The subscription business model has become a cornerstone of modern consumer and business practices, dramatically influencing how we access everything from entertainment to software. Its rise, particularly in the streaming industry, highlights a significant shift in consumer preferences and business strategies. This article explores the dynamics of this model, its various forms, and its profound impact on the streaming sector and beyond.

What is a subscription business model

The subscription business model is a method of providing goods or services to customers on a recurring basis, usually in exchange for a regular subscription fee. The model has gained popularity in various industries, including streaming, software, e-commerce and more. The basic concept of the subscription model is to establish an ongoing relationship with customers and offer them continuous access to products or services, often with the option to cancel or modify the subscription based on their needs.  

How the subscription business model works  

Understanding how the subscription business model works is essential both for companies that want to adopt this approach and for consumers who want to get the most out of their subscriptions. 

Let’s consider the mechanics of this model: 

Customer acquisition

The journey usually begins with customer acquisition. This involves marketing and advertising activities aimed at attracting potential subscribers. To reach their target audience, companies can use various strategies such as social media campaigns, email marketing, content marketing and partnerships, and outdoor campaigns.

Example of Disney+ ad. Source:

Subscription offers 

Subscription companies offer a range of subscription plans or tiers, each with its own set of features, pricing, and benefits. These plans cater to different customer segments, considering different preferences and budgets. Customers choose a plan that meets their needs.  

Settlements and payments   

Subscription fees are billed at regular intervals, such as monthly, quarterly, or annually, depending on the subscription terms. Automated payment systems handle transactions securely, providing subscribers with a seamless payment experience.

Hulu plans. Source:

Access to content or services 

After subscribing and paying the initial fee, customers gain access to the content or services included in their chosen subscription plan. This access can vary greatly, from streaming libraries and software tools to exclusive content. 

Customer engagement 

Subscription companies prioritize ongoing customer engagement. They use data analysis and algorithms to personalize the user experience by delivering tailored recommendations, personalized content and relevant offers. Engaged customers are more likely to continue their subscription. 

Retention strategies 

To reduce customer churn and retain customers, companies are implementing various customer retention strategies. This may include offering rewards for loyalty, discounts for long-term commitments, or responding promptly to customer concerns and feedback. 

Feedback and iteration 

Continuous improvement is a fundamental aspect of subscription models. Companies actively seek feedback from subscribers and use it to improve their offerings. Whether it’s refining content recommendations or solving technical issues, customer input plays a key role in iteration. 

Upselling and cross-selling 

Subscription companies are looking to increase revenue by upselling or cross-selling to existing customers. Upselling encourages subscribers to upgrade to higher-tier plans, while cross-selling introduces complementary products or services.

Example of upselling in Netflix ( Netflix offers customers of lower plans the opportunity to upgrade to a 4K plan.

Churn management 

Churn, or the rate at which customers unsubscribe, is closely monitored. Companies analyze churn data to identify patterns and causes of churn, enabling them to take proactive steps to reduce churn rates. 

Types of subscription business models

Subscription business models come in a variety of forms, each tailored to the specific needs and preferences of both businesses and consumers. These models have evolved and diversified across industries to accommodate a wide range of products and services. Here we’ll cover some popular types of subscription business models: 

Subscription Boxes 

What it is: Subscription boxes offer curated collections of products delivered to subscribers on a regular basis. These boxes often revolve around specific themes or niches, such as beauty products, food, fashion, or hobbies. 

Examples: Birchbox (beauty products), Blue Apron (meal kits). 

Streaming Services 

What it is: Streaming services provide access to a vast library of digital content, including movies, TV shows, music, and more. Subscribers pay a recurring fee for unlimited streaming. 

Examples: Netflix, Disney+, Spotify, Hulu. 

Software as a Service (SaaS) 

What it is: SaaS subscription models offer access to software applications and tools on a subscription basis. Users receive regular updates and support while paying a recurring fee. 

Examples: Microsoft Office 365, Adobe Creative Cloud, Salesforce. 

Membership Programs 

What it is: Membership programs grant subscribers access to exclusive benefits and services. These benefits may include free shipping, discounts, early access to products, and more. 

Examples: Costco, LinkedIn Premium. 

Freemium Models 

What it is: Freemium models offer a basic version of a product or service for free, with the option to upgrade to a premium subscription for additional features and benefits. 

Examples: Spotify (free with ads, premium without ads), Dropbox (free storage, premium with more storage and features). 

