Subscription is a global trend that has also impacted South Africa, which currently has 7,2-million active subscriptions.
The subscription economy, or subscronomics in the country, will be around $530-million this year, according to the latest analysis presented by Telecoming, which believes the South African subscription-based economic model will grow at 14% each year to exceed $820-million in 2025.
In 2021, South Africa will account for 11% of the market for subscriptions in Africa and the Middle East, South Africa is a mature market in this economic model, and its growth rate is therefore lower than the rest of the region, which is close to 20% year on year.
“Subscronomics is a global trend about marketing products with a revenue model based on recurring payments,” explains Javier del Corral, country manager: South Africa at Telecoming. “Subscription-based business models have become global and really popular thanks to technology.
“It is a disruptive model because it changes the relationship between brands and their customers. More and more companies see this model as an opportunity to grow steadily, and new actors are joining the scene. In some sectors, it will mean a real revolution.”
Technology and data allow companies to build a scalable offer based on users’ interests. The digital context forces companies to adapt the storefront and the range of products and services, as well as the payment methods. Also, the ease and speed of delivery, the management of returns, and, above all, customer loyalty are key to building loyal communities.
Del Corral adds: “One of the main advantages of the subscription economy is that the user does not have to worry about payment. This step has always been a big challenge in commerce; the subscription reduces it. From this point of view, payment technologies, such as direct carrier billing, are becoming strategic for customer acquisition and retention.
“Advertising, good service and a simple payment system are the keys to succeeding in this global dynamic ofsSubscronomics.”
As a global driver of this new movement, digital content accounts in South Africa for 90% of the market in terms of turnover. Video, Music and Podcast complete the top three services with the most significant weight in the region (67%, 19% and 4%, respectively).
Some figures from the South African subscronomics ecosystem include:
* 13% of South African households have a subscription to a music service, a figure well above the African average of 2% and in line with the global ratio of 14%.
* Music services in South Africa are cheap, under $3.50 per month. The median value of a subscription to music services in Africa is $4.65 per month.
* The market for subscription music in South Africa will be around $100-million dollars in 2021 and $200-million in the next four years. It currently accounts for 26% of the African music subscription market.
* Podcasts, however, are considered a high-value service, with an average monthly cost of almost $5.00, well above the average world price of $3.00.
* Nearly one in two South African households is subscribed to a video-on-demand service. It is a very high figure compared to the world average, which remains below 30% of households.
* In 2025, South Africa will have almost 5-million active subscriptions to SVODs. South Africans spend nearly $107 per year on video subscriptions, consolidating a market of $353-million in 2021. It is a mature industry that will grow at a rate of 9% until 2025.
* The growth of the turnover of SVODs in South Africa is more moderate than in other sectors such as music or podcast, with rates above 15% year on year.