The subscription economy is quite hot in many industries, and as the word implies, you subscribe to a product or service rather than owning it. That is a paradigm shift as it changes everything from how we see value to how our balance-sheets look and most likely will change even more in the future. It will also potentially impact the environment, which can go both ways. As you don't own your equipment, you may want to exchange it with a new product more frequently or the other way, where assets are shared among several users leading to fewer products.
Subscriptions can force the development of cheaper products, more and faster development, and tough competition, as the subscribers can easily change service (with some commitments), but more or less like a phone subscription. Some customers stay with the same service provider forever. Some will always chase the cheapest and best service provider at any given time possible.
Some subscription models will continue looking more like leasing. Some will eventually develop new products and services based on subscription economies in ways we can't even think of now.
The subscribers will have more freedom and can utilize products and services when needed, but over time some customers will experience prices way higher than owning the product. The subscription economy will enable companies to have variable costs rather than fixed costs. I also believe a new breed of companies servicing the contracts will see a market. Banks and financial companies will need to see into new business models to serve the subscription models, as it's not leasing and not financing conventionally; it is something new. The subscription economy will also require a new look upon value. If you get equipment financed, what is the value of the equipment? Is it the variable cost price, or is it a non-existing selling price? And residual values will never come to play, as nobody wants to own an old product in a world where capital is not tight into tangible assets!
Whatever way you look at it, a subscription economy is about how to get a product or service financed. When a company develops a product or a service, considerable investments are typically invested. For software and services, we today already use subscriptions, and the apparent reason is that the delivery of the service has no or is close to marginal cost. Suppose you sell a printing machine or another hardware asset. In that case, you'll typically need a vast investment upfront for every delivery, which will increase risk, and, as mentioned above, question the asset's real value.
When companies today offer subscriptions on hardware, like a car, a forklift, printing machines, or any other hardware product, the subscription is more like leasing. You will have a contract with duration and/or a guaranteed volume, a residual value, a service/maintenance contract, and everything you already know. You will, however, NOT own the asset at any point.
The following articles will discuss what products and services subscriptions fit better!
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