The subscription revolution

The subscription revolution
From streaming music services and cloud storage to niche retailers offering regular deliveries of fruit or even socks, the subscription business model is spreading far beyond its heartland in the telecommunications sector. Cerillion’s Marketing Director, Dominic Smith, examines the subscription phenomenon.

Consumer and corporate markets are in the midst of a revolution as companies transition from selling products to becoming service providers. From the street corner entrepreneur to the largest conglomerates, all are vying for recurring business from existing customers in a bid to gain a more predictable revenue stream based on subscriptions and create a more valuable supplier-customer relationship.

This ‘subscription revolution’ is sweeping through all industries and all geographies, transforming traditional businesses and creating whole new business models for start-ups able to take advantage of customers that are now more receptive to subscription-based service offerings. It was recently revealed that even YouTube, apparently a universally free service, will start selling access to a set of channels on a subscription basis, as it looks to bring on-board new content and further monetise its offerings.

As a business whose origins lie firmly in the telecommunications sector, Cerillion has many years’ experience in managing the complexity of subscription and usage-based services in what is arguably one of the most sophisticated markets for pricing and packaging of services. The irony is that whilst businesses in other verticals are looking to the telco sector for the tools and experience to manage subscription-based pricing models and contract periods, many Communications Services Providers (CSPs) are moving in the opposite direction and relying on subscription-free ‘pay as you go’ offerings for their consumer segments.

In the past, subscription services were billed using traditional on-premise billing and accounting systems. However, the arrival of cloud-based technology, including Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) means that service providers now have an alternative solution that is not tied to high CAPEX and lengthy integration projects.

Cloud Billing or ‘Billing-as-a-Service’ solutions bring the ability to quickly setup and start billing for a new service, without the need for any infrastructure or upfront licence fees. So whether you’re a start-up with a new business to launch, or an existing business looking to experiment with a new service or business model, billing becomes the enabler of innovation rather than an inhibitor.

Demand for Cloud Billing solutions is accelerating rapidly as providers of digital and non-digital services look to leverage the latest technology. But with low barriers to entry, particularly in the digital economy, and rapidly increasing competition, many service providers are already struggling to differentiate their offerings, being limited to simple subscription-only capabilities.

Today’s subscription-based economy requires the flexibility to mix-and-match subscription and usage-based pricing models, plus the ability to tailor offerings to the full range of B2B and B2C segments. Without this, even the best service in the world will be at the mercy of lower-priced imitators. And as Betamax versus VHS and many other cases have proven over the years, it’s not necessarily the best idea or technology that wins, but the superior business model and marketing that triumphs.