A powerful tool for direct-to-consumer marketing, subscription businesses are seeing some shifts in the growth equation. According to a new report, digital advertising isn’t hitting the way it used to.
To understand the current state of the subscription economy, Bango, the subscription technology solution company used by Amazon, Google and Microsoft, commissioned a report called “Gravity Shift: Subscribers, bundles and the acquisition black hole.” Conducted in May, the research includes data from 201 cross-industry subscription business leaders in the U.S. and the U.K. who are responsible for customer acquisition strategies and budgets.
Importantly, beyond the subscription market, Bango’s experts said these shifts are likely to have an impact on digital advertising businesses.
Overall, the report found that a shift is definitely brewing for subscription services. As with other channels for shopping, consumers are seeking value in new places and for subscriptions this can mean bundling with services that they already trust and pay for. Executives told the company that this signifies a “fundamental change in the forces driving growth,” with opportunities to unlock new audiences for broader reach as acquisition methods change.
Key findings in the report show that 45 percent of leaders would describe direct marketing spend as a “black hole” in their budget. More than half (53 percent) said they believe direct channels are no longer a sustainable path to growth. With that in mind, 80 percent of businesses are cutting back on at least one paid channel, including paid search ads, display advertising and paid social ads.
“Netflix spends nearly $3 billion a year on marketing,” said Giles Tongue, subscription expert at Bango. “That’s simply not feasible for the rest of the market. Most brands don’t have the scale to absorb that kind of spend, especially when the returns are eroding. Direct-to-consumer marketing is hitting diminishing returns, and leaders are now looking for smarter, more sustainable ways to grow.”
Eighty-eight percent of subscription brands also “expect direct acquisition costs to rise in 2025.” Almost a third believe there will be increases of more than 25 percent. As brands adjust where they will focus their budgets, 82 percent said they plan to increase investment in indirect channels this year, 90 percent said they are already bundling or plan to start in 2025 and 72 percent said that they will invest in indirect routes to bring in higher quality subscribers.
With companies planning to increase bundling opportunities, 44 percent said that they are bundling, or plan to bundle, subscriptions via retailers in 2025.
From a consumer’s perspective, Bango found that 62 percent of subscribers in the U.S. prefer to manage subscriptions in one place through a bundle and 44 percent reported that they already get at least one subscription free through a packaged deal. Younger consumers are even more likely to lean on bundles, with 55 percent of consumers ages 18 to 24 years old reporting that they have signed up for a bundled subscription that they previously paid for directly.
“We’re seeing a clear shift from the subscription economy to the bundle economy,” Tongue said. “Consumers don’t want to manage 10 separate subscriptions — they want value, convenience and flexibility. The brands that win in this next phase will be the ones that package their offerings in ways that reflect how people actually want to buy.”
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