Streaming, cars and even the market: why is everything a subscription? | Curiosities

DVDs left the video store and ended up on Netflix, CDs are on Spotify, the library migrated to Kindle Unlimited, while the pen drive became Dropbox. These evolutions reveal that the concept of sale and ownership has been unraveling and the new market mantra is the subscription economy. Offer services, experiences, personalized clubs and have recurring financial returns.

Special because everything is a video subscription

Recurrence economy, subscription, association

Netflix Amsterdam Office (Image: Disclosure/Netflix)

Although it has gained traction in the past decade, this model is not so new: newspapers, magazines and cable TV won’t let us lie. Also known as the recurrence and association economy, this type of business has undergone some transformations in recent years and gained more space in large companies. Currently, the Subscription Trade Association – SUBTA, an association specializing in subscriptions, shows that there are six pillars that support this model:

1) Signature Boxes: are tied to niche products. Every week or monthly, brands send boxes with various items to the customer’s home;

2) Membership: people pay a fee, become members of companies/groups and are entitled to exclusive experiences of a brand;

3) Subscribe & Save: the consumer can set up varied product deliveries on a recurring basis. The pillar is used for consumer goods, such as Amazon Subscribe & Save, considered an online supermarket in the format of subscriptions;

Signature box: Supply sends toiletries (Image: Supply/Unsplash)

Signature box: Supply sends toiletries (Image: Supply/Unsplash)

4) Media and streaming: is one of the most popular. People subscribe to audio and video services on online platforms, such as Netflix, Disney+, Globoplay, Spotify, Apple Music, and have access to content made available by them;

5) Digital Subscription: has a lot of relationships with technology companies, applications and digital platforms. By subscribing, you can have technological products and services, such as WordPress, Wix and 1Password;

6) SaaS (Software as a Service): it has to do with software licensing. Instead of buying, you make a subscription and can install the program on your device. It is the model used by Adobe, TOTVS and Microsoft 365.

Recurrence economics has changed the way we consume

Cable TV lost nearly 1 million subscribers in 2020 (Image: Cottonbro/Pexels)

Cable TV lost nearly 1 million subscribers in 2020 (Image: Cottonbro/Pexels)

Access to content is the triumph of the recurrence economy. The impact came in many forms: broadcasters launching their own streaming, legalized IPTV gaining traction with aggressive packages, and platforms like YouTube charging a monthly fee to make video interruption-free. A sector that was already living on monthly plans and suddenly went against the trend is cable TV.

Numbers obtained by Techblog through Anatel’s Data Panel show that in January 2014 Brazil had 18,204,337 cable TV access points; in January 2020, that number was 15,410,300. After peaking in mid-2014, adherence to this type of service has dropped even further. In the last year alone, the sector has lost nearly 1 million subscribers.

Experts heard by the report believe that pay TV suffers from versatility. The viewer needs to be very available, without the possibility of watching a program at another time. But that’s not all, as explained by Renato Svirsky, CEO of Guigo TV, a national internet pay-TV company.

Guigo TV's app in the LG TV app store with webOS (Image: Ronaldo Gogoni/Tecnoblog)

If we go back to the beginning of satellite TV, [você vai perceber que as empresas trabalhavam e ainda trabalham com] very expensive infrastructure. To deliver cable TV, you need to dig holes and wire the poles to be able to deliver the service. The big investment is in the infrastructure and not in the cost of the content […] It’s not the programming that’s expensive, it’s costly to send the satellite to orbit, for example […] When we talk about Netflix, which is the pioneer in streaming, the consumer is paying for content.

Renato Svirsky, CEO of Guigo TV

And with the advent of DirecTV Go, Guigo TV, Pluto TV and others, many Brazilians migrated to IPTV, or simply stayed on streaming platforms such as Netflix and Globoplay. A study by Vindi, a company specializing in recurring billing, shows that among the services most paid monthly by Brazilians are movie and series platforms, which are much preferred.

Netflix, for example, dominates in all Brazilian regions, soon after appearing Amazon Prime Video and HBO Go (now HBO Max). Vindi’s survey is in line with other international surveys: The State of Mobile 2021 shows that in 2020 Brazilians spent more time on Netflix, Prime Vídeo, Twitch, Globoplay and YouTube, respectively.

You had to be very available on cable TV. For example, a broadcaster is going to air a series, the person has to be at that time, at that moment. If you lost, it’s over. Streaming, on the other hand, has that magic of choosing the time and how you want to watch it. So, I think that traditional TV is going through a moment of transformation, I don’t think it’s the end of it, because cable TV companies have done a good job of producing and digitizing content.

Rodrigo Dantas, CEO of Vindi

Automotive and software sectors were heavily impacted by the recurrence

Volvo works with car subscription plans (Image: Press Release/Volvo)

Volvo works with car subscription plans (Image: Press Release/Volvo)

There was a time when having a car was the consumer dream for many young people. However, a survey by Deloitte consultancy reveals that, among Brazilians who use shared car services, 55% questioned the need to own a car. This movement is even greater among the younger audience: 62% of young people from Generations Y and Z do not want to have a private vehicle in the future. For Deloitte, many of them avoid ownership and seek sharing, a reality that meets the economy of recurrence.

