What do most of the SaaS players, OTT players and most of the new age players have in common ? They are selling Subscriptions not just any form of it but one that is heavily influenced form of Netflix.
Netflix started as a DVD rentals company , you had to pay a monthly fee and you got X amount of DVD rentals a month for it. But they smartly and quickly pivoted into Streaming services but if anything the model is basically the same yet adds a lot of skin in the game for both the users , investors as well as the owners. Streaming is digital and thus it brings scale which is something that will make or break a potential unicorn in the making.
Mechanics of subscriptions
In SaaS world you want to aim to convert your users to invest in Yearly plans which essentially gives you much needed runway as well as capital to stay afloat and the wonders of it show up on your books. But very few people have made a marketplace that has a defenite price point based subscription built into it.
It goes and it comes
One of the weird things about subscriptions is you dont own anything but rent/licence it to the end user and this means a couple of things at the bottomline of the unit economics :
-> It drives Life Time Validity , if you keep the marginal user hooked into subscription you are not gonna face the classical Churning problems.
-> You are not selling the product but rather the experience and by extension the virtues that come and go with it. You dont need to replicate them in some sense of the world and that is a rather strong moat to have.
-> Buying decisions are trumped by your aggregation level's of the subscription. If i buy a Chair from IKEA i have to think about the product , if you allow me to try 12 chairs from different product lines each with its own unique offerings i am no longer thinking about the product but rather the experience.
-> It can be hard for some verticals and cheaply inexpensive for others. Outsorucing as an industry can be labelled and packaged as a subscription service and sold a million times over but the same cannot be done for say Music. Distribution and Marginal Cost of Utility matter a lot here than elsewhere.
Present , Future and Beyond
Presently subscriptions are add a lot to the table , Satellite TV is being replaced by the likes of Netflix , Amazon Prime and so on. Radio , DVD's , Buying of albums have all become a thing of the past and Streaming is paving the way forward. In some sense both Airbnb and Uber are also making use of subscriptions and Prime is the biggest example. If Amazon does its own manufacturing and ends up selling most used stuff by an average buyer (Its sort of already happening via Amazon Basics) it can exploit Prime subscriptions in many more ways to come. Car manufacturers are trying rentals via subscriptions , it can soon be a thing for Travel , BnB , F&B industries as well.
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