Consumers have increasingly turned to subscription services since the coronavirus pandemic began to change everyday life in March.
Subscription businesses have seen skyrocketing rates of growth since the beginning of the COVID-19 pandemic, according to a detailed study from Recurly, a company that helps thousands of companies manage subscription platforms. The report compares subscription rates from the week of March 9, 2020, to the time period of March 16, 2020 to June 29, 2020, finding that industries like digital entertainment and education technology saw massive increases in interest because of the changes forced on society by the pandemic.
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The move to remote learning led to an almost overnight spike in demand for education-related subscription services like Kahoot! and Quizlet that helped teachers give quizzes and students work on projects together. According to the report, new free trials for education peaked in the week of 3/23 with an increase of 327%.
Stay-at-home orders across the world similarly contributed to burgeoning interest in subscription-based entertainment, software, and consumer goods/e-commerce platforms.
“In many ways, COVID-19 has accelerated us to the future, because the convenience factor of subscriptions that have been appealing to subscribers has only been furthered now that they are reconsidering the true cost of going to the store or the mall, browsing aisles and racks, finding something they like and then bringing it home,” Recurly CEO and founder Dan Burkhart said in an interview.
“Consumers are looking at subscriptions as a little bit of a form of entertainment and a little bit of a self-soothing balm to engage with some of these offerings that are out there in the form of box-of-the-month type deliveries. Perhaps it’s a way that folks are keeping themselves happy.”
One of the biggest ways subscription services were able to lure people in was through free trials. Hundreds of companies offered week or month-long free trials that had high rates of conversion to full membership plans.
In the last two weeks of March, there were 120% and 101% increases in new trials respectively, which continued into April at rates of 20%-30%. But by May, things started to level off, with the massive increases in the education and digital media sectors being offset by the huge drop-offs with travel, hospitality and entertainment.
The steep losses the study found with the venue-based entertainment industry mask the growth seen in almost every other sector.
Burkhart explained that these businesses relied almost entirely on travel or foot traffic and that CDC guidelines brought subscription numbers essentially to zero. He said that Recurly works with a number of movie theater chains on digital ticket subscription services and noted that a number of these businesses have been in the news recently due to their significant financial struggles.
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A number of software, e-commerce, and professional service platforms saw spikes in new trials as well. The free trials led to concrete gains in almost every industry when it came to new subscriptions.
“Growth in new subscriptions immediately increased during the first few weeks of the COVID period, ranging from 20%-40% higher than the pre-COVID timeframe. April saw the highest growth of any month with a peak growth of 85% and the weekly data staying above 60% the entire month,” the report said.
“This carried into May until growth slowed a bit toward the end of the month. For the last several weeks of May and first weeks of June, the growth rate was between 31%-42% above pre-COVID levels.”
New paid subscriptions peaked for the business and professional services sector at a 60% growth rate in May, while e-commerce saw huge spikes in April and May. The peak of new subscribers started in mid-April and lasted until the week of May 11 at growth rates between 108% and 148%. Education saw highs of 173% in May while the digital entertainment sector hovered between 80% and 50% from April to June.
Education and e-commerce led the way with trial conversion rates, according to the study.
“Trial conversion spiked quickly after the COVID period began, jumping from 42% to 53% the last few weeks of March. From there, outside a slight dip in April to 38%, the conversion rate remained above 49% for the remainder of the study period,” the report added.
“This is important to note given the massive number of free trials that began in late-March/early-April that ended in May. This shows that subscription businesses offering trials were successful in converting those trials into paid subscriptions.”
The report also breaks down the situation facing each industry specifically, explaining what led to the increases or decreases in subscription rates. Business and professional services subscriptions rose due in no small part to the struggling economy, which forced companies to turn to a web of “consultants, agencies, and third-parties” to stay afloat.
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E-commerce similarly rode the economic rollercoaster prompted by the pandemic. Burkhart said economic uncertainty in the first months of the pandemic forced millions to cancel subscriptions before turning back to them as a respite.
“Consumer good spending and adoption rates are being driven by the at-home entertainment of surfing the web, coming across items, and passing the time by ordering something and then waiting,” Burkhart said. “It’s almost like giving a gift to yourself that repeats. That anticipation is a form of entertainment and excitement which perhaps we all need.”
Companies like FabFitFun and others that provided self-care products like workout equipment or art supplies saw increases in interest as more people sought to treat themselves during the stressful peaks of the pandemic, according to the report.
Shows like “The Mandalorian” and “Tiger King” helped millions pass the time while stuck at home, and the free trials offered by companies like Netflix and Disney+ helped spur the increased subscription rates seen in digital media and entertainment. The report notes that these figures will continue to stay high now that the fall TV season is starting and sports like baseball as well as football start play.
Learning and working from home both contributed to the increases in subscription rates for education and software sectors.
“The effects of COVID-19 will be felt for a long time as businesses adjust and recover and consumers navigate through the new normal,” Burkhart said.
“What COVID-19 has done is disrupt consumer purchasing patterns and change the venue. In certain instances, like with education, it really expanded in a week. All of a sudden, the number of people looking for software quintupled overnight. This is a rare moment.”
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