Subscription Economy

in #leofinance4 months ago (edited)


What will the future be like?

Everything becomes more expensive and fewer people own more. For most people, it will end up owning nothing. But that's not only because everything becomes more expensive, it's also the mindset of "I don't want to commit".

It's the mindset " I want to be flexible".

Buy something and hold, no matter what it is, is a long-term commitment. You don't buy a house for some months.

It's something for the long term, decades.

Even if people can afford it, hold it long-term and build wealth, they don't want it.

Another mindset in today's world is "I want it now". That's terribly stupid. On-demand = premium price. The patient makes the gains. Not those people.

A failed marriage and other relationships are also wealth killers.

That's why a subscription economy will be the future.

Because holding and commitment is something 99% of people don't care about, everything will become a subscription at some point. No matter the asset class.

it will be a Netflix-like world.

Pay your monthly fee to live somewhere, pay your fee for food, pay your fee to drive a car, and so on.

Less ownership for the masses.

Is it a good thing? I don't know. Fewer players in the market always build monopolies and show the worst side of capitalism. I mean, the trend will come, no matter we like or hate it.

And bigger players dictate the price at some point because in every space is some natural demand.

But the system is not in the first place the problem. Its the financial education. 99,9% don't have a plan.

Where do you want to be in 2 years? 5 years? 10 years? For most is paycheck to paycheck plus the planning of buying a new smartphone or Tv.

That's it.

Where do we see today already a subscription economy?

  • Of course, streaming. Nobody wants to buy a Movie anymore. Sure that was at no point in time smart.

  • The rental market in real estate.

  • Car sharing and other sharing businesses.

  • On content websites, digital tools, servers, websites ( Software and all digital goods). AWS controls 45% of the internet for example.

  • Memberships, for example, amazons free delivery.

  • Nfts ( @splinterlands ) is a perfect example of that.

  • Any intelligent property. From books to music.

  • transportation, insurance.

  • and many more.

The trend will continue. This has some reasons.

Investors love subscription-based businesses

A subscription-based business has some awesome advantages against classic ones. Revenue, growth rate, future earnings are easier to calculate + in a long term less competition and the potential of a monopoly.

Because to start and expand a subscription business, needs a ton of money. If it's big enough, it makes it because of the cash flow to compete with it for new businesses.

Think about car sharing. If some businesses ( for example car manufacture) build the infrastructure for it, it will be impossible for others to compete if the tipping point is reached.

The people already use it. The app, the payment plan, and so on. The market shares get absorbed. And the cost of referring a customer is lower than trying to become a customer to change the service.

That's the first-mover advantage.

Just in time (JIT) and on-demand

With subscriptions, everything is better to plan. How many resources are needed to run the business? How many new customers come because of advertisement campaign and so on. In this space, money reaches peak efficiency.

Just in time = less "unproductive money" in companies. Why? Because everything is there if it's needed. No less not more. Covid shows some weak points of the production just in time. But if manufacturers rent things out at some point and don't sell, even an economic crisis has fewer effects.

At this point, production means expansion.

Which spaces will next start with subscriptions?

IMO food delivery has some potential for that. Pay for a subscription and become free delivery or something extra. Could be sold with " get a free salad on each order" or something like that.

It forces people to stay connected with their favorite food companies. More orders could be a result out of it.

IMO huge potential, as far I know, the first tests already run in some countries for that.

Same with things people need for daily life. From Food up to shampoo. Amazon test that space already for years. I think it will expand at some point if delivery chains become again more efficient.

And many more we cant think of today.

Effects on Businesses that cant add a subscription?

In short, these services will become absolute premium services. Construction, repair stuff, programming, and so on. Every business that builds something or generates value by costume orders will become way more expensive than today.

And you may already know, these services are already expensive.

Minimum wage jobs will be all in the subscription economy ( like already today).

Creative and building jobs will become incredibly high-paid jobs.

Those companies will also profit from it and become more specialist than ever.

How it could affect asset owners?

They are part of the game. The assets should increase in value ( some decrease, depending on what it is).

For example, real estate should become on a long time scale more valuable. Up to the point people are in the metaverse. That I could imagine they lose in value. Not sure.

maybe it will be on real estate simple a following in trend, good locations = price increase, bad decrease.

If the assets can be a part of the sharing economy, they should have space for value increases.

How about crypto?

Difficult to predict the long-term to the masses. If efficiency is higher than classic businesses, there can be a space for massive growth. But the core idea about crypto is against this. It's about ownership.

Maybe it can be the counterweight. I could imagine finance will have space, digital contracts, digital rights, and maybe access to subscriptions to make them more secure.

But the subscription economy doesn't happen overnight, it makes it IMO impossible to predict the crypto industry in comparison to it. There will be some huge winners, but also many losers. Like in every industry with maturing.

Conclusion on a subscription world

In short, everything becomes more efficient and specialist. More expensive items are available for more people to use. That's not bad. Things become cheaper to use.

The downside is fewer people own less and become dependent on companies. Think about covid and stimulus checks going directly to food companies that deliver food to those people. Could be less freedom if governments work with them.

More wealth will be transferred to the already rich. They become ultra-rich and will use most likely costume made services. A costumed life for them and a standardized life for the masses.

There is no critic in any way to that, I mean that's how it works. Avg people also profit and are less innovative.

Bad or good?

What I can say, it will be the same but different.

That was my thoughts about that topic. Feel free to share or start a conversation in comments on that topic.

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The financial markets and big business want to turn everything into subscriptions. The process is called rent-seeking. Big business loves rent-seeking because it is easy and predictable.

The unfortunate result of a subscription economy is that everything becomes mediocre. People end up having to live with what ever the tenement lords of the public want to force on people.

Hopefully crypto will provide an alternative to the rent seeking economy by providing a lower cost method for selling differentiated services.

i agree!

The dangers of less ownership will be laid bare, and quite frankly like you said, it's already happening


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I don't really like the subscription economy model that much. Just look at the streaming services market, its way too over saturated and it doesn't even seem worth it to subscribe to multiple services. Everything can be found online if you search hard enough.

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