Subscriptions come for everything, even sleeping
You’ve heard of subscriptions to entertainment services, music platforms, and fitness centers, but what about skiing, sleeping, or using the self-checkout line at the grocery store?
If you have not heard of it yet, you will soon as it is already here:
- Vail Resorts reported that 75% of their skiers paid for the Epic Season Pass ($82/mo) instead of purchasing non-subscription lift tickets
- Eight Sleep launched a subscription service ($24/mo) to track your environment and sleep that you are required to buy for 12 months with the purchase of an Eight Sleep mattress
- Walmart plans to limit the self-checkout line to Walmart+ subscribers ($12.95/mo)
Most U.S. businesses pursue a subscription model because it appeals to their team and investors.
Businesses adopt subscription models because recurring revenue provides more stability and predictability in forecasting for strategic planning and investment purposes.
Additionally, the data shows that investors prefer recurring revenue from subscriptions over one-time revenue. For example, when evaluating a purchase price, a software company's recurring portion of revenue is typically valued at 7-15x, while the non-recurring revenue is valued at 1-3x, per Vista Point Advisors.
While subscription models are trendy, they don’t work for every business. The requirement to sign up for a recurring payment dampens customer demand, per McKinsey & Company. For example, Eight Sleep received a lot of pushback from customers who didn’t want to sign up for their subscription service by purchasing the Eight Sleep mattress.
I completely empathize with them; there is no way I would pay a subscription to sleep. I don’t care what Andrew Huberman has to say.
