Can businesses replace shrinking subscription revenue?
Data Analytics & Commercial @ Recast
When does a quiet rumbling become a loud roar?
Well, to mangle a few well-worn cliches together and to paraphrase a quote from Ernest Hemingway “very slowly and then all at once”.
Of course the swashbuckling Hemingway was referring to a question about his recent bankruptcy, but as with all memorable quotes it does have a certain timeless quality that gives it transferability to a myriad of scenarios.
Cord-cutting, the phenomenon that describes consumers reducing expenditure on monthly subscriptions, is one such milieu.
Indeed given the recent spate of news and announcements from the media and tech world - the consolidation of sports content in a new mega merger between ESPN, Fox and WBD and the introduction of adverts on Amazon Prime being just two such examples - it’s clear that corporations are taking pointed steps to stem the bleeding that has resulted from a decade or more of subscription fatigue.
The latest industry to send shivers down the spines of investors is dating (yes it is an industry now, but then again it probably always was) where its two major players, Match (the company behind Tinder) and Bumble have signalled they may have hit a growth ceiling as the pair struggle to overcome a generation shift in its core user base and long held view that paying a subscription for access to people is, well, a bit icky.
Indeed since the heady days of mid-pandemic valuations (a time when people craved connection) the pair have since lost more than $40 billion in market cap – a quite staggering erosion of shareholder value and a fact that has left leaders at the company scrambling to find growth opportunities.
So what gives?
Well one such interpretation could be that whilst subscription models provide businesses and investors with the warm blanket of reliable cash flow there does come a point where, inevitably, you reach a saturation point of willing subscribers.
You hit the ceiling and once that happens growth becomes a game of price increases, churn reduction or as Prime have done, the introduction of a new revenue stream, usually advertising, which history will tell us doesn’t always go down well with customers.
For dating apps this problem is arguably exacerbated by the reality that these platforms exist expressly to pair people off, at which point, presumably, the need for the app and therefore subscription is removed.
Our world and finances are now so inured with subscription models that for both businesses and individuals your choices boil down to, in many circumstances, a straightforward all or nothing scenario; you either subscribe or you don’t, you either acquire a new subscriber or you don’t.
In short, we no longer can see the wood from the trees.
But what if another way exists? One that could provide a bridge to subscription but which generates incremental growth and revenue along the way?
Micro-transactions as a legitimate revenue stream
At Recast we believe there is another way, one that delivers genuine value for businesses and consumers alike and one that removes the pressure, for the first time of that all or nothing subscription mentality.
Picture a media business where delivering the quarter didn’t hinge on acquiring thousands of new customers at huge discount or a dating app where generational shifts were smoothed out by a steady stream of income from non-subscriptions.
Micro-transactions are that way
A way to bridge the gap between subscription and the cliff edge of nothingness.
A way to offer customers flexibility without undue commitment.
And perhaps most crucially, a way to capture and distribute more value, more quickly than ever before.
Recast’s invocative wallet technology achieves this for arguably the first time by making integrating micro-payments into business processes and the customer journey a realistic possibility and not a logistical improbability, capturing value and data in ways not possible with more conventional subscription models.
And the results speak for themselves; average revenue per user comparable with conventional subscriptions, first and zero-party data captured at point of transaction and organisations such as World Aquatics unlocking value from geographies never before catered to.
Subscriptions may provide a warm blanket of comfort for businesses but true incremental growth will have to come from something new, something innovative and something bold.