Living in the Subscription Economy

Edited by Sarah Gupta and Cindy Tan

Dear Reader,

We're sharing another piece with you this week, focused on the explosive growth of the Subscription Economy.

In this piece, we will compare the Impact Score Signals for the top performers across Video, Music, Food, and Automotive sectors and will share the forecast for the near future.

The video streaming wars are heating up this fall

Leading video streaming services are experiencing slow growth in Q2, with Netflix seeing the largest subscriber churn rate followed by Hulu and Disney Plus. Netflix lost about 400,000 subscribers in the US and Canada due to production delays of original content caused by the pandemic. Owned by the Walt Disney Company, both Hulu and Disney Plus saw a slight decline of 5% and 3% respectively despite the debut of Disney Plus’ Marvel series earlier this year. HBO Max saw the biggest subscriber growth with the addition of 2.8 million US subscribers in Q2. Newer entrant Apple TV+ is catching up as subscribers sign up for the free promotional offer extended to users of Apple’s hardware devices. By comparison, the trendlines of these video streaming services follow a similar pattern as they’ll see their biggest growth in winter when users tend to stay indoors and watch more TV.

Music streaming services: Winners and losers

Music streaming giant Spotify retains its position as the market leader with 165 million paying subscribers and 365 million total monthly active users during Q2 2021, with a 20% and 22% growth year on year respectively. Spotify’s main competitor, Apple Music, is quickly gaining in, perhaps bolstered by its exclusive content from high profile artists, curated radio, an extensive music library bigger than Spotify’s, and affluent iPhone users who don’t mind paying for the service after its free trial ends. Even though Youtube Music recently hit its milestone of 50 million subscribers in August, it’ll still be playing catch-up with Spotify and Apple Music over the next year.

NWO.AI forecasts continued growth for Spotify and Apple Music while Deezer and Amazon Music remain in decline perhaps due to a lack of consumer awareness and solid marketing strategy.

What happened to Lossless Audio?

In May, NWO.AI detected a few inflection points in lossless audio, correlated with Apple’s and Amazon’s lossless audio upgrade. The increase in user interest led to a peak Impact Score of 100 in July. Lossless audio promises superior sound quality compared to the lossy compressed music files with lower bitrates, found on ad-supported music streaming tiers. It ensures listeners get the best sound quality available, especially on a good pair of headphones. However, interest in lossless audio saw a sharp decline in August as people who listen to music exclusively via Bluetooth audio found that it couldn't sustain the high bitrates required by lossless audio, making the sound quality no different than what they get from a lossy subscription service.

The food subscription craze

Even though Covid restrictions were lifted in the summer and dining out resumed, food subscriptions grew. Perhaps after more than a year of lockdown during the pandemic, time-scarce consumers are getting tired of cooking daily, and are subscribing to meal kits even though restaurants have reopened. According to one report, “increasing preference for homemade meals among millennials is a major factor contributing to the growth of the market.” As consumers focus on a healthy diet to strengthen their immune systems during the winter, we expect a sustained interest in meal subscriptions in Q4 2021.

Players in the meal delivery game

The meal delivery craze has seen its ups and downs throughout the year but as consumers have gotten used to cooking at home and eating healthy, new players in the market are growing fast. For instance, interest in Mosaic Foods -- launched in 2019 -- grew by 174% as it rides on the growing plant-based movement with its offering of meatless meals prepared by chefs in the company’s in-house kitchen. Earlier this year, Sunbasket announced its pivot to a “full-service health-forward food delivery company” to differentiate itself from an increasingly crowded meal kit subscription market, which perhaps contributed to its growth. Home Chef has also seen a slight growth with its offering of over 38 meal kits in any given week, including oven-ready meals. By comparison, Freshly and Green Chef are facing a slight decline, perhaps due to their relatively higher price points at $9-$12 per serving and $12-$13 per serving respectively.

What’s driving the car subscription market?

Though vehicle subscriptions have been around for years, it has recently started gaining traction along with the rise of the sharing economy and subscription services. Car subscriptions mainly appeal to consumers who prefer flexibility, low commitment, and a low-risk way to try out various brands and electric vehicles. At just a monthly fee, consumers can avoid the upfront cost of a car purchase and the hidden costs of car ownership such as maintenance, inspection, repairs, insurance, and taxes. When Covid restrictions were lifted in the summer, car subscriptions exploded to a peak Impact Score of 100 as consumers began heading out more. While interest has slightly faded, the Impact Score of car subscriptions will hover around 80 in the near future as changing customer preferences for car subscriptions fuel market growth.

Are you feeling subscription fatigue?

With the increasing number of subscription services, it’s obvious that consumers are starting to experience subscription fatigue. According to Deloitte’s 2021 digital media trend report, video streaming services are in competition with video gaming and free content on social media. Providers are facing a tough fight in retaining customers who may be canceling their subscriptions due to the economic burden caused by the pandemic and the stalling of original content production by these services. However, most subscription services will be in high demand during the winter, which perhaps explains the decreasing impact score surrounding ‘subscription fatigue’ in Q4 2021 and Q1 2022.

About NWO.AI
NWO.AI's predictive platform enables leading Fortune 500 companies and government agencies to anticipate and track global cultural shifts by aggregating, analyzing, and producing actionable reports on human-generated data. We are leveraging petabytes of external, noisy, and unstructured data from various sources - including search, social media, blogs, news, patent databases, SEC filings and we are continuously adding more sources. Our mission is to answer the what, when, and most importantly 'why' behind a consumer trend and enable our customers to detect these shifts as early as possible.

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