The strange and sudden rise of subscription businesses

There’s Ola share pass. Soon, there will be Zomato Gold and MMT Black. Also, The Times Group’s new online subscription media product under Times Internet. Companies in India are increasingly looking at a business model once considered niche

Indian unicorn startups are following Amazon's lead (Prime) in launching their own subscription-based products and services

In India's startup ecosystem, the subscription model was considered niche, restricted to those catering to specific needs

Ola, with its 'Share Pass' was one of the earliest to offer a subscription-based service. Others like MakeMyTrip are now following suit

In subscription-based models, the ultimate power is in the hands of the customer: she chooses whether to renew or drop-off

The largest media company in India is waking up to it. Soon, Times Internet, a subsidiary of Bennett Coleman & Company (BCCL) will launch an online subscription-based media product. The editorial team is being put together as you read this.

On Monday, restaurant discovery and food delivery startup, Zomato announced the launch of its subscription-based product Zomato Gold in India. Gold, which the company calls “an exclusive members club”, is expected to simultaneously launch in Bengaluru, Mumbai and Delhi-NCR in the coming days. It is the company’s second subscription product after Treats, where it charges users an annual fee of Rs 249 for a dessert with every order. A Zomato spokesperson said that the company has registered over 50,000 users for ‘Treats’ as of October.

Screenshot of an email confirming Zomato Gold's imminent launch

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Three months ago, online travel agency MakeMyTrip launched its own variant of a subscription-based service called MMT Black. It didn’t stop there. Close on the heels of Black, a free, invite-only, spend-based offering targeted at high-frequency travellers; the company launched MMT ‘Double Black’, where users pay an annual fee for cancellation benefits (full refunds) and a priority resolution guarantee.

73000

The number of users who have signed up for MakeMyTrip's spending-based loyalty programme, MMT Black

Flush with funds, Flipkart, the Indian e-commerce unicorn, is also expected to restart its ‘Flipkart First’ subscription-based loyalty programme in the coming weeks.

A simple question must be asked here. What’s going on?

The last 18 months have been pivotal in the rise of subscription-based digital products and services in India. For a variety of reasons. One, entry of Amazon Prime is perceived by many as a game-changer. More and more people see value in a year-long membership that guarantees, among other things, next-day delivery, grocery shopping, access to video content, and now, a voice-based device in the form of Echo. Two, the entry of services like Netflix and Hotstar. These have played a role in habit-formation. So, to binge-watch House of Cards or Narcos, you have to pay a fee. Many are on it—4.2 million, as per the KPMG Media and Entertainment industry report (PDF), 2017.

Timing, according to Satish Meena of Forrester Research, is most important. Citing the example of Amazon Prime that “opened up the subscription model like no one else did”, he says. “It is very similar in the case of Zomato. They want to be the default for food delivery. They already have content, search and discovery, what they need is transactions.”

A niche business

While there is a renewed interest in subscription models, also known as the ‘recurring revenue’ model in some parts of the world, it is one of the oldest in existence, pioneered largely by the newspaper and the communications industry.

AUTHOR

Venkat Ananth

Venkat is currently in his tenth year in journalism. Prior to The Ken, he was Deputy Content Editor at Mint as part of the newspaper’s digital team. He also wrote in-depth features on the business of sport for the newspaper. His earlier assignments include Yahoo! (as a columnist) and the Hindustan Times, where he began his career. Born in Mumbai, Venkat holds a Bachelor of Mass Media (Journalism) degree from SIES College of Arts, Science and Commerce, Mumbai and a Master of Arts degree in International Studies from Goldsmiths, University of London. He currently resides in New Delhi, where he moved nearly five years ago.

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