The Importance of Supporting Both Transaction and Subscription- based Business Models

There’s no disputing the fact that the purchasing habits of today’s consumers have drastically changed, which has forced businesses across all sectors to adapt accordingly. The U.S is currently immersed in a subscription-based economy – in which companies are less focused on selling products and more concerned with customer retention and reoccurring revenue.

In fact, research firm Gartner predicts that more than 40 percent of global media and digital product companies will use subscription services for their fulfillment, billing and renewals by 2015.For companies, the benefits awarded by a subscription-based business model are abundant. These benefits include recurring revenue, established long-term relationships with customers, guaranteed cash flow during slow times and the ability to place inventory purchases against future sales. For customers, this type of business model offers the benefits of fixed costs and greater convenience.

While subscription newspapers and magazines have been around for decades, it’s not the only thing that’s subscription-based anymore. More businesses today are coming up with unique ways to use the Internet to sell products that have not traditionally been sold via subscriptions. From music to movies to cars, there’s been a dramatic increase in the number of companies offering up monthly subscriptions to accommodate consumers purchasing habits, particularly over-the-top (OTT) providers.

While a subscriber-based economy is nothing new to most broadband service providers, OTT providers – like Hulu, Netflix, and Amazon compete with traditional cable operators – and offer on-demand content through subscriptions with no transaction-based purchases. In fact, in 2012, 58 percent of OTT video revenue came from subscription service, according to data from ABI Research.

For example, over-the-top (OTT) provider Amazon offers an “a-la-carte” streaming library at a base rate each month. Using Amazon Prime Instant Video, members can access an unlimited number of TV shows and movies at a fixed monthly rate.

However, findings from a new survey of 758 media industry executives may be signaling a change.   While the majority (54 percent) of survey respondents said a monthly subscription-based model is currently the best economic model for OTT delivery, the future may hold something different.  Respondents claim that in the future there will be a push for charging consumers on a pay-as-you-go or on-demand model in which providers offer a portion of content at a monthly fixed rate, but charge individually for premium content.

That being said, the ability for companies to support both subscriber and transactional models within their billing infrastructure is critical. With WinCable from GLDS, service providers are able to bill both subscriber and transaction purchases.  Rather than simply authorizing transactions and reporting purchases to the billing system, the WinCable billing and subscriber management system is able to process order requests for subscription-based services as well as juggle transaction-based billing from an unlimited sources of delivery channels.

Find out more about what WinCable can do for you.