Subscription services the future of Big Tech?

The subscription economy has been on the rise for quite a while now, with companies looking to build stronger and more lasting relationships with customers while generating guaranteed income. This has led to the fall of ownership as we know it and has given rise to users – meaning, you now have to abide by a monthly or yearly pay-plan to use a service. And right now, in the realm of technology, it seems to be the hottest goal for companies.

The allure

From the businessman's perspective, the idea behind a subscription model is that instead of having to convince you, the customer, to buy a new product every time one is released, they need to convince you only once. And then, if they can keep you happy and satisfied, they will be able to generate steady, predictable income. When it comes to products like paid apps or smartphones, sales are the only way of generating money. And then, after a while, sales will fall as consumers will start to demand something new.

Cloud technologies

The development of cloud technologies is one of the biggest reasons why the scales are tipping towards subscription services for tech-enabled companies. This technology has made digital services more accessible, giving rise to content and data services. Subscription-based content services are perhaps the most popular subscriptions in the world right now with Netflix, Spotify, Amazon Prime and others having millions of subscribers. With giants like Alibaba, Google, Microsoft and many more competing in the cloud-based big data processing market, many have adopted the subscription model.

Products vs services

What is the most important factor for a tech company looking to enter the subscription market? Mahtab Uddin Ahmed, the CEO of Robi Axiata Limited says, "The first thing is to recognize digital platform as a service." Take content services, for example. We could buy songs or movies for a price, but that's expensive when there are platforms like Netflix or Apple Music with endless content for us. In the case of products, if you are suddenly asked to pay continuously for something you could own after a one-time payment, it's annoying. That's exactly why customers were infuriated when Adobe declared their move to the Creative Cloud in 2013. But Adobe didn't suffer because now, they were pitching their previous products as a service. Yes, the subscription-based model did lead to the loss of customers, but professional users were now actually treating the Creative Cloud as a one-stop platform for all of Adobe's products. This and a steady inflow of money each month made Adobe's move a financial success.

Having the right strategy

So, what should be the approach for companies? Mahtab Uddin Ahmed says, "As long as you have the right business model that drives traffic to your platform, you have a business case to pursue. So long as the focus is on the platform, one can structure it around the subscription-based model or otherwise, depending on the market realities and the business strategy." This seems to be exactly what Apple is doing right now. Apple has 6 main subscriptions to offer but holds only 20% of the smartphone market. For a while now, the main entry point into these services has been the iPhone. But now, the tech giant has not only started introducing an iPhone at an affordable price point, but has also made the iPad, Apple Watch, and the Mac more distinct in their respective product categories. All these can now feed a much wider user-base into the core Apple subscriptions.

What's in it for the consumers?

Why should we, as consumers, pay a monthly or yearly fee instead of purchasing a product? To put it simply, technology moves way too fast and if an app isn't updated, it dies. We cannot expect developers of an app we're really invested in to continuously provide maintenance, introduce new content and new technologies for free.

Where does Bangladesh stand in all of this?

Some companies have given a shot at the subscription-based content service scenario in Bangladesh. Iflix recently exited the market. Robi CEO Mahtab says, "Unfortunately, we don't have much in the way of platform-based business in Bangladesh. Unless part of a bundle offer, people don't tend to have much liking for subscription-based services." He also said that the rate of digital adoption and copyrights are a concern here. But Mahtab believes that there is definitely a market here, companies just need to be in it for the long haul. Red Dot Digital, an associate of Robi, has recently rolled out the set-top-box and subscription-based service Binge, which is a full-fledged digital entertainment platform open to all and can be used on both small and big screens. Mahtab further said, "We believe a Bangladeshi OTT platform can compete at the international level and we want Binge to be that platform. We are very encouraged by the response received within a short period. What we need right now is to invest in the right kind of content to create demand in the market. But that can only happen if we can bring together the bright minds who can create those contents."

Subscriptions are indeed poised to be the future for tech giants and tech-enabled companies. Even Uber has rolled out their Ride Pass subscription in select US cities. Everyone wants a piece of the pie.