We are all familiar with the idea of subscribing for a service. Most of us subscribe to cable, our phone service, and yes, Netflix. These are services that we now signup and pay for on a monthly basis, though many of these services were not always provided in this manner. For example, Netflix revolutionized how we rent movies. Instead of taking a stroll to the friendly neighborhood video rental store, Netflix allows us to receive and return videos by mail. We pay for it in a monthly subscription instead of paying a cost for each video we want. Of course, this is before Netflix started offering online streaming.
The difference between these two economic models is clearly displayed in how we listen to our music. Apple and Spotify contrast the difference very well. Apple’s iTunes was a significant supplier of music where we could buy a song for just 99 cents. That is, until companies like Spotify decided to offer a subscription service for music. Instead of paying for each individual song or album we could now pay a monthly fee and have access to all the music we wanted. This new model ended up being so successful that Apple had to release their own subscription music service called Apple Music.
This marks a significant shift in our economy. It is a shift from the pay-per-product model, which we are used to, to the subscription model. Many products are becoming available on a subscription basis. Do you need a fancy ball gown or a tuxedo? Check out Rent the Runway for the ball gown or Menguin for the tux. Want to get snacks in the mail? Well there are now a variety of subscription services for healthy snacks to try. In the future you may even be able to subscribe to your car. Neighborhood Sun is now working on a subscription model for community solar.
The electric industry is slowly catching on to the subscription model. An electrical utility in Australia called Mojo Power is attempting a new model for supplying electricity. They are trying a hybrid between subscribing for electricity and paying based on use. With Mojo, you pay a subscription, between $30 and $50 based on the type of service you want, and you gain access to cheaper wholesale electric rates. Mojo Power only makes its money off the subscription fee. Although this is a form of subscription, it is still limited by its reluctance to abandon the pay per use model.
So far, we have discussed how the subscription model has become prominent in the business world and how energy companies are attempting to implement it. Next time we will be exploring why a subscription service for electricity makes a lot of sense for a clean energy future.