8 Subscription Burnout Bill me later? How about never?
By Grainger David

(FORTUNE Magazine) – Perhaps you're thinking of getting a new watch. Yours is so passe: It only tells time. Thanks to Microsoft, now you can buy a watch that receives news, weather, e-mail, sports scores, stock prices, and more--all for under $300, plus the low, low subscription price of $9.95 a month. To true geeks, that may sound great. (One such watch is actually called the Dick Tracy.) On the other hand, a subscription watch could be the last step toward the coming trend known as Subscription Burnout. "Sooner or later, there's a bill that breaks the camel's back," says Peter Rojas, editor of gadget weblog Gizmodo. "People are going to start asking how many of these subscription services they really need."

"Need" is such a subjective term. TiVo, Netflix, DirecTV, satellite radio, BlackBerry, cellphone, DSL, long distance, mortgage. Which, you may find yourself asking, is expendable? Subscription peddlers all hope that once hooked, consumers won't be able to quit. "You've got to look at us from a different perspective," says Jim Collins, a spokesman for Sirius Satellite Radio. "It's kind of like using a remote control for the first time. You're not going to want to stand up and push the buttons anymore."

But you will want to do something about your rapidly expanding credit card bill. That's why the companies that are well positioned to deal with Subscription Burnout are those that can offer Subscription Denial. Take Verizon. Its wide array of services encourages bingeing--it offers local, long distance, and mobile-phone service, Internet, and, most recently, DirecTV--all able to be bundled into a single bill. (Verizon says 48% of its 30 million users choose to bundle, and they churn away at a rate 70% lower than nonbundled customers do.)

The companies in trouble in the looming subscription shakeout, by contrast, will be those that pioneered attractive businesses only to have the territory annexed by the big guys. Think Netflix and TiVo, hurt by cable's push into video-on-demand and DVR, respectively, and (sorry, Dick Tracy fans) Microsoft's MSN Direct.

The lesson for fledgling subscription-based companies? Find a partner quick, before one finds its way into your business. And if you're thinking of making subscription watches--it's time to rethink. --Grainger David