Currently there are some 7.2 million active subscriptions in South Africa, generating around $530m this year, according to the latest analysis presented by Telecoming, which predicts that the subscription-based economic model will grow in the country at 14% each year to exceed $820m by 2025.
According to the data from the international company specialising in digital service monetisation technologies, this year South Africa will account for 11% of the market for subscriptions in Africa and the Middle East. South Africa is a mature market in this economic model, and its growth rate is slightly lower than the rest of the region, which is close to 20% year on year.
“Subscronomics [subscription economics]is a global trend about marketing products with a revenue model based on recurring payments. Subscription-based business models have become global and really popular thanks to technology. It is a disruptive model because it changes the relationship between brands and their customers. More and more companies see this model as an opportunity to grow steadily, and new actors are joining the scene. In some sectors, it will mean a real revolution,” explains Javier del Corral, Country Manager South Africa at Telecoming.
Technology and data allow companies to build a scalable offer based on users’ interests. The digital context forces companies to adapt the storefront and the range of products and services, as well as the payment methods. Also, the ease and speed of delivery, the management of returns, and, above all, customer loyalty are key to building loyal communities.
Del Corral continues: “One of the main advantages of the subscription economy is that the user does not have to worry about payment. This step has always been a big challenge in commerce; the subscription reduces it. From this point of view, payment technologies, such as Direct Carrier Billing, are becoming strategic for customer acquisition and retention. Advertising, good service and a simple payment system are the keys to succeeding in this global dynamic of Subscronomics.“
South Africa’s favourite subscriptions are to digital content
As a global driver of this new movement, digital content accounts in South Africa for 90% of the market in terms of turnover. Video, Music and Podcast complete the top 3 services with the most significant weight in the region (67%, 19% and 4%, respectively). Some figures from the South African Subscronomics ecosystem:
- 13% of South African households have a subscription to a music service, a figure well above the African average of 2% and in line with the global ratio of 14%
- Music services in South Africa are cheap, under $ 3.5 per month. The median value of a subscription to music services in Africa is $ 4.65 per month.
- The market for subscription music in ZA will be around 100M$ dollars in 2021 and 200M$ in the next 4 years. It currently accounts for 26% of the African music subscription market.
- Podcasts, however, are considered a high-value service, with an average monthly cost of almost $ 5, well above the average world price of $ 3.
- Nearly 1 in 2 South African households is subscribed to a video-on-demand service. It is a very high figure compared to the world average, which remains below 30% of households.
- In 2025, ZA will have almost 5M active subscriptions to SVODs. South Africans spend nearly $ 107 per year on video subscriptions, consolidating a market of $ 353M in 2021. It is a mature industry that will grow at a rate of 9% until 2025.
- The growth of the turnover of SVODs in ZA is more moderate than in other sectors such as music or podcast, with rates above 15% year on year.