Subscription-based services such as Amazon Prime, Apple Music and Disney+ have grown in both popularity and price throughout the past several years, but how much are students willing to pay for them?
In a study done by C+R Research in 2022, consumers estimated spending an average of $86 per month on subscriptions. In reality, consumers spent an average of $219, or 2.5 times their average original estimate.
Several educational apps such as Duolingo, Kahoot and Quizlet have instituted subscriptions that make new and existing features part of paid tiers. Companies start charging for subscriptions at low prices, then raise them as they try to find the highest price most customers will pay, BYU finance professor Taylor Nadauld said.
For the language learning app Duolingo’s premium subscription, “I would probably pay $10 more from what it is now,” BYU student Cindy Hernandez said. She said she would pay this amount because the app helps her learn and she finds that valuable.
However, Hernandez would not pay an additional $10 a month for an app such as Apple Music.
“I’m not really learning anything from it. It’s just kind of a comfort,” she said.
Companies rely on subscriptions because it makes revenue more consistent, Nadauld said. When a customer signs up, they are less likely to stop paying for the service.
“It’s a little harder to get someone to pay you every single time they use a product,” he said, “than it is to get them to pay you once and then hope that they keep paying you.”
If customers feel they are paying more than what a service is worth, they might cancel, Nadauld said.
“If I was really invested in it, the most I’d be willing to pay is probably about $10. Maybe up to $12 depending on specifically what the subscription is and whether or not they’re making any improvements,” BYU student Cael Erickson said of monthly subscriptions. Erickson does not pay for any subscriptions, but said he would be most likely to pay for a music-streaming app.
In addition to maintaining customers, companies who operate a subscription business model can be acquired at a higher price because their revenue model is more stable and forecastable, Nadauld said.
While subscription-based business models may not be what’s best for consumers, “it’s best for the company in terms of making them more attractive as an acquisition target,” Nadauld said.
Subscription models are likely here to stay, he said, but new technologies will arrive that will help people manage their various subscriptions.
“So ironically, people will get one more subscription that helps them manage all of their other subscriptions. That’s what I think is gonna happen,” he said.
Subscription tracking services include Rocket Money, PocketGuard and Trim, among others. While many of these services offer free features, they offer paid features as well.
