Disclaimer: This article is not a professional analysis of the current market situation. I am just a high schooler who enjoys researching about market finance even though I may not thoroughly understand it. All facts claimed in this article are subject to biases and can be misinterpreted. This article should not be used as a basis for researching about any investments you plan to take. It is just my view of the market. Please take everything stated here with a grain of salt.

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In the past few years and in the last decade, we are observing a shift in the majority of the business industries where corporations are changing to a subscription based business model from a more traditional "pay and done" model. To understand the potential motives behind this change, we must first understand what is a subscription based model.

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Subscription model

The subscription business model is a business model in which a customer must pay a recurring price at regular intervals for access to a product. (wikipedia). In essence, instead of paying the full sticker price for a product or a service, the customer will receive bills either weekly, monthly, yearly, or any regular intervals of time. This type of model requires marketing which focuses on building consumer trust for longevity instead of just grabbing their attention and selling the product to them. This model also ensures a stable stream of revenue because customers pay moderate to little amounts for prolonged use of the product or service.

Even though only recently the economic trend is leaning towards subscription based business model, the origin of the model itself dates back all the way to the 1500s. In those days, customers would regularly pay a fee for access to newspapers from their local media company. Traditionaly, services like gym or club memberships, television cable or radio service, storage units and etc were the primary users of subscription based models. It was not common for a product sellers to utilize such models.

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So why implement a subscription model for "selling" products?

There are a variety of reasons for choosing this model. First of all, as mentioned previously, this ensures a steady stream of revenue instead of a one-time income. If you look at some of the conservative methods of investment, investing in utility companies, which supply electricity, water, or any service which was almost regarded as an essential need for living, was largely deemed as a safe investment. This is because they usually have 20 or so years long government contracts and only a few companies were even approved to be eligible enough to be awarded these contracts. As such, they attracted long term investors who usually had a large capital to invest. In the recent decades, some "product selling" companies wanted to attract such long term investors. This required them to show a more steady stream of income in their financial statements so they made use of the subscription based model.

Moreover, it is effectively a brilliant marketing strategy. A sticker price of $1000 USD looks like an exorbitant amount to the average customer. On the other hand, $80 USD per month does not sound that bad. This brings in a whole new market of customers who would not have been a customer in the first place had the sticker price displayed $1000 USD. This benefits the customer as well since prolonged subscription to a company requires trust, and such trust necessitates higher quality of products, increasing customer experience over all.

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To conclude, even though the subscription based business model has been traditionally used for services, it is increasingly getting more common to "subscribe" to even buy a product. What used to be simply walking into a showroom to buy a car with straight liquid, (well.. it was never really "simple"), now requires you to go through a complicated process get a credit clearance in order to "subscribe" or "purchase" a car in these so called installments, which are often the only way to "buy" a car in some dealerships.