How Subscription Services Are Expected To Impact Personal Finances in the Coming Decade

Subscriptions are agreements where you pay on a scheduled basis to continue receiving a benefit. It could be a weekly, monthly or annual payment, and you might receive a physical or virtual product or service. But it’s an ongoing relationship between vendor and consumer, sometimes called a membership or continuity program.

Paying a recurring fee for access to something you want has continued to become more popular lately. And this shift to subscription services offers both benefits and challenges, especially when it comes to finances.

Why Have Subscription Services Become So Popular?

Believe it or not, subscriptions have been around for more than 400 years — starting with newspapers and magazines. The famous Book-of-the-Month Club was launched in 1926, eventually leading to countless monthly book subscriptions. Next came cable TV in 1948. Then record and CD memberships, the precursor to online music services and satellite radio. And Netflix was a DVD mail-order subscription a decade before it became one of the first streaming video platforms.

The number of streaming service subscriptions alone passed 1 billion worldwide in 2020, according to the Los Angeles Times. Many analysts credit this boost in at-home viewing (and also product delivery) to the COVID-19 pandemic, when being in quarantine left us without normal entertainment and shopping options.

Even when public venues started reopening with restrictions, streaming providers like Disney+ and the former HBO Max (now just Max) were changing viewing habits forever. They began releasing blockbuster movies for home viewing at the same time as they hit the theaters. While post-pandemic movie releases are mostly back to the old theater-first pattern, people aren’t willing to give up their streaming services.

But it’s not just media and entertainment … now you can get subscriptions for nearly anything you can think of. Options include beauty products, razors, pet supplies, pre-packaged dinners, wines and gourmet coffees. “Subscription boxes” are curated selections from a range of brands in a specific category, usually at a discounted price. Software programs are often offered as subscriptions as well.

Over time, many factors have contributed to this growth.

• The expansion of mail routes, lower postage costs and cheaper paper allowed mail-order services to thrive in the late 1800s
• The Book-of-the-Month Club’s success proved that subscriptions to more than newspapers were viable business models
• Memberships like Columbia House for tapes and CDs and Netflix for DVDs took the book club concept to new types of media
• Cable TV provided better signals in more areas, with a lot more viewing choices that people embraced
• Satellite radio and streaming music gave people the opportunity to avoid disruptive ads and personalize their playlists
• The Dollar Shave Club proved that people would pay for subscription boxes of personal care products
• The COVID-19 quarantine increased the demand for streaming media services 
• The pandemic also had people ordering food, personal items and other supplies for delivery, and subscriptions made it easier
• Gyms had to close during quarantine, so at-home fitness subscriptions like Peloton exploded

How Will Subscription Services Look in the Future?

While subscription services are likely to continue evolving, there’s no reason to expect their demise. In fact, many subscription models are likely to become even more common. They’re convenient for customers, and provide reliable ongoing income to businesses. The sweet spot occurs when customers feel valued by the brands through perks like discounts, subscriber exclusives, and customization options.

AI

Artificial intelligence (AI) can make subscriptions easier for companies to administer, provide analytical insights based on subscriber trends and other data, and automatically create retention offers based on customer behavior. It can also offer predictive personalization options for customers, and recommend customized products and services.

Let’s not forget that AI platforms themselves — like ChatGPT, Midjourney, and other text and art applications — also use a premium subscription model.

New models

Subscriptions can be for digital products, physical products, services and more. Here are some of the newer subscription models that could become even more popular as their segments grow.

• Financial subscriptions give you the opportunity to invest in fractional shares, build up savings, track your expenses, or learn about money
• Healthcare subscriptions for physical and mental wellness allow customers to access services from the comfort of their homes instead of having to waste time driving and sitting in a waiting room
• Fitness subscriptions for at-home workouts give the gym experience without having to go there
• Home improvement subscriptions give homeowners the ability to make their own upgrades or renovations by following along with the experts
• Business listing subscriptions let people search, compare, and read reviews for the types of contractors and other professionals they need to do work around the home
• Subscription boxes give people the joy of opening a present every month instead of just on birthdays and holidays
• Pet subscriptions provide new toys and treats that pet owners can test out with their own fur babies
• Baby subscriptions remove stress by supplying new parents with the necessities they need for each stage in the child’s life
• Beauty subscriptions give people access to customized new products they weren’t aware of at a fraction of the cost
• Meal prep subscriptions take the hassle and guesswork out of healthy meal planning by providing done-for-you dinners
• Gourmet food subscriptions let people experience new things that they wouldn’t normally think to purchase
• Travel subscriptions give people access to discounts for future adventures they might not have taken

