There is a ceiling on subscriptions

The defence of subscription pricing is that people were always subscribed to things so nothing much has changed.

That’s true as far as it goes and it’s worth taking seriously before disagreeing with it. A household used to have a daily paper, a couple of monthly magazines and a cable package with sports on top. Call it four things to keep track of, arriving on a predictable schedule, at prices that didn’t move often. Nobody sat down at the kitchen table and experienced any of that as a burden worth managing.

What people are being pushed towards now is a music service, several television services, a gaming service, some sports channels, maybe a paid podcast and a news site. That’s not four things. It’s closer to a dozen. Each has its own billing date and its own renewal and its own quiet price rise, and the difference isn’t only the money. It’s the cognitive load of holding all of it in your head and knowing which one you’re paying for by accident.

If there’s an upper limit on how many of these anyone will tolerate and there obviously is, then people hit it quickly and start cancelling. Something has to go. What gets cancelled first is whatever provides the least utility for the money you hand over every month without thinking about it and that’s a brutal test for anything narrow. A service with a handful of excellent shows loses to one with hundreds of decent ones because when you’re cutting from ten down to five you’re not judging quality, you’re judging how often you open the thing.

That raises a real question about whether the smaller services ever work. Not whether they’re good. Plenty of them are very good. Whether the economics survive contact with a saturated market where every new customer has to be taken from somebody else.

There’s a second constraint underneath. People won’t hold two subscriptions that do the same job. Nobody is paying for two music services if they can help it so within each category the market isn’t really growing, it’s being divided. Once everyone who wants a music service has one, growth means persuading people to switch.

Switching somebody across is expensive in a way that growing a new market never was. You’re paying for marketing and a free trial and the discount that finally gets someone over the hump, and then for the friction of moving across whatever they have already built up in the thing they are leaving. If the cost of moving a customer across ends up higher than what that customer is worth over their lifetime, the whole model stops working and the thing that made the category attractive turns into the thing that makes it impossible.

That’s the spanner in the economics and it doesn’t get fixed by better content or a better app. It’s structural and it arrives at exactly the point where the category looks most successful which is when everybody who wants the thing already has one.

The part that should worry anyone running one of these is how the ceiling gets enforced, and nobody sits down and audits their subscriptions in an orderly way. What happens is that money gets tight in one particular month, or a card expires, or somebody notices a charge they can’t account for and then four things get cancelled in ten minutes on a feeling rather than an assessment. Whatever you were doing to justify the price that month is not part of that decision.

So the thing you’re really competing for isn’t value. It’s being remembered fondly enough to survive a bad Tuesday.

The cable package everybody points at as the precedent had one bill, one company and one thing to cancel when money got tight, and that made it far more durable than a dozen small charges that each look reasonable in isolation. Splitting the same spend across ten providers didn’t just move the money around, and it gave every one of them a separate opportunity to be the charge somebody finally notices.