Subscriptions pay model is growing faster than both pay-to-download (or premium apps), and freemium (apps with non-subscription in-app purchases). App publishers should consider using auto-renewable subscriptions where applicable in their monetization strategies.

Dickey Singh on October 26, 2016

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Activate Inc. published research on Oct 26 in the Wall Street Journal and looked at top 100 non-gaming media and entertainment apps from 2011 to 2016, on consumer pay models in mobile apps.

Side note: games are the most popular category on the Apple and Google Play app stores, and 25% of the 4.2 million apps on the app stores are games.
This research focused on media and enterprise apps and excluded gaming apps.

Consumer pay models

Only pay-to-download, freemium and subscription consumer pay models were considered in the research.

Apps that do not monetize or monetize outside the app store (using advertising, sponsorships, self-promotions and affiliations) were not included. I blogged about Mobile ad blocking and various app monetization options available here.

Pay-to-download

On the app stores, this means the paid or premium apps. I have blogged about how hard it is for app publishers to charge for their apps in 99 penny gap & premium apps.

Side note: Paid apps may also have in-app purchases. In the research, Paid apps with in-app purchases were excluded from this pay model.

Freemium

Free-to-download apps with non-subscription in-app purchases (i.e. consumable and non-consumable in-app purchases product types)

Subscription

Free-to-download apps with an In-app purchase subscription.
The subscription may be non-renewable, or auto-renewable with durations: weekly, monthly, bimonthly (once every two months), quarterly, half-yearly, or yearly.

Consumer Pay Model changes over time

Percent of available apps on the two largest app stores over time

• Pay-to-download apps went from 54% in 2011 to 3% in September 2016 (no surprise here)
• Freemium apps increased from 28% in 2011 to 32% in 2013, and then decreased to 26% in September 2016
• Subscription pay model apps went from 18% in 2011 to 71% in September 2016

Percent of App Revenue on the two largest app stores over time

• Pay-to-download apps went from 63% in 2011 to 2% in September 2016 (again, no surprise here)
• Freemium apps increased from 20% in 2011 to 23% in 2013 and then decreased to 12% in September 2016
• Subscription pay model app revenue went from 17% in 2011 to 86% in September 2016

Subscriptions feed the internet & media world

The chart below shows top 10 apps across all categories except gaming subscription revenues by an app in the US in last 12 months from September 2016. Top subscription services in app stores are mainly video and music streaming.

Subscriptions will account for over ½ of consumer internet and media growth

The research also predicted that subscription would continue to be the dominant revenue model, accounting for over half of consumer Internet and media growth. Consumer internet and media growth are estimated to grow from $1.7T in 2016 to $2.1T in 2021.

Consumer Internet and Media Revenues in the research includes Radio, Recorded Music, Magazine Publishing, Newspaper Publishing, Video Games, Filmed Entertainment, Book Publishing, TV Subs and Licensee Fees, Internet Access, Digital Advertising & Traditional Advertising on these platforms.

Subscriptions in all app categories

Auto-renewing Subscriptions have been made available for app categories, not just games, media and entertainment, since mid-2016.

Apple and Google have incentivizing app publishers with better pricing for subscriptions with 85:15 split for app publishers (after the first year in the case of Apple), since mid-2016.

App publishers should seriously consider subscription pay model.

Freemium Subscriptions

Not to confuse with “Freemium” and “Subscription” pay models in this research, Auto-renewal subscriptions on the Apple app store support the freemium model, i.e. free trials with a length dependent on the duration of the subscription.

• 1 week free trial is available for weekly auto-renewal subscriptions
• 1 week or 1 month free trial is available for monthly or bimonthly auto-renewal subscriptions
• 1 month free trial for quarterly auto-renewal subscriptions
• 1 or 2 months free trail for half-yearly auto-renewal subscriptions
• 1, 2 or 3 months free trial for yearly auto-renewal subscriptions

Subscriptions pay model is growing faster than both pay-to-download (or premium apps), and freemium (apps with non-subscription in-app purchases). App publishers should consider using auto-renewable subscriptions where applicable in their monetization strategies.