Beyond Flat Fees: The Rise of Hybrid Subscription Models

New models. New ads. New pricing tiers. The subscription economy has been active, to say the least, with YouTube CEO Neal Mohan revealing TV screens have now surpassed mobile as the primary device for YouTube viewing in the U.S. This milestone shows YouTube is no longer just a video platform — as Mohan noted: “YouTube is the new television.”

The subscription economy continues to evolve, presenting both challenges and opportunities for businesses and consumers alike. With the global subscription market projected to reach $1.5 trillion this year, according to DarwinCX, companies are refining their strategies to attract and retain customers.

The subscription industry is witnessing a shift toward more flexible and diverse pricing models. Tiered pricing remains a cornerstone strategy, with companies like Netflix and Spotify offering different levels of access and features to accommodate varying customer needs and budgets. This allows for personalized offerings and maximizes potential revenue. In fact, PYMNTS data shows that 46% of consumers are “deal chasers” and will switch services to get a better deal, while other consumers can be wooed away from being loyal customers with a better price.

Usage-based pricing is gaining traction, DarwinCX noted, particularly in the SaaS sector. Companies such as AWS and Twilio have implemented this model, appealing to businesses that prefer paying based on actual consumption rather than committing to flat fees.

Meanwhile, hybrid models, which combine elements of tiered, usage-based and freemium pricing, are becoming more popular, according to DarwinCX. For example, Adobe offers a subscription for its full Creative Cloud suite and a pay-as-you-go option for individual apps. This flexibility allows consumers to engage with services without being locked into a single pricing framework.

Ad-supported tiers are emerging as a key trend, particularly in the streaming industry. Netflix, which had long resisted advertising, launched its ad-supported plan in late 2022. By the end of 2025, approximately 10% of U.S. Netflix subscribers are expected to opt for this more budget-friendly option. Similarly, platforms like Disney+ and HBO Max have introduced ad-supported tiers to provide more affordable alternatives to their premium offerings.

As the number of subscription services grows, consumers face “subscription fatigue.” A 2024 CNET study found U.S. adults spend an average of $91 per month on subscriptions, with two-thirds reporting price increases in at least one of their subscriptions over the past year.

Subscription fatigue has become a noteworthy trend. As services proliferate, consumers are becoming more selective about where they spend their money. A Civic Science survey found 50% of video service subscribers either canceled or intended to cancel one or more subscriptions in 2023 due to subscription fatigue.

Moreover, subscription fatigue is not limited to streaming services. Across industries, consumers are reassessing their subscription portfolios, leading to higher churn rates and increased pressure on companies to demonstrate value.

Streaming companies are implementing various strategies to fight subscription fatigue and retain customers:

• Content Diversification: Platforms like Netflix are investing heavily in diverse, high-quality content, including live events and sports. The introduction of NFL games and high-profile boxing matches has helped Netflix create “must-watch” moments that keep subscribers engaged.
• Personalization: Netflix’s recommendation engine uses AI to offer tailored content suggestions based on viewing history, keeping viewers engaged and reducing churn.
• Bundling: Companies are exploring bundling strategies to provide more value. Disney, for example, offers a bundle that includes Disney+, Hulu, and ESPN+ at a discounted rate.
• Flexible Plans: Streaming services are introducing more flexible subscription options, including ad-supported tiers and the ability to pause subscriptions, addressing consumers’ desire for more control over their expenses.

To acquire and retain customers, subscription-based companies are employing several key strategies:

• Improved Onboarding: Companies are focusing on creating smooth, user-friendly onboarding processes to reduce early churn. This includes sending instructional emails or videos, using in-app guides and simplifying the overall process.
• Loyalty Programs: Implementing reward systems that incentivize long-term subscriptions and encourage repeat business.
• Community Building: Platforms are creating engaged communities around their content or services, nurturing a sense of belonging that can increase customer loyalty.
• Transparent Communication: Companies are prioritizing clear communication about pricing changes and service updates to build trust with their subscribers.
• Data-Driven Personalization: Leveraging AI and machine learning to provide hyper-personalized experiences, content recommendations and offers based on individual user behavior and preferences.

As the subscription economy develops, companies need to focus on innovation and meeting customer needs to address subscription fatigue and strengthen loyalty. By providing flexible pricing, varied content and tailored experiences, subscription businesses can overcome market challenges and remain successful.

The post Beyond Flat Fees: The Rise of Hybrid Subscription Models appeared first on PYMNTS.com.