Powering the Subscription Economy: Behind-the-Scenes Insights

Introduction

In this blog, we delve into the intricate operational activities that keep the subscription economy running seamlessly. From managing credit card transactions to revenue recognition, learn about the behind-the-scenes operations that play a critical role in sustaining the subscription model.

Qualcomm’s Positive Earnings Impact and Dispute Resolution with Apple

• Qualcomm’s stock is currently up 20% due to the resolution of a royalty dispute with Apple.

• The dropped litigation between Apple and Qualcomm is expected to have a positive impact on earnings for both companies.

• Qualcomm anticipates that it could add another two dollars to its earnings as a result of the resolution.

• The breaking news has been well-received in Silicon Valley, with a focus on the positive implications for the industry.

• The CEOs in the tech industry believe that the resolution will allow everyone to refocus on innovation rather than engaging in legal disputes.

The Subscription Economy and Its Behind-the-Scenes Operations

• The subscription economy relies on continuous incoming revenue to sustain the business model. It’s not just about selling the initial product, such as a peloton or a razor, but also ensuring that the revenue keeps flowing in over time.

• Behind the scenes, a lot of operational activities take place to support the end-users’ seamless experience. This includes managing credit card transactions, handling monthly billing, and determining the recognition of revenue.

• From an end-user perspective, using subscription services may seem effortless, but the intricate behind-the-scenes operations play a critical role in sustaining the subscription economy model.

The Impact of Subscription Model and OTT Services

• The subscription model allows companies to focus on providing great service while we take care of the upgrades and bundles for customers.

• However, competitive pricing is a significant threat to this model, as seen with the entry of Disney and Apple into the streaming market.

• The pricing strategy involves small differences to appeal to consumers, such as setting the price at $5.99 instead of $6 for psychological impact.

• It’s important to note that despite the hype around OTT services, it currently represents only 5% of the $500 billion TV industry.

The Future of Fender Guitars in the Streaming Era

• The Fender guitars business, known for the iconic Stratocaster, faces the challenge of adapting to the digital streaming era.

• While telecommunication companies like ATT, Verizon, T-Mobile, and Sprint use pricing and product differentiation to compete in the market, Fender’s approach with expensive, high-quality guitars poses a unique challenge.

• The key question is how Fender can attract customers and adapt to the subscription model prevalent in the streaming era, especially considering the high cost of their guitars.

The Success of Fender Play

• Fender realized that 90 percent of their customers actually stopped playing the guitar after 90 days, and they wanted to help them continue playing.

• To address this, they launched Fender Play, a program that teaches customers how to play the guitar for a simple $20 a month.

• Customers who sign up for Fender Play are sticking with it, leading to increased guitar playing and more purchases of guitars, amps, and accessories.

• The success of Fender Play demonstrates the effectiveness of supporting customers in developing their musical skills and sustaining their interest in playing the guitar.

Conclusion

The subscription economy relies on seamless behind-the-scenes operations to sustain continuous revenue flow. Understanding the intricate processes involved in managing credit card transactions and revenue recognition is essential for businesses operating in the subscription model.

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