Though the vast majority of subscription business models are computer-based applications (like the annual Microsoft Office subscription allowing for this article to be written), the model is making its way into almost every industry, and the COVID-19 pandemic is causing some issues regarding accessibility to services that have already been paid for (i.e., a subscription business model). An easy example would be a gym membership that is already paid for, for a gym that has been forced to close its doors.
There are some positives, as well, but just as it has with so many other aspects of daily life, the lockdowns have shaken up the steady rise of subscription-based business.
What Are Subscription-Based Businesses?
There are countless ways to monetize a business, with the most historic and “normal” being a pay-for-service model. If you want a cheeseburger, you go to a restaurant and buy one, and the business dealings are over until you want another cheeseburger. Subscription models encourage customers to continually utilize a given service by charging a monthly or annual fee for unlimited use (sometimes with restrictions) of said service. The rise of data analytics tools allows for much easier ways for companies to determine which model best suits the bottom line for their given service.
The obvious examples that come to mind are things like cable TV and internet, but gym memberships are concrete examples, as well as things like meal boxes being delivered to your house, or even concierge healthcare, which is a fee-based, all-encompassing means of care. COVID hasn’t affected things like internet and TV very much, but with limits on production, and forced closures of many brick-and-mortar businesses, many subscription-based services are finding themselves in a pickle. On the other hand, some are booming due to the delivery offerings.
Issues Due to COVID-19
As small businesses have suffered the most during COVID-19, subscription-based software services programmed to help those small business have seen a pretty drastic decline. Consumer memberships such as clubs, travel groups, and the aforementioned gyms have also seen steady declines and have been forced to make the business decisions of either paying back subscriptions and losing money that way, or saying, “Sorry, the government is making us close, but we already have your money,” ultimately costing them business down the road.
Sports, as a whole, is a $500 billion industry in the United States, and both in-person (season tickets) and from home (exclusive content) subscription models are seeing steep declines as athletics continue to be locked down for most major sports.
Even COVID-19 has some sliver linings, and some subscription-based industries experiencing upticks since lockdown include home entertainment like Netflix (video streaming subscriptions grew by 700% in March), e-learning services, digital news outlets, and video conferencing software companies. None of these are all that surprising, given the government orders to stay home.
With the stay-at-home orders in full effect, subscription-based delivery services have also experienced an increase in business, and they were already on the rise before the pandemic. Beauty boxes, monthly shave kits, and prepared meal services are all experiencing growth during the lockdown.
What to Expect
Ultimately, more than half of subscription-based businesses have reported “no-to-little change” due to the COVID-19 lockdowns. With more and more of the country starting to open up, the expectation is that those companies that experienced heavy losses during lockdown should expect to see spikes when regulations are lifted. In the sense that “we don’t know what we have until its gone,” the simple availably of these services, after a time of unavailability, should prove beneficial.
For the companies that made a few extra dollars during stand down, expecting a bit of the opposite effect would certainly be good for preparation’s sake, but just as many companies are discussing more remote work options moving forward, many consumers have taken a liking to getting their goods delivered, and the subscription-based companies that improved during COVID shouldn’t expect too much of a decline as more and more companies start to open their doors.