Flua will have Fiat and Jeep models by subscription (Image: Paulo Bareta/FCA Disclosure)

Flua has Fiat and Jeep models by subscription (Image: Paulo Bareta/FCA Disclosure)

The consultancy warns that the automotive industry needs to follow the new scenario closely. Volvo, Porsche, Mercedes-Benz, Volkswagen, Audi and Nissan are some of the automakers that joined the wave. As with Netflix, you choose the best plan and subscribe without the traditional bureaucracy and obligations, such as maintenance, insurance and IPVA. Aiming at Uber, Stellantis (formerly FCA – Fiat Chrysler Automobiles) launched Flua, a car subscription service with Fiat and Jeep models in the catalog in Brazil. When choosing the plan and the vehicle, the user does not have to worry about documentation, licensing, licensing and property tax.

Anyone who has already done the math and put down the monthly cost of a car, maintenance and other things on paper, will realize that, in some cases, it is more worthwhile signing. It depends a lot on the person’s use. The pioneer in this was Volvo: you sign […] and the car arrives hours later in front of his house. I believe it is a new model and automakers have suffered a lot because of the changes in the world. Younger people are changing car consumption, young people from 16 years to 19 years of my generation, who dreamed of having a car, today they no longer have that desire. The goal now is to have a good cell phone, to have some freedom. This directly impacts automakers’ balance sheets.

Rodrigo Dantas, CEO of Vindi

In addition to automakers, another sector that has reinvented itself in the world of subscriptions is software. Adobe, TOTVS, Microsoft, Arquivei, McAfee and Zendesk are some of the companies that operate in the SaaS (Software as a Service) pillar and offer recurrent solutions. The owner of Photoshop who works with B2B and B2C abandoned the licenses to enter the subscription model.

Scott Belsky, Adobe Product Director (Image: Press Release/Adobe)

Scott Belsky, Adobe Product Director (Image: Press Release/Adobe)

In the fourth quarter of 2015, already with the new strategy and driven by it, Adobe had a record revenue of US$ 1.31 billion, a growth of 22% compared to the same period of the previous year. Also in the fourth quarter, the company obtained more than 830 thousand signatures. “We achieved record revenue of $4.8 billion in fiscal 2015, representing a 16% growth over the previous year,” the company told investors at the time.

Elói Assis, director of the retail and distribution segments at TOTVS, sees the phenomenon of software subscriptions as a two-way street. The companies that supply the product start to have constant revenue, while the consumer has more savings. This impact is even greater in large corporations that move from dependence on large server structures to the cloud.

Elói Assis, director of the retail and distribution segments at TOTVS (Image: Publicity/TOTVS)

Elói Assis, director of the retail and distribution segments at TOTVS (Image: Publicity/TOTVS)

With over 40,000 active customers, TOTVS is a Brazilian technology company that provides management software. Like Adobe and Microsoft, she decided to ride the wave of recurrence about 10 years ago. In the first quarter of 2015, TOTVS saw its revenue grow 47% with subscriptions. Currently, the SaaS model represents 80% of Brazilian technology revenue.

When the customer does the math, at the tip of his pencil, he sees that it is cheaper. That’s why people change their model and for us it’s more advantageous, because this “wins” is for both sides. TOTVS manages to capture more revenue, because, until then, we were playing software sales (license). Now we are selling software, with server, with link, with support team, infrastructure, etc. In other words, I’m capturing more revenue that I didn’t capture before […] and I can still pass on savings to my client. Everyone wins, no one loses in this relationship.

Elói Assis, director of the retail and distribution segments at TOTVS

Subscription model is not for everyone

Orders at a distribution center (Image: Publicity/Amazon)

Orders at a distribution center (Image: Publicity/Amazon)

Recurrence economics is a trend. It already appears in many other industries, and Gartner predicts that 75% of companies working in the sales model will offer subscription services by 2023. Cobasi has plans to ship pet food and other products on a recurring basis; Nespresso has a capsule subscription; Wine has plans to ship wines; and Leiturinha is famous for sending children’s books.

In Brazil, Amazon launched “Programe e Poupe”, a service that allows customers to make market purchases by recurrence. Personal care, food, beauty and pet items are found on the website. Consumers can select products, schedule shipments, and Amazon delivers automatically at monthly or semiannual intervals. The service arrived in Brazil at a time when people were more trapped at home due to the pandemic and online shopping took a leap.

Recurrence economics is not for everyone (Image: Sticker Mule/Unsplash)

Recurrence economics is not for everyone (Image: Sticker Mule/Unsplash)

The studies and success stories presented here can create high expectations. However, subscription savings are not for everyone. “If the product does not have recurrent consumption by consumers, it will probably not work in the subscription model”, says a study by Vindi.

The Big Point of a Subscription Business […] It’s [analisar] what size will the project be. Many of the services that give up along the way are clubs that don’t grow much. They get, for example, 1,000 subscribers and stop at that. There were, for example, many barbecue club initiatives […], because Brazilians are fanatical about barbecue and these services delivered premium meats to people’s homes. Again, the entrepreneur needs to worry about the experience of the business, some things have not grown so much because the consumer wanted to have the complete experience, they not only want to receive the product […] The best tip we share for people who don’t know if it’s worth migrating to subscriptions is to analyze the service: to become a subscription business, it has to have a recurring characteristic in the consumer. Does the customer consume every week? Every month? All day? If yes, then it can become a subscription.

Rodrigo Dantas, CEO of Vindi

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