The Subscription Economy Is Eating Everything: When Every Product Wants Monthly Fees
From software to furniture to razors, every company wants recurring revenue. But the model is breaking.
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You probably have at least a dozen active subscriptions. Netflix, obviously. Spotify, maybe. But also software you use for work. Cloud storage. A fitness app. A food delivery service. Perhaps a mattress subscription or a razor subscription or a clothing subscription. Your parents might have complained about paying for cable and a phone line. You're paying for thirty different services, each extracting a few pounds monthly.
This was the genius of the subscription economy. Instead of selling a product once, you could lock customers into paying forever. A £200 application became a £15-per-month subscription. A £50 razor became a £12-per-month razor subscription. A £300 sofa became a rented sofa at £40 per month.
For companies, subscriptions were magic. Predictable revenue. Customer lock-in. The ability to raise prices gradually without customers noticing. An entirely new business model that nobody could have imagined in the 1990s.
Now, in 2026, that model is beginning to break. And what comes next reveals something uncomfortable about the way businesses are structured.
The venture capital model that worked for Salesforce had a fatal flaw when applied to physical goods.
The SaaS Revolution
Subscriptions didn't start with Netflix. They started with software. In the 1990s and 2000s, enterprise software was sold in enormous upfront licences. You'd buy a copy of Oracle database for £100,000 and own it forever. You'd pay for updates, but the baseline model was perpetual licence.
Then Salesforce came along and changed everything. Why should customers pay £100,000 upfront? Why not charge £100 per month, per user? The customer doesn't have to make a big capex commitment. Salesforce gets predictable recurring revenue. The customer can cancel anytime if they're unhappy, so Salesforce has to keep the product good. Everyone wins.
This worked brilliantly for Salesforce. The company became worth hundreds of billions. Every software company immediately copied the model. Microsoft moved Office to subscriptions via Microsoft 365. Adobe killed perpetual Photoshop licences and moved to Creative Cloud subscriptions. Every startup launched as a SaaS business, because that was the only way to get funding.
The model worked because software has no marginal cost. Once you build the software, the cost of serving one more customer is approximately zero. Subscriptions meant that companies could have asymptotic profitability (as they scaled customers, they didn't scale costs proportionally). The margins just got bigger.
The value per service has declined.
For nearly two decades, this looked like genius. It was. Companies like Salesforce, Slack, Figma, Datadog, and thousands of others built billion-dollar companies on the subscription model.
The Expansion Into Physical Goods
Then, in the 2010s, companies started applying the subscription model to everything. Why sell razors once when you could sell razors monthly? Why sell furniture when you could rent furniture? Why sell groceries when you could have a subscription box of curated groceries delivered monthly?
Dollar Shave Club became famous for selling razor subscriptions. Casper and Tuft & Needle rented mattresses. Blue Apron and HelloFresh delivered curated meal subscriptions. There was a subscription for everything: flowers, socks, snacks, skincare products, coffee, wine, pet food.
The logic seemed identical to SaaS: if you could lock customers into recurring payments, you'd have predictable revenue and customer lock-in. What could go wrong?
The subscription economy isn't dying, but the era of everything is a subscription is over.
Everything, it turns out.
The venture capital model that worked for Salesforce had a fatal flaw when applied to physical goods.
The Fatal Flaw
Physical goods subscriptions have a fatal flaw that software subscriptions don't: marginal cost. Shipping a razor to someone every month costs money. Manufacturing the razor costs money. The customer service to handle monthly billing and cancellations costs money. Unlike software, where marginal cost is zero, physical subscriptions have real, growing costs.
This meant that the only way to be profitable was to have extraordinary customer retention. If your customer acquisition cost was £40 and a customer typically stayed for six months before cancelling, you'd make about £20 in profit (£40 per month revenue minus £30 in marginal costs). That's a 50% margin on customer acquisition, which sounds fine until you realise that you have to acquire 100 customers to stay in business, and most of them are going to cancel within six months.