Hybrid Models 

What it is: Hybrid subscription models combine elements of different subscription types. They may offer both physical and digital products, tiered pricing, or a combination of free and premium features. 

Examples: Amazon Prime (combines free shipping with streaming and other services), Adobe Creative Cloud (offers different software tools under one subscription). 

Content-Based Models 

What it is: Content-based models focus on providing access to a specific type of content, such as news articles, magazines, or educational materials, through a subscription. 

Examples: The New York Times (digital news subscription), Audible (audiobook subscription). 

Access to Digital Communities 

What it is: Some subscription models grant access to exclusive digital communities, forums, or social networks where members can interact, share insights, and access premium content or features. 

Examples: Patreon (allows creators to offer content and access to a community to paying subscribers), Discord Nitro (offers enhanced features within the Discord platform). 

Content Licensing Models 

What it is: Content licensing models allow subscribers to access a library of licensed content, such as images, videos, or music, for use in their projects. Subscribers pay a fee based on usage and licensing terms. 

Examples: Getty Images, Shutterstock (photo banks) 

Why subscription business models are thriving 

Subscription business models create a win-win scenario for both companies and customers: 

  • Lower Barriers to Entry: Subscriptions often lower the barriers to accessing high-quality products or services. Customers can try out new offerings without a significant upfront investment. 
  • Customer-Centric Approach: Subscription models promote a customer-centric approach, as companies must continuously deliver value to retain subscribers. This emphasis on customer satisfaction drives innovation and improvements. 
  • Flexibility: Subscribers typically have the flexibility to adjust or cancel their subscriptions as their needs change, offering them control and choice. 
  • Adaptability: Subscription models are adaptable and can cater to various industries and customer segments, from entertainment and software to e-commerce and beyond. 
  • Predictable Revenue: Subscription revenue streams are predictable and recurring, making it easier for companies to plan and allocate resources. This stability can reduce the uncertainty associated with one-time sales or seasonal fluctuations. 

Important metrics to monitor for a subscription business model 

The importance of specific metrics can vary depending on your subscription business’s goals and focus. However, here are some of the most crucial metrics that are generally considered important for monitoring and managing a subscription-based business effectively:

Monthly Recurring Revenue (MRR): MRR is a fundamental metric as it provides insights into your monthly revenue stability and growth.

Churn Rate: Churn rate is critical because it measures the rate at which customers are leaving your service, directly impacting your revenue and customer retention efforts.

Customer Lifetime Value (CLV): CLV helps you understand the long-term profitability of your customers and informs your acquisition and retention strategies.

Average Revenue Per User (ARPU): ARPU gives you a snapshot of the average revenue generated per subscriber, helping assess the overall health of your subscriber base.

Net Promoter Score (NPS): NPS reflects customer satisfaction and loyalty, which can significantly affect your subscriber retention and referral rates.

Customer Acquisition Cost (CAC): CAC helps ensure your customer acquisition efforts are cost-effective and sustainable.

Subscription business models in the streaming industry 

With subscription-based streaming services, users enjoy the freedom to discover a variety of movies, TV shows, documentaries, and original series at their convenience. This accessibility allows viewers around the world to enjoy the same libraries of content. Many streaming platforms rely on exclusive and original content to attract and retain subscribers. Creating unique programs, movies and documentaries has become a competitive advantage. These exclusive offerings can range from blockbuster productions to niche content that targets specific audiences. 

Looking ahead, the future of subscription-based streaming is likely to be characterized by increased competition as more players enter the market, leading to a wider range of content and more competitive pricing. Platforms can form partnerships and collaborations to provide content libraries, further enhancing their offerings. In addition, continued advances in recommendation algorithms and artificial intelligence-based personalization will create even more tailored user experiences.


Subscription models offer consumers a range of benefits, including cost efficiency, convenience, personalization, and ongoing value. The ability to customize experiences, receive regular updates, and enjoy the convenience of seamless access has made subscriptions an attractive choice for today’s consumers. If you would like to find out more about different ways to monetize your OTT content, read our other article.

As the subscription economy continues to grow and evolve, it presents both opportunities and challenges for businesses. Staying innovative, listening to customer feedback and adapting to changing market conditions will be critical to long-term success. 

If you would also like to create your own streaming platform with the option of subscription for your users, contact us. We will advise you, help you, and implement a white-label platform that will provide your recipients with unique content and provide you with a permanent and reliable source of income.