Standard Bank says subscriptions for digital services, particularly online entertainment and streaming, are eating into consumers’ disposable incomes across earnings brackets.
In recent years, many businesses have shifted their models towards recurring revenue, driven by subscription services. Such models allow businesses to have recurring streams of revenue from customers as opposed to one-time or irregular purchases. Customers are offered lower costs for certain products and services, or access to a bundle that puts various offerings together.
While convenient, data from Standard Bank shows that subscription spending has risen sharply, eating into disposable income.
Subscription bills vary, depending on income, but many high-income individuals spend well over R1,000 per month, the bank said this week. On average, low-income households spend R336 per month on subscriptions, while middle-income earners spend R482.
High-income men over 40 spend the most. “But even their female counterparts are forking out over R1,000 every month on streaming, health and fitness, and digital services.”
In middle to high-income brackets, men spend more than women and older customers often commit to long-term or premium services, driving up costs. In contrast, among lower-income segments, clients over 60 show less engagement with subscriptions.
While subscriptions have been growing in popularity as a way to lock in customers for the long term, the number of subscriptions that consumers have to contend with, from gym, video on demand, music streaming, pay TV, software and even for vehicles, has led to a state of “subscription fatigue”.
Even then, the number of services or products now being settled by recurring, often monthly, payments is not slowing down.
The bank notes that streaming and entertainment take up the largest share of household subscription spending, followed by health and fitness and then software and digital services. High-income earners are especially inclined towards premium digital subscriptions, including fintech services, and advanced software.
Streaming and entertainment also dominates among middle- and lower-income consumers, making up more than 68% of all subscriptions. Health & fitness as well as software & digital services subscriptions are steadily growing.
“We all deserve to spend a portion of our income on things that bring joy and comfort. But as incomes rise, so do expenses — often unconsciously. This ‘lifestyle inflation’, including growing subscription costs, can shrink disposable income and delay emergency savings,” said Doret Jooste, head of money management and advisory at Standard Bank.
“Subscription fatigue is real. Many add more subscriptions without regularly reviewing their needs,” Jooste said.
According to Juniper Research, the global subscription market is on track to reach nearly $1-trillion in just three years. From 2022 up to 2026, market growth is projected at 68%. Even then, as more businesses adopt subscriptions, they will have to contend with increasingly frustrated and discerning consumers who are cancelling services at a faster rate, especially in markets such as the US.
Jooste suggested taking proactive steps such as reviewing subscriptions to assess which services can be kept or cancelled, negotiating or looking for bundle deals to lower costs, using apps that track recurring expenses to help identify areas where one can cut back, and setting up automatic transfers for salary increases and additional income.
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