What kinds of businesses use a subscription revenue model?
The consistent nature of recurring revenue is what makes the subscription revenue so popular, even with businesses you wouldn’t expect. Companies have launched subscription models for all kinds of products and services.
While almost every business could shoehorn their business model to fit the subscription business model, it’s best suited to a few different kinds of companies:
Access to content: video, music, books, membership sites
Companies that provide ongoing access to content—like video, audio, or books—are excellent candidates for subscriptions.
In the streaming-video realm, Netflix, Hulu, and HBO all provide high-quality entertainment for a low price. While your $8.99 monthly fee for Netflix might feel small, those of us who have been subscribed for 5+ years have each added over $500 to Netflix’s coffers.
Music and books are also frequently sold by subscription. For music, there’s a good chance you're already subscribed to Spotify, Apple Music, or Tidal—perhaps even all three. Amazon offers a subscription service for ebooks, and Audible offers unlimited access to audiobooks, as long as you remain a subscriber.
Access to services: SaaS, utilities, insurance, leasing
Service businesses are also primed for subscriptions.
Many software companies (us included!) now offer their software on a subscription basis (SaaS) instead of as a one-time purchase. With more traditional one-time software sales, it’s much more difficult for developers to make changes and improvements to their products, relying on clunky update systems to deliver those improvements to the end customer. Offering remotely hosted software packages on a subscription basis makes it much easier for software companies to improve their product over time. Customers don’t need to worry about how they’ll host the software or how they’ll keep it up to date.
Leasing an apartment, a home, car or a machine is another example of a service-based subscription business that are offered by companies like Excedr. Think about paying your rent; landlords deal with retention, churn, and other aspects of a subscription business every day.
Another example you might not consider when thinking about subscriptions? Insurance. Companies like Geico and Progressive charge customers monthly (or sometimes yearly) for home, auto, boat, and renters insurance, and customers are free to switch providers at any time.
Access to products: personal care, food, pet care
Finally, many products are now available on a monthly basis. Subscription products tend to be split into two categories: convenience and curation.
Any product that frequently needs replenishing is a good candidate for convenience subscriptions, from shaving (Dollar Shave Club) and groceries (Blue Apron) to pet food (Chewy) and even coffee (Trade).
Curated subscription boxes are generally based on a theme or target market. These subscription services deliver a curated selection of products on a monthly or quarterly basis—for example, Stitch Fix delivers a monthly box of hand-selected fashion items, while Art Crate delivers a similar service for home-decor products.