There are subscriptions for everything now. And I remember over a decade ago when I really started to notice the walls closing in. Companies wanted you to pay in perpetuity and less and less things were available to purchase outright. And the subscription model really started to take off around 2005.
But of course, even before 2005, there were subscriptions. Magazines are a great example. But there were also newspapers, cable TV and even Netflix had a hybrid approach where they were mailing out physical DVDs. But post 2005 is where we’ve really seen subscriptions take off and they have not slowed since.
So after 2005, we have Netflix Spotify, Amazon prime. New York Times, Peloton PlayStation Now, BarkBox, Dollar Shave Club, and the list goes on. And what prompted this episode is I noticed that multiple doctor’s offices are now trying to get you to buy in. To an annual membership. So sometimes subscriptions can make sense and they can provide a lot of value for consumers.
But of course the play is to make you pay forever. You just have to decide when paying in. Not forever, but when paying a, an ongoing subscription makes sense. So it makes sense when the additional purchases aren’t forced, when you’re not buying things that you wouldn’t normally be buying, it also makes sense when there is redeeming value provided.
So on the provider’s end. They are there are, they are incurring an additional cost which would be passed on either way. So it makes sense to continue to pay the subscription and then the lower monthly costs actually offset the sacrifice of not owning. And this can particularly be the case where the product or service is a temporary purchase.
So let’s run over some examples. With additional costs, with newspapers, it makes sense, right? They have to continue to pay writers. They have to continue to create new content. So it makes sense that you would continue to pay for that content. With dog food there can be actually some real value here in a subscription because dog food is heavy.
It could be delivered to your door. Dog food is also something where you can predictably buy at an interval and it’s not a forced purchase. Amazon prime makes sense. Amazon prime bundles up free shipping along with other things, but that free shipping, that free shipping comes at a cost. So Amazon prime makes sense.
And then, but where you want, you want to avoid the forced purchases. And right here, I have the doctor visits. Obviously, many people are just seeking out to go to a doctor for a one off occurrence. They don’t want to go and subscribe to their doctor. And then I have the Dollar Shave Club because razors are really something that can be picked up at the store easily.
I don’t need to buy them at an interval. So to me, the Dollar Shave Club is really something where we’re getting away from dog food and more into something where This is not something I need to have on a subscription at a delivery. Obviously, for some people, it may make sense, but for others, it’s a forced purchase.
And then, with no redeeming value, think about Peloton and think about Microsoft Office. They’re not really doing a lot on their end, but they’re continuing to charge for it. So, let’s take the case of Peloton, and you have a subscription to these Streaming exercise classes. Well, it’s not like all of those classes are live.
Many of them are pre recorded once and yet they sell them over and over again. And even if there is some expense, it’s on the nominal side for Peloton, but they’re charging as if that value is being provided over and over again. And so for some people, they may get a lot out of the classes. And obviously Peloton has tied their classes.
To their actual physical products, but they’re not providing that redeeming value on their side. And similarly with, with similarly with Microsoft office we have a software where you used to be able to purchase as, as a one time as a one time cost. And you still can, but you don’t get all of the benefits to the Microsoft office suite, but Microsoft isn’t doing that much on their end to maintain office.
So it really is. It really is a, a windfall for Microsoft, but there’s not a lot of redeeming value. I will say the good thing about Microsoft Office is that the cost is fairly low per month. But with Peloton, I think it’s somewhere in the 39. 95 area. And that’s, that’s a case where this is something where you could have bought a few DVDs and been done with the purchase, but now for the convenience of having that streaming exercise class.
And hooked up to the display on the bike, you’re really paying a premium. So I like the one one time price option, and it makes sense if you priced as high as a company because then you can price in how much you could expect to get from a lifetime membership. You already know how long you expect your customers to stay before they turn.
And so having this option gives someone the ability. To finalize a purchase and be done with it and not have their credit card charged on an ongoing basis. And I do think subscriptions, this, this force, this continued force force of subscriptions on the customers is going to lead to one time. More one time alternatives, more one time pricing alternatives, especially when you have situations where the, the purchase doesn’t need to be an ongoing one, right?
I, I, I use YouTube for yoga classes and I take the same yoga classes over and over again. I don’t need to have access to a yoga subscription. And I think. More and more customers will start dropping subscriptions as it makes less and less sense because this really in the in the aggregate We have a lot of ongoing costs for consumers and at at some point they become too much And so what ends up happening is customers just start going through and taking off subscriptions Wholesale, so I think that will end up happening But I do think subscriptions have their place in many, in many circumstances, especially with PlayStation now and the ability to switch out games.
That’s really, really useful to not have to buy those games every time you want to try them. And maybe sometimes you don’t like a game or it’s not as good as you thought it would be. And then it’s easy to switch out. So that’s where it makes sense. Of course, Netflix makes sense. There are any number of.
Options that you can have available. For example, you can now on with Netflix, you can go access Seinfeld and you don’t have to buy the entire all of the seasons, which would cost easily. Let’s say, let’s say 150 easily to buy all of the Seinfeld episodes. Now, if you so choose, you can go watch them. And so you have many, many choices you don’t have to buy.
And in those situations, there really is a lot of value for consumers, but what consumers have to look out for is the situations where the subscription doesn’t make any sense.