Through the E-book rental service “Millie’s library", the user is looking through the books.
/Photograph by Kim Min-hyeok
Recently, the subscription economy, a method of paying a monthly subscription fee and receiving goods or services, has grown in popularity. The number of Korean users of the online streaming service “NETFLIX” rapidly increased up to 1.53 million in March from 390 thousand in February, according to app analytics firm “WiseApp.”
Also, other services using the subscription model have become extremely popular. For example, the number of members of E-book rental service “Millie’s library” has grown to 700 thousand people. Following these successful cases, the subscription economy model is beginning to be adopted and tested in various areas.
Experts say the reason for the popularity of the subscription economy is that consumers place more value on what they experience rather than owning a particular product or service. Forbes, a business magazine of the United States, noted that the subscription economy is breaking up the centuries’ old concept of ownership and creating a new economic life, shifting the way things are consumed from ownership to subscription.
How the term subscription economy emerged
The emergence of the term “subscription economy” has to do with the emergence of NETFLIX. It has been able to grow into the world’s largest paid video service using a different method compared to the traditional DVD market. The existing DVD rental method allows customers to select the DVD, pay the fee, watch it for a certain period and return it to the store. However, with the original NETFLIX model, customers can rent and return freely for a month by paying a monthly subscription fee.
NETFLIX gained popularity in this way and then started their streaming services due to the development and dissemination of the Internet. Streaming means a way of connecting to the Internet and playing contents in real time, unlike downloading methods that videos are stored directly on your computer. Anyone could enjoy all the contents on NETFLIX for a monthly fee. This led to the emergence of the term subscription economy.
The three business models of the subscription economy
Three business models have emerged as the subscription economy expands into various areas. The first model is the unlimited-use model, which allows unlimited access to content when users pay the fee every month. This is the most representative model of the subscription economy.
It is mainly used by markets that register contents such as music, videos, books and games on the Internet and make subscribers pay to access. For instance, if you purchase a monthly pass from “Melon,” a music streaming service, you can freely listen to the music that Melon offers for a month.
The second model is the delivery for regularly-used model. Subscribers can receive service on the desired day regularly. “Kukka,” a flower delivery service has launched a subscription service for customers who want to receive flowers at regular intervals, and subscribers can also set a theme for the flowers they receive. If the theme is flowers for lovers, they send flowers related to love.
The last model is the rental model which shows that we can share even the things we normally thought we should own. For instance, there are vehicles, clothing, and accessories. “Hyundai Select,” a subscription service offered by Hyundai Motor, allows you to switch the vehicle you use. This will be an attractive option for people who want to ride different types of cars or for those who are thinking about the type of car to buy.
Positive opinions on the subscription economy services
Kim Hyun-seo (Freshman, Department of Applied Biology and Chemistry) of Seoul National University, a NETFLIX user said “I usually had to go to the movie theater to watch the movie, but as I paid for a month with NETFLIX, it is convenient that I do not have to go to the movies.” He added, “It is good to enjoy various contents at low prices.
However, another NETFLIX user, Cho Jae-sung (Freshman, College of engineering) of Hongik University said, “I did not watch it as much as I thought because I had subscribed for several months and delayed watching with many excuses.” He also said, “It would have been better if I had saved the money for several months and watched movies in the theater.”
After the emergence of NETFLIX, the term subscription economy has shown up. It was applied in various services. But it was nothing but a trend. So far, the services that just followed the trend have already been wiped out. In a long term, only services that merits of the subscription economy will survive in the end. Therefore, consumers or companies will need a better understanding of the definition of the term subscription economy.
Kim Min-hyeok firstname.lastname@example.org
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