Bundling

Subscription bundling means taking more than one subscription and paying them together as a package deal. Sometimes you’ll see them referred to as an “add-on” at a discounted price — which might be free for a period of time, and then just a few bucks. Think Hulu and Disney+ … if you bundle these subscriptions, you save money over buying both individually, pay for them in one transaction, and use one login for both platforms.

These arrangements have been rising in popularity for their convenience and savings to consumers, and additional revenue for companies. So they’re not likely to go away. However, bundling practices could shift to allow even more varied options and customization, including a range of categories to choose from.

Personalization

Savings are nice, but nobody wants to pay for things they don’t use, even at a discount. So the ability for customers to personalize their subscription options is going to be key for continued growth.

People want to feel like the brands they interact with know and value them. AI can help with this, but people like interacting with other humans instead of bots. They’re also concerned with how their data will be handled when AI is collecting and analyzing it. Companies want more access to customer information, and consumers want to give less — while still enjoying opportunities for personalization.

That can include personal recommendations based on surveys, quizzes or past behavior, the ability to pick product color combinations, or personalized deals and rewards that correlate with their purchases. These options benefit the consumer, but also the brands because customers stick around longer.

Current Challenges Related to Subscription Services

Companies have challenges with keeping subscribers active and finding ways to engage them. Customers have challenges with handling too many recurring charges that automatically hit their cards or come out of their bank accounts.

Be aware of these issues:

• Losing track of monthly spending
• Dealing with overdrawn bank accounts or over-limit credit cards
• Paying for things you don’t want, need or use
• Receiving new items before you’re ready
• Stockpiling items that continue arriving
• Paying more for things over the long haul than you would up front

If you’re not careful, too many subscription payments can result in financial loss or credit card debt, which can lead to a poor credit score. That in turn could put you in a position where you need to rebuild your credit.

How to overcome the current challenges

The best way to avoid facing subscription-related financial challenges is to follow a few best practices.

• Review your credit card statements each month
• Keep track of all your subscriptions in one place, whether it’s a spreadsheet, text document, or budgeting app
• Make sure you always have substantially more money coming in than going out
• If possible, time automatic withdrawals to occur when you’ll have the funds (like right after payday)
• If it’s a refill subscription and you have too many on hand, pause it or revise the schedule
• If you no longer get enough value from the subscription, consider canceling it

If you’re paying for your subscriptions with credit, make sure to compare credit cards and choose one that has high rewards for that specific category. For example, some cards give you additional cash back rewards for purchases like mobile phone services, satellite or cable TV, streaming platforms, and other subscription-related categories.

Future Financial Challenges Related to Subscription Services

Profitable subscription services need to be a long-term symbiotic relationship between brand and customer. But when we experience economic uncertainty, including inflation and recessions, people re-examine what they’re spending each month. So if the economic future looks less than bright, subscription service challenges are expected.

• When consumers set a budget, the first items considered for cancelation are non-essentials like subscriptions
• If too many customers churn, or drop off, the subscription service can’t supply the same value to other subscribers
• Lack of customer retention forces businesses to focus on acquisition instead — but it’s much easier (and more profitable) to keep current customers happy than to attract new ones
• If too many subscription services experience reduced profit, the options for consumers diminish as well

How to prepare for future challenges

Consumers need to support services they like if they want to keep them around. But companies need to provide value if they want to be successful. With that in mind, there are many ways you can prepare for some of the future challenges in the subscription world.

• If money is tight, only keep the subscriptions you really want or need to have
• Consider whether the subscription brings you joy, convenience or peace of mind
• If you do enjoy a subscription, consider telling others about it — especially if there’s a referral or affiliate program that pays you a fee for new sign-ups
• To avoid feeling strapped in future economic downturns, build good savings habits now by putting your money in high-yield savings accounts or certificates of deposit (CDs)

Subscription services can be good for both businesses and consumers. They can also present challenges to both. Understanding the big picture and avoiding financial traps will allow you to skillfully navigate your subscription landscape.