Regulatory Headwinds for Subscriptions

Abhishek Dadoo
|
December 8, 2021
|
Monetization
|
Regulatory Headwinds for Subscriptions
Your submission has been received! Click here to download.
Oops! Something went wrong while submitting the form.

Guide to Evaluate Payment Providers to Increase Direct Revenue

Seamless payments have been a game changer for e-commerce players selling physical goods. Learn how to increase direct revenue by making the payment experience effortless!
Your submission has been received! Click here to download.
Oops! Something went wrong while submitting the form.
Your submission has been received! Click here to download.
Oops! Something went wrong while submitting the form.

On this page:

Jump to Value Delivered:

This article was first published on INMA.


At some point, this was bound to happen. It’s already happening in other industries as well. I am talking about the Oct 28th policy statement by Federal Trade Commission (FTC); they want to make it easier for you to cancel subscriptions.


The FTC is not alone. Regulators across the world are onto this trend. The Reserve Bank of India (RBI) ruling about mandatory reminders prior to recurring charges went into effect on Oct 1st causing heartburn for any publisher with card subscribers from India. The Competition and Markets Authority (CMA) in the UK is contemplating similar rulings. But what is causing this sudden outburst of consumer protectionism?

Sudden Outburst of Consumer Protectionism

People forget and people get busy. Disengagement is human nature! However, history is riddled with examples of disengagement-led business models. Blockbuster used to have a prominent revenue line item called late fees. Netflix came along and disrupted Blockbuster’s business by offering DVD rentals by mail and at a flat rate with no late fees. Engagement-led revenue is so engrained in Netflix’s gene pool, that even today when OTT fragmentation is at its peak, Netflix self purges inactive subscribers regularly.


It’s obvious that the more you drive the more you are at risk of having a car accident. Hence, fixed monthly car insurance is moving to usage-based car insurance. AWS offers reserved server instances, but only after metered pricing gets more expensive for the business. The pricing mechanisms in the SaaS industry are also fast evolving. SaaS companies are starting to align their pricing with the value their customer receives.


In July 2020, Newrelic (NYSE: NEWR) pivoted from subscription-based pricing to usage-based pricing. Their Chief Growth Officer, Manav Khurana wrote: “It was a bold and risky move. But it made sense because we repeatedly heard from our customers that the new model better aligns with their success. Simply put, you only pay for what you use. No more shelfware as with other subscriptions.” To learn more about the changing patterns of the subscriptions economy, I follow Kyle Poyar from Open View Partners, a venture capital firm.  In his recent blog post, he writes about why usage-based pricing is on the rise.

Buyer’s Remorse

All of the above examples bring to bear the fundamental truth about digital subscriptions - buyer’s remorse. Wikipedia defines buyer’s remorse as the sense of regret after having made a purchase. In the case of digital subscriptions, the remorse arises from not engaging with your website enough to justify a monthly recurring payment. In a March 2021 study conducted by Northwestern University’s Medill Spiegel Research, they found that 49% of digital subscribers do not go to the websites they had paid for even once a month. Ed Malthouse, Speigel’s Research Director says “Most subscribers are either complete ‘zombies’ or almost a ‘zombie’.” At this rate, when the path to canceling subscriptions is made unnecessarily complicated and opaque, it makes sense for the regulators to step in; especially at a time when almost every digital publisher is luring users with $1 trial offers.


As with everything in life, there is always a silver lining. With the regulators stepping in to make subscription cancellations easy, my conjecture is as follows:

  1. The dreaded zombie subscriber purge will become inevitable.
  2. The $1 trial offers will no longer work for sustainable subscriptions growth, and the cost of loyal subscriber acquisition will increase.
  3. Engagement will become the north star metric for all quality publishers and creators.
  4. Winning a subscription commitment from a user will form an ever-lasting relationship between the publisher and the user.


Let’s make great content and our users happy. Once again!

Abhishek Dadoo,
Co-Founder

Dushyant Khare
Co-Founder

Send us a note if you'd like to get in touch

What to read next

Abhishek Dadoo

Abhishek is a seasoned business leader and technology product manager. He has worked in management consulting with PwC and Altman Solon in Boston, USA before moving to Singapore permanently. In Singapore he has held roles in market development with Ericsson and DHL before branching out to start his own venture, Shoffr, a digital marketing solution that provides online to offline attribution for digital marketers. In 2019, Abhishek sold Shoffr to Affle, a publicly listed ad-tech company in India.

Further reading
See all posts

Tenting, metering subscription strategies have different pros, cons

Every tentpole strategy starts with how the publisher decides its tentpole content. At its most basic level, data-driven publishers look at their last

October 26, 2022
/
Read More

Simple data strategies for subscriptions

We live in a world where there is no shortage of data: first-party data, third-party data, and zero-party data. However, most publishing organizations

October 18, 2022
/
Read More

Global digital subscription trends suggest viability of pay-per-unit option

Digital publishers are striving to find the perfect balance between subscriptions and ad-supported business models. The struggle comes because ad yie

August 16, 2022
/
Read More

Ready to monetize casual audiences?

Let's get in touch.
Book a Demo