Oversubscribed.
Not so long ago I was given the opportunity to cut back on hours at my job, and devote more time to writing. There was a screenplay languishing on my hard drive. I had a folder stuffed full of half-written essays. I had a head stuffed with ideas I wanted to write about. It was a sweet deal and I jumped on it.
It was only later that I did some checkbook math to figure out the impact of the reduced paycheck that would accompany the reduced hours at work. What I found surprised me.
It seems that I had put my entire financial life on autopilot. I knew the flow of money into my checkbook would be down to a trickle until I found a way to sell some writing. It turns out I’d also given up control over the flow of money back out. Everything from entertainment to charitable contributions had been converted to some sort of fixed subscription. As far as monthly expenses were concerned, my checkbook ledger might as well have been chiseled out of stone.
It wasn’t always like that. When I was a kid growing up my family had a house payment, and bills from the gas and electric companies. We got Life Magazine and National Geographic. Plus we had the ubiquitous Model 500 black rotary dial phone, which was dirt cheap on a monthly basis as long as we didn’t call anyone long distance. Everything else required a trip to the store.
I saw one of those old phones on a visit to the Cooper Hewitt Design Museum in New York. It astonished my daughter, who wondered how we managed to work the dial with an index finger. It seems the thumb has become the primary digit of communications for the new age of texting.
Displayed next to the old black phone was a turquoise Princess Telephone. I don’t think anyone saw it coming at the time, but those colorful Princess Phones marked a watershed moment in the inability of families to manage monthly bills. For the privileged few it was a way to have something more special than anyone else. For the phone company it was a way to tack a few extra bucks onto the monthly bill. Then go to work expanding that base of people willing to pay the higher rate.
For any family with a teenaged daughter the Princess Phone quickly became a necessity. As did the larger monthly phone bill. This is the Premium Subscription Model. When I took that journey through my checkbook I found it everywhere.
TV has gone from a handful of channels coming in free through the antenna to a premium digital cable package with hundreds of channels and on-demand movies and high-speed Internet. Then we turn around and replicate the same premium voice/data package for the family smart phones. We pay Netflix every month to get movies in the mail. We now have a separate monthly Netflix subscription for streaming content. Apple is getting into the subscription game with its music content. Amazon offers Amazon Prime, which combines music and films, along with shipping deals on the things you buy on-line. Somehow, we’re convinced we need them all.
There is no longer a need to drop money in the collection plate at church. It comes straight out of my checkbook every month. So does the contribution to Public Radio. There’s a monthly charge for the gas company to keep the furnace maintained. The guy who spreads fertilizer on the yard a few times a summer wants me to sign up for a plan to keep the yard mowed and the driveway shoveled, all for a couple hundred a month. You get the picture.
Companies love the Premium Subscription Model because once they have you signed up future sales become automatic. This is important. A marketing professor I know has been working on a theory about how the Internet transferred huge gobs of power to the consumer by making pricing information available instantly to everyone. The Premium Subscription Model reverses this, putting the company back on top. You no longer look at the price of an individual transaction as carefully as you would if you were standing in a showroom or shopping on-line.
Inflation has been low to nonexistent for some time now, partly because of the equalizing effects of the Internet. Companies that move to a Premium Subscription Model have power to push prices back upward. In essence, a company doesn’t even need to have a better mousetrap. Just an aggressive effort to get customers signed up, then a good CRM program to keep them all on board while prices ever-so-subtly float upwards.
Companies will also have more ability to follow the money, which we all know is ending up in fewer and fewer hands. Anyone who spends some time flying on an airline knows how this works. You get the dreaded email that begins, “In order to improve our service and make your experience even more exclusive…” The seats get smaller, the perks diminish, and you are politely and enthusiastically told how to get it all back by upgrading to a new premium level of service. For those who can afford it life just keeps getting nicer. For the rest of us, it’s a continual struggle to afford the new monthly premium required to keep up. It’s the Princess Phone strategy everywhere you look.
This generates loads of cash for the companies that have learned to make it work. Stock analysts love to recommend companies that are converting their business to a subscription model because the growth of revenues is so reliable. You can probably sign up for a class at business school titled, “Using the Premium Subscription Model to generate reliably increasing revenue streams for the rest of eternity.”
The problem, of course, is that those of us on the other side of the equation have surrendered huge hunks of control over our financial lives without even realizing we did it. It used to be that when the economy hit a rock or a job changed, cutting back meant going to the store less often. Or maybe choosing the cheaper item. Now we have this tangle of relationships that need to be painfully unwound.
The smart person would hit the UNSUBSCRIBE button on everything and go live in a cabin off the grid. Me, I’m too caught up in the web for that. I’m just going to hope someone buys the screenplay so I can continue to pay for my oversubscribed life.
