The subscription commerce market has grown at an impressive rate, having increased by more than 300 percent over the past seven years. American consumers are subscribed to an average of three different subscription services, up from 2.4 services five years ago, and 34 percent say they will sign up for more services within the next two years.
However, churn rate is a constant concern for subscription businesses. Recent research found such companies have an overall churn rate of 5.6 percent, although this varies greatly depending on the industry. Media streaming services like Netflix and Spotify have churn rates around 5.2 percent, while box-of-the-month subscriptions encounter churn rates as high as 10.5 percent.
Despite this threat, the subscription industry’s considerable growth continues, and many companies are likely to want a piece of the pie.
In the July Subscription Commerce Tracker, PYMNTS explores how subscription-based businesses are adapting to an ever-changing market, and how they keep their payments experience secure.
Developments From Around the World of Subscription Commerce
Netflix, for one, reported a net loss of 126,000 U.S. subscribers last quarter, marking the first time since 2011 that the company has lost more American subscribers than it gained. The loss is likely due to increased competition from new streaming services from WarnerMedia, NBC Universal and Disney. Netflix’s total domestic subscribers now amount to approximately 60 million.
Amazon Music has fared much better, with membership growing by 70 percent over the past year, according to a report by MIDIA Research and The Financial Times. This growth exceeded that of Spotify and Apple Music, its more established competitors, and is largely due to the popularity of Echo and Alexa devices, which default to playing music from Amazon.
While music and movie streaming services are well-entrenched in the subscription commerce ecosystem, video game streaming is still gaining momentum. The latest entry is Google Stadia, a cloud gaming service announced prior to the Electronic Entertainment Expo (E3) last month. The console is expected to retail for $129.99 when it launches in November, and Google will also offer users a subscription plan for $9.99 a month that comes with free games, exclusive titles, and the ability to stream at 4K resolution and 60 frames per second.
For more on these stories and other subscription commerce developments, read the Tracker’s News and Trends section.
KiwiCo’s Collaborative Approach For Payments Security
There are currently 200 different subscription box services for children in the U.S. focused on a wide range of products, from books to toys to clothing. Although they account for a small segment of the overall market, they face the same threats from fraudsters and bad actors. KiwiCo, an educational subscription box for children, takes a collaborative approach to security, according to its Chief Operating Officer Bill Onderdonk. In this month’s Feature Story, PYMNTS spoke with Onderdonk about KiwiCo’s subscription model and how it aims to keep customers’ data safe.
Deep Dive: How Online Gaming Competes in a Global Subscription Market
Video games were one of the first industries to experiment with subscription models, with early online games like “EverQuest” and “World of Warcraft” charging monthly fees to maintain their servers. But online games are feeling the competition from mobile games, console games and free-to-play games that earn revenue through microtransactions. The video game subscription space is changing as more games move online, away from physical cartridges and discs.
This month’s Deep Dive explores how online games are adapting to the expanding subscription marketplace, and the measures companies will need to take in order to remain competitive.
About the Tracker
The Subscription Commerce Tracker™, powered by Recurly, explores how companies use subscription-based commerce to build long-term customer relationships and steady revenue sources. The Tracker includes notable developments in the market and the companies that are rapidly innovating the space.