Subscription Businesses Thrive in a Downturn

by K. V. Rao

This past week was filled with news about subscription businesses thriving in the downturn. Everything from socks by subscription(!) to the iPhone to Netflix.

In particular, last week’s news about Netflix is another feather in the cap for subscriptions. Since January of this year, in this dicey economic environment, Netflix has seen its subscription base grow by more than 600,000 to reach more than 10 million subscribers. With this in mind, we think it’s safe to say that we expect to see an increase in the number of companies looking to optimize their services via subscription.

Naturally, we’re a fan of subscription-based businesses for many reasons. As a consumer, subscriptions are cost-effective and efficient. You use what you need, when you need it. Same goes for the service provider - subscriptions are efficient, predictable, profitable.

Back in January, Ray Wang of Forrester Research was quoted as saying "I think SaaS has an element of being recession-proof." So far, that certainly seems to be the case. SaaS and subscription companies like salesforce.com are reporting strong earnings and customer growth.

This is all good news. If you’re a service provider and aren’t offering a subscription option to your customers, don’t you think it’s time to take a serious look at subscriptions?