Navigating the subscription economy: Pricing, experience, and data - Tearsheet

"Despite macroeconomic turbulence, U.S. subscription-based businesses are continuing to see growth, with 89% reporting they are confident about increasing their recurring revenue in the following months, according to research by Mastercard. Although the research shows resilience in times of economic uncertainty, there is a slight drop-off in year-on-year revenue growth: 35% of U.S. businesses saw subscriber growth of 21-30% in 2023, compared to only 18% of businesses achieving this growth rate in 2024."

"Subscribers are now more discerning and harder to keep Rising inflation is knocking at the door, and consumers are becoming more discerning about which subscriptions they intend to keep: More than one-third of U.S. consumers report that they are spending more compared to 12 months ago, mainly due to increased prices by service providers and data also shows consumers prioritize "saving money" when canceling their subscriptions."

"This has pushed Over-the-Top (OTT) providers to enhance value through flexible subscription options and lower-priced ad-supported tiers. Along with the number of subscriptions per consumer, overall spend has also increased with customers spending an average of $118 in subscriptions monthly. Over half of all consumers are now closely tracking how much they spend on each service. For businesses, this means that the right pricing strategy can be the difference between retention and churn."

U.S. subscription businesses report high confidence in growing recurring revenue despite macroeconomic turbulence, yet year-on-year subscriber growth has slowed from 2023 to 2024. Consumers are becoming more discerning amid rising inflation, with over one-third spending more than a year ago and prioritizing saving when canceling subscriptions. Customers juggle more than three subscriptions on average and spend about $118 monthly on subscriptions. Over half of consumers now closely track spending per service. Flexible pricing, ad-supported lower-cost tiers, downgraded plans, and reduced-price offers can materially impact retention versus churn.

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