AI芯視界

It's time for our regular economy segment.
Traditionally, subscription services referred mostly to newspapers and magazines but nowadays, it's more than that.
Demand for subscription is high for video content, music streaming platforms, and even computer software. For more on 'subscription economy', we have our business correspondent Lee Rae-hyun here with us in the studio. Good to see you, Rae-hyun.
Good evening, Jung-min.
So, tell us more about the subscription economy what is it and why is it so important to businesses?
Right, the term subscription economy might be unfamiliar to some, but I'm pretty sure many people have used it at least once. It's a growing business landscape in which traditional pay-per-product or service companies are moving toward subscription-based business models. It involves selling recurring subscriptions to consumers in exchange for access to a product or service over time. So basically, it's about access, not ownership. Credit Suisse says the subscription economy market size grew to 530 billion U.S. dollars in 2020 from 420 billion in 2015. And it's expected that 75 percent of global manufacturing companies will provide the service this year. Along with this, this service is now expanding into a variety of industries in the current era of digital transformation.
Amazon on Wednesday started a subscription service that allows premium members in the U.S. to purchase multiple drugs for a flat fee of 5 dollars a month, the e-commerce giant’s latest foray into health care. Car companies, too are getting in on the act as Hyundai Motor introduced a program in South Korea and other countries including Spain and the UK that allows customers access to one car out of 6 options with a monthly subscription fee of a little over 800 dollars.
OTT businesses, including Netflix, are noticeable, as leading video content industries and are seeing exponential growth since the COVID-19 pandemic.
Although Netflix saw a drop in the number of subscribers last year, largely due to increased membership fees some experts forecast that as the demand for video content continues to rise, the company's profits may recover this year.
They also say that as subscriptions are mostly automatically prepaid, companies can secure stable income until customers cancel their service.
Also, service providers can monitor consumer reactions based on a long-term relationship with them and use data to improve products and services.
Right, then how does this service benefit consumers?
Right, as you might have already guessed, most people are welcoming this new business model. Using this kind of service, there's no need for consumers to spend a sizable amount of money at once. Moreover, consumers can always access the latest product and services. U.S.-based subscription billing platform eLabs says 78 percent of adults around the world were subscribed to a subscription service as of 2022. That's quite a lot.
And this is what people had to say about the benefits of subscribing over owning a product or service.
"I subscribe to a video streaming service. I can reduce my time by accessing the service whenever I want."
"I subscribe to a salad delivery service. It's convenient when I'm busy and can't go to a store."
"I'm planning to get chicken breast delivered regularly. Subscription services are cheaper, and I get it delivered to my door by the time it runs out."
Right, and what's the outlook for the subscription economy?
Well, the service has now adopted AI technology to provide better choices for consumers. For example, some video subscription services provide recommended videos based on users' histories. Spotify the global audio streaming platform provides music playlists based on a technology that analyzes peoples' voices to detect their feelings. It's expanding into the product delivery service, too, where it recommends books or drinks using an algorithm function that's based on a customer's gender and age.
Despite the development in technology, however, one expert says businesses should brace for difficulties, too. Take a listen.
"As the economic slowdown continues, consumers tend to tighten their purse strings. The first thing they would likely do is cut their recurring payments for some subscriptions. But still, it's important for companies to adopt the subscription system in the long term, as the system is expanding into essential products and services."
So, there are concerns about subscription services in a volatile financial market. But the expert says, letting consumers easily and conveniently cancel their subscriptions in this situation can be a good strategy that can lead to a positive corporate image, keeping consumers coming back in the future...