Subscription Based Products are in Trouble

Some Companies Are Losing Customers as the 2022 Recession Hits

Netflix, Hulu, Spotify, and others are all in trouble. People are cancelling and holding off on discretionary goods, and accumulating cash as the recession drags on. They’re doing this because inflation is up, and the stock market is down. It’s only a matter of time before lower stock prices translate into the reality of less jobs. You see, the stock market is an Oracle of what is to come. You have the brightest minds, AI, all making decisions off of all known information. What the stock market is telling us is that bad things are in store for our economy in the future. You could argue that interest rates are a denominator when it comes to calculating stock prices – this is a correct. However the stock declines have not been the same for all sectors.

Ben Graham original formula

Some Companies Will Keep Subscribers

Now I think companies that offer tangible financial benefits to their subscribers will keep them. Amazon will keep their Prime customers, since you can easily save the cost of a subscription through a few orders without paying shipping. Another example is Apple Music, by this point folks who listen to Apple music are likely engrained in the Apple ecosystem. It would be a large pain for these Apple Fans to leave the ecosystem or start to pay for music on an ad-hoc basis. Apple pretty much has them tied for life. Costco is another good example of a company that saves members on bulk purchases, and offers high quality store brand products – in fact I wouldn’t be surprised if MORE people get subscriptions as recession hits home.

What Stocks I Prefer

If I had to make a chose between rivals, one at a time, here is my list of my winners and losers:

  1. Netflix vs Amazon – Amazon!
  2. Disney Plus vs Amazon – Amazon!
  3. Spotify vs Apple – Apple!
  4. Fitbit vs Apple – Apple!