Subscription based business models

A subscription based business model sells periodic use or access to physical or digital products or services. In contrast to the razor and blade business model, subscription models use formal agreements between the seller and buyer, to protect profitability. The model reduces uncertainty and assures constant revenue streams, often even paid in advance, for the duration of the subscriber's agreement. Subscription pricing is often designed so that the subscription gives the buyer a lower price per unit, than from one-time purchases. The buyer may also find subscription models more convenient and time saving than one-time purchasing. On the downside the buyer might want to pay a one time fee for the security of knowing that no further payment is necessary. There are different forms of subscription based business models:

Subscription for access to digital or physical products or services
Examples: Forums, databases, music services, blogs…

Subscription for a fixed number of products or services
Examples: Magazines, operas, books, newsletters socks…

Subscription for minimal service plus additional charge depending on usage
Examples: Telephones, software, rental cars…

Subscription charging for specific use of a service
Examples: Software-as-a-service, level of engine use…

Subscription for unlimited use of a service
Examples: Trains, public transportation, fitness clubs, software…


Further reading:

• The Freemium Business Model
• The Razor & Blade Business Model