhones that would allow customers to own iPhones using monthly payments rather than single transactions. Shifts to subscription-based ownership, rather than outright ownership, are seeming to become more prevalent, or at least the rumors of companies considering them are. This shouldn’t be taken as unusual, if anything, the data shows that there is a real benefit to businesses for having a subscription-based model. In Spring of 2021 Zuora, Inc., the leading subscription management platform provider, released its bi-annual Subscription Economy Index™ (SEI) which showed that subscription businesses had grown nearly 6x faster than the S&P 500 over the previous 9 years, driven by an increase in consumer demand for the use of subscription services.
The Tech industry has seen similar moves in subscription-based plans that pair with hardware in companies like Whoop, the fitness tracker wearable that wraps its hardware costs into a $39 monthly subscription, and Peloton, which does have an upfront hardware purchase of a bike or treadmill but requires users to pay a $39 monthly membership fee to access classes and content.
There are of course incumbents in the subscription model space who shifted their models early — Adobe changed their $700 Photoshop license to a subscription-only model for their Adobe Suite, forcing designers to spend $20+ per month for….forever. Some of these changes haven’t been met without backlash, as seen in 2019 when BMW announced they would begin charging car owners a yearly subscription to use Apple CarPlay, the announcement was met with heavy backlash from consumers that forced the car brand to eventually reverse course. However, this hasn’t deterred other automakers from implementing their own subscription-based services, like Toyota that now requires customers to subscribe to their connected service plans to use their car’s remote start function, and Tesla that has rolled out a Beta test of their “Full Self-Driving” as a subscription.
Subscriptions becoming more dominant in the market, with many companies not providing a one-off purchase option, is not done without risk to the consumer and driving fundamental shifts in the ownership economy. Even Medium, the website this is being posted on, offers a subscription model for certain “premium” features. Certain companies, like Netflix and Amazon Prime, position themselves as “utilities”, though if consumer car brands begin charging monthly subscriptions for heated seats or not running ads in your car it begs the question — is the car you purchased ever really “yours”? This is not to mention the increasing recurring costs of having many monthly subscriptions; in a study done by Interpret announced in 2022, 20% of consumers say that they “subscribe to too many video streaming services”, with the $5-$15, sometimes even $50, a month subscriptions adding up quickly when consumers have multiple services. And with this sentiment existing already in the video-streaming segment, there is an interesting market reaction to be seen when other segments and brands begin to subscription-ify their services and goods. It’s possible that we are not too far off from consumers getting monthly subscription bills totaling in the hundreds to thousands for everything from their car to their music, to even their smart fridge.