The venture capital model that worked for Salesforce had a fatal flaw when applied to physical goods. At scale, you have more costs, not fewer. Shipping a million razors is harder than shipping 10,000 razors.
The Saturation Point
By 2023-2024, the subscription economy was reaching saturation. Companies realised that a typical consumer could only sustain so many subscriptions. You might pay for Netflix, Spotify, and a cloud storage service. But twenty subscriptions? Thirty?
Subscription fatigue became a real phenomenon. People were getting angry about the sheer number of charges on their credit card. Companies were raising prices aggressively to compensate for poor retention. Customers were cancelling in waves.
The data told the story: enterprise SaaS subscriptions still worked brilliantly. Slack, Salesforce, Datadog (these companies had incredible retention because they were business-critical). But consumer subscriptions were struggling. Retention was declining. Customer acquisition costs were rising. The mathematics were breaking.
The value per service has declined.
The Price Increase Backlash
Companies tried to compensate by raising prices. Netflix went from £5.99 to £15.99 for premium. Spotify raised prices from £9.99 to £12.99. Fitness apps raised prices. Cloud storage services raised prices. Every company assumed that customers would grumble and accept the increases.
They didn't. Price increases caused churn. Customers cancelled Netflix and used free alternatives. They cancelled fitness subscriptions and went back to the gym. They switched from Spotify to pirated music. The elasticity was higher than companies expected.
The basic problem was that most consumer subscriptions weren't valuable enough to justify the cost. Netflix was valuable when it had an enormous library and no competition. Now, there's Netflix, Disney+, Apple TV+, Amazon Prime Video, Hulu, and a dozen others. The content is fragmented. Customers have to subscribe to multiple services to watch what they want. The value per service has declined.
The Debt Trap
Worse, the subscription model created a psychological debt trap. You paid £10 for a subscription with the intention of using it every month to justify the cost. If you didn't use it, you felt guilty. But the guilt wasn't enough to make you actually use the service, so you just cancelled.
This was a design flaw nobody anticipated. By trying to optimise for recurring revenue, companies had created a model that was, in many cases, worse for customers than paying once. If Netflix cost £200 as a one-time purchase, customers would deliberate heavily before buying. But with Netflix at £15.99 per month, customers subscribe casually, then feel annoyed every month as the charge appears, then cancel. Both the company and the customer are worse off than if there had been a one-time purchase.
The subscription economy isn't dying, but the era of everything is a subscription is over.
The New Model Emerging
Smart companies are starting to adapt. Netflix introduced an ad-supported tier at lower price points. Spotify introduced a free tier that's viable (with advertising). Some companies are moving away from strict subscriptions and toward pay-as-you-go models or one-time purchases with upgrades.
Figma charges per feature tier but lets you use the free tier indefinitely. Dropbox charges for storage but doesn't make you subscribe monthly for basic functionality. These models are less predictable than subscriptions, but they're more aligned with actual customer value.
The smartest approach might be a hybrid: a core product that's free or low-cost, with premium subscriptions for power users. This creates retention without forcing all customers into recurring payments. Discord uses this model. So does Slack. So does Notion.
The Founder Lesson
The subscription revolution taught companies something critical: predictable revenue is worth a tremendous amount. Wall Street loves it. It's easier to forecast. It's easier to raise funding on. But predictable revenue only works if the product is actually valuable enough to justify recurring payments.
Companies that tried to force subscriptions on products that had one-time value discovered that customers would rebel. The market is gradually pushing back against mandatory subscriptions, particularly for physical goods or services that don't improve over time.
The companies that will win in the next era are the ones that use subscriptions strategically, not universally. They'll use subscriptions for products that genuinely improve over time, that create lock-in, or that provide ongoing value. They'll offer one-time purchase options for products that don't meet those criteria.
The subscription economy isn't dying. But the era of "everything is a subscription" is over. The next era is about being honest about which products actually benefit from recurring revenue, and which ones are just extracting customer guilt and resentment.
The companies that figure that out will win. The ones that don't will watch their churn rates climb.
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