Some years ago I was asked for proof that teachers wanted subscription-based products. At that time, I could only cite the success of relatively few early educational content innovators such as Teachit (used in over 80% of secondary schools and consistently achieving 80%+ resubscription rates), Espresso and a growing field of subscription products in other sectors. Today, the ubiquity of subscription models in online provision elsewhere is undeniable and yet school content is lagging behind this trend.
The shift towards subscriptions is strong: according to the Economist Intelligence Unit 80% of businesses surveyed noted their customers are now seeking to sign up for, rather than simply buy, their products. Respondents also recognised the new business opportunities inherent in subscriptions — in revenue, competitive differentiation and increased customer loyalty, as well as key consumer benefits like reduced transaction costs, more convenient use of services and easier upgrade / downgrade options .
There are also changes in the decision making process. While individuals do look for exactly what they want, they are also susceptible to social influence — ‘herd-like’ — in their decision making. For content providers, this change is crucial as it impacts directly on purchasing:
“…a common model is that an individual teacher is inspired…they try it for themselves, like it, and encourage other members of staff to try it”. 
Successful subscription models fall broadly into three sectors: software as a service (SAAS), premium content and user-generated content (UGC).
The migration of software to cloud-based subscriptions is widespread, adopted by traditional players such as Microsoft, but also a slew of new services. These work because they either tie users into using the product via content (Dropbox) or functionality (FreeAgent). Because of the time invested and/or content stored, users are locked in to services like these. If the services operate a freemium model the numbers of users, at least at the free content level, can be huge (Skype, for example, generated a £45M annual profit from just 12% of its users paying for premium services).
Premium content is increasingly sold via online subs, in discrete packages and products (generally the model in specialist markets, including the education market) or broad content delivery services (Netflix, The Times). Many of these models still rely on traditional sales or marketing to acquire customers. Key for premium content subscriptions is a stream of new and essential content.
UGC models have historically been most successful in businesses generating advertising revenues (Youtube, TES) rather than subscriptions. But, as Teachit proved, you can use UGC to build a large user-base from which subscriptions can be sold for either SAAS or premium content offerings. The biggest benefit of the UGC model is the ability to build a large, active and loyal community and avoid the traditional costs of customer acquisition.
Successful subscription-based services build recurring, predictable revenues, increase customer insights, and offer enormous marketing potential. Most importantly they should build loyalty. But this comes at a price. There are high expectations in terms of quality, freshness and usability. Sales and marketing efforts can be concentrated to new customer acquisition with the product itself looking after customer retention. Easier said than done — and it can take some period of low revenue to reach these goals.
Through a freemium or UGC model the cost of customer acquisition can be very low, and for the customer the financial barriers to entry can be small. For state markets, such as education, subscription models fit very well with annual budgets and the ongoing threat of curriculum change. Added benefits of a digital subscription model include data — for the advertising sales /data in itself, but, also for efficiently targeted marketing and informed product development. Online subscription services offer unparalleled opportunities for individual, targeted messaging, and for building loyalty and stickiness. The users of subscription products need nurturing. This can be hard to build into traditional content production models.
Just because very few products and services in the schools market are successfully offering subscription models does not mean that they can’t work. There is plenty of evidence that subscription models are fast becoming the norm for accessing content across most markets and platforms. The landscape is shifting. Mobile devices are blurring the boundary between home/ school learning, introducing new opportunities for flexible content that works at home and at school. Educational content companies who don’t embrace and invest in delivering via subscriptions are unlikely to be ready to capitalise on these new opportunities.
Subscription based content will become central to school purchasing: the research and the existing digital successes across industry sectors are testament to this fact. Teachers as individuals will be accustomed to and comfortable with this way of purchasing, and it fits schools’ annual model of intake and budgets particularly well.
It’s my belief that teachers and schools are more than ready for subscription-based content. It’s just that there aren’t enough good ones on offer yet.
Co-founder of Teachit and digital education consultant
[published in Education Investor, Sept 2016]
 Economist Intelligence Unit, 2013. New Rules for the Subscription Economy
 R.A. Bentley, 2014. Mapping Collective Behavior in the Big-Data Era
 Schoolzone, 2015. The digital (r)evolution in schools