Subscription Plans weather that be netflix, amazon prime or Spotify are bad for your financial health & worst of it it’s long-term financial trap. Let me explain you how ?
In Today’s Modern World, we are surrounded by various Subscription Services. Lots of tech services comes in subscription like for Entertainment, Cloud Storages, Shopping and Even Luxury Cars & EVs comes with Add-On subscriptions. And suddenly your life is surrounded with un-necessary subscription payments and that’s where your financial health is badly affected because Big Tech Corporations bombard your life with unnecessary subscriptions. Example: if you want to watch great Movies & TV Shows, you can’t watch it with just one subscription, you need to pay bunch of various Subscription just to enjoy good movies & this is caused because of Predatory Capitalism.
Predatory Capitalism
We are slowly normalising subscriptions trend in very unhealthy way, like BMW recently launch their subscription of heating seats for 18$ a month. Now it’s very unfair for customers who are already paying hugh amount of money for luxury car with built-in heating seats feature & yet you can’t access this feature because it’s behind another pay wall. Think from Common sense perspective, you have the Car, you own the car, you have built-in features in car yet you are unable to use it without paying extra. These Big Corps want to max their profits so they apply these strategies which unfortunately are not consumer friendly. That’s typical Predatory Capitalism and in future we will this seeing more often in tech industry.
Liability
When you look at it from financial perspective, any kind of subscription is nothing but liability for you which simply means it is burden on your wallet. Let me ask you a question, if you promise to pay X amount of money to me each month in exchange I will give you access to my large movie collection, what do we call this Business Arrangement ? it’s Rental Business Model. Which simply means I’m owner of my movie collection & you will get access to it if you agree to pay me X amount of money each month. When you compare this with old methods of one-time purchase of BluRay Disc, it provides more value because here you own the BluRay disc, you don’t have to rent it monthly from anyone to watch it & re-watch it.
Does it provide any real value
Real Question is Does it Provide Any Real Value ? Now you can make argument that’s at X amount I’m able to watch my favourite show on Netflix on Demand without any Ads so it’s value for money. Let’s understand this from Macro finance perspective & do the maths. I’m taking example of Netflix subscription for this. The cost of basic subscription will cost you around 199 INR per month & 2,388 INR per year to get access to your Movie Library, keep in mind that you don’t own any movies or TV Show in Netflix because when you stop paying, you lose access to Movies. Now let’s predict how much money you will spend on Netflix in next 10 Years. 2388 INR multiply it by 10 Years, it will be 23,880 INR and keep in mind we are not including Inflation numbers. Now let’s Calculate & compare it with One-Time Purchase of Movie. Imagine if I want to purchase The Dark Knight Movie BluRay UHD 4K, at the time of recording this video it will me around 1290 ₹ on Amazon. Which means I can purchase & own a movie at 1290 INR. Dark Knight is Oscar winning movie so it obvious it’s Expensive in india but Average price of BluRay Disc varies & some might cost you around 500 INR or 1000 INR. This is one time purchase, so in the long run it will cost you almost 0 INR because that’s the difference between rental & ownership model. In fact, you can also re-sale your Old Movies collection at decent price. Now you can argue that purchasing all the Oscar winning movies from last 10 years is expensive. Yes, it is slight expensive but you have to understand the trade-off & concept of Ownership.
Rental vs Ownership
Let’s understand the Rental vs Ownership, Most of Subscription base business in Tech work on Rental Business Model, which simple means you pay X amount per month in exchange you get access to their product/service. Where as in Ownership Model, you pay X Amount for a Product/Service without any reoccurring payments. The difference is there is unique freedom when you own a product. You can modify it, use it the way you want & you can also re-sale in some cases. In Rental Model, you don’t have freedom & you will have to rely on the actual owner. Example: tomorrow you can’t go to market to sell your movie collection from Netflix because you didn’t own any even thought you were Loyal (Premium) Netflix Member. But in case of BluRay Disc, there is always an option to re-sale it in future. That’s the Reason why ownership Model is more consumer friendly in long-term instead of Rental Model which feels good in short-term.
Hidden Risk
Not all glitter is gold & not all shiny things are diamonds. Yes, it is true that because of Subscription Model consumers can get access to services at cheaper price but the real Risk lies under it, which is ignored by everyone. One big risk is Inflation of Prices, it is well known that companies like Netflix, amazon rise their Subscription price in every few years to adjust according to economic inflation. Cost of Netflix in year 2014 was 7.99 USD for Basic & 12 USD for Premium & in year 2022 the cost has rise to 9.99 USD for Basic & 19.99 USD for Premium. There is steep rise in price by 20-39% in just 8 yrs. The worst is Amazon subscription, in year 2005, Amazon Prime was cost at 79 USD per year and in year 2022 the price is 139 USD per year which is 43% price hike in 17 years. Now ask yourself a question how much percentage your Monthly Salary has increase in last 17 years considering Pandemic, Inflation, Rising Cost of living etc. Answer it in Comment box below. Another hidden risk is uncertainty of life, today you can afford to pay for subscription but ask yourself can you afford it in future with rising cost of living & inflation in economy.
Conclusion
Now I’m not saying All Subscription Services are bad, some are good, some are not so good but I want you to understand that you as a consumer should be aware of positive & negative aspects of it so that you can make right choice. Next time before you buy any subscription plan, just ask yourself these 2 questions.
- Does it provide any value ?
- Can I afford it in long term ? If the answer is Yes, then you should go for it & buy that subscription.
