Subscriptions drive new businesses

Is the concept of ownership on its way to extinction? Subscription-based businesses have increased their revenues by more than 300 percent over the past seven years. Schibsted is looking into how to expand this model into new kinds of offerings.

I have to make a confession.
I binge.

If I find a new TV series I like, I could easily watch all the episodes of all the seasons in a matter of days. For me, imagining a world without Netflix – or similar subscription-based streaming services – is almost impossible. But such a world existed not too long ago.

Netflix was introduced to the Norwegian and Swedish markets in 2012, after having launched its streaming service in the US in 2007. In 2015, Netflix had grown to 70 million subscribers. Today, they have 167 million. When the new streaming service Disney+ launched on the American market last year, it amassed 10 million subscribers in just one day. Nine months later, it has grown to 60 million.

It is almost difficult to comprehend the massive growth subscription-based services have seen over the last few years. Internationally, more than seven out of ten consumers subscribe to one or more services, and the number is growing. The growth is largely driven by consumer demand; consumers want the convenience, flexibility and frequency that subscription models supply.

For businesses, the attractiveness of the subscription model is reflected in revenue growth. Subscription-based businesses have increased their revenues by more than 300 percent in the past seven years, significantly outperforming other companies. In the face of the Covid-19 pandemic, 76 percent of subscription-based companies saw a stable or even accelerated growth rate for their offerings. As a result, a growing number of industries and businesses are adopting the model.

Unparalleled growth in digital media

Schibsted has been in the subscription game for a long time, and we’ve seen unparalleled growth in digital media subscriptions over the last few years. As the Corona pandemic swept our countries, the hunger for news, information and entertainment drove our subscription numbers to new heights. As of October 2020, we have more than 840,000 digital subscribers across our Norwegian and Swedish brands. The appetite for digital news subscriptions has never been greater.

However, subscription is no longer a game that only media brands can play. Industries as diverse as mobility and home appliances are increasingly adopting subscription as a business model. Today, you can subscribe to products and services as diverse as a car, a dishwasher, and a unicorn-themed ”mystery box”. Whatever your niche is, there is a subscription-based product for you.

At Schibsted, we are following this widespread adoption of subscription-­based models closely. Next, a division in Schibsted that invests in digital startups, is increasingly looking at and making investments in subscription-based services, including the podcasting platform Podme. In addition, our marketplace division is investigating a variety of subscription-related opportunities. We see that the subscription-related expertise and experience we have built up for years within our media division can be utilized in new ways, in very different parts of our organization. Our goal is no longer just to increase the number of media subscriptions we have – but to have more subscription-based business throughout Schibsted, and to deepen the relationships we have with subscribers today, by giving them subscriptions that offer them more and more relevant products, services and content. Being subscription-driven is about catering to genuine user needs and wants.

So, what do users want? Well, no matter the product or service, they will most likely prefer the option that is simple, convenient and easy to understand. Owning a product is often none of these things. In fact, product ownership is often a hassle. Owning something means that you have to pay up-front for a product that you do not know how many times you will actually use. Owning something might mean you have to pay for or spend time on the maintenance of that product. And in the age of rapid innovation and technological advances, owning something might also mean the inevitable frustration of watching your product become obsolete as new innovations enter the market.

We want access instead of owning

So, fundamentally, most of us very rarely actually want to own something – rather, we want access to what that product or service can offer us in value, right when we need it. Take washing machines as an example. Do you really need to own a washing machine? Or do you need your clothes to be clean, at a reasonable cost, with minimal effort?

Increasingly, research suggests that consumers favor ”access over owner­ship”, and 57 percent of adults world­wide say they wish they could own less ”stuff”. This trend is often known as ”the end of ownership”. And as ownership ends, so begins the era of usership – where the focus is on using and paying for what you need, rather than owning it. Just like with subscription-based products.

From a business perspective, the end of an era that has served business owners and shareholders well might seem intimidating. However, rather than being threatened by change, joint trends of usership and subscription could result in vast opportunities going forward for both Schibsted and others – within existing business, across businesses and within new product areas. By using our assets smarter and investing in the subscription economy, we believe we can secure existing business, create opportunities for future growth, and most importantly: cater to genuine user needs.