The subscription based platform business has been thriving. Which one is still developing at an early stage, and hence could be a good investment?
When we purchased Microsoft office product in the past, we could simply purchase different versions, as in Microsoft office 2010, 2013, 2016 and etc. Nowadays, we can purchase Microsoft 365, which is based on subscription and gives access to all of the latest Microsoft office applications.
Other IT software companies also give similar subscription-based products. For example, Adobe also offers access to their latest Adobe software from their cloud instead of selling individual software to customers.
However, it is not just IT software companies that are gearing towards subscription-based platforms; other big companies like Netflix, Disney and Amazon are also offering subscription platforms, in which consumers can pay certain fee to enjoy all the services at no additional costs beyond recurring subscription fee.
Why is this happening?
There are many reasons as to why subscription-based business model works better than traditional business model:
- It costs less to acquire customers, as subscription billing makes it easier to retain customer base
- It is easy to up-sell and cross-sell different/similar products/services to subscribed customers
- It offers platform, in which customers can explore not just the products they wanted to purchase initially, but can also explore other products
- It is easier to maintain relationship with customers because it is on-going relationship, and companies can predict their revenue stream with more accuracy
This is why subscription has been a popular choice for companies with online streaming service, such as Netflix and Disney, which was made possible by faster internet access and improved data usage via recent 4G technology.
One industry which just started to have subscription-based business model is game industry. Unlike online streaming services where data usage can be simply limited to the content, game requires a huge amount of data to play via online streaming environment.
With soon-to-be-available 5G technology, now many game companies are trying to offer similar subscription services to customers, where they can choose a variety of games and play online without having to purchase them individually. Microsoft is one example, as they offer Xbox Game Pass with which game players can freely play all the games available with a recurring subscription fee.
Platform business for game has been slow to develop, as huge data required for online stream service was a technical obstacle. However, with 5G and improved data usage, many companies are trying to become the next Amazon in game industry.
Can you pick the right one?
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