In this solo talk, Chris Haroun explains why adding a subscription element to a business model is attractive to investors. He argues that subscriptions smooth out monthly or quarterly revenue volatility, which leads investors to apply premium valuation multiples because recurring revenue is more predictable. He illustrates the concept with several examples: the shift from one‑time purchases of Microsoft Office and Adobe Creative Suite to low‑price, charm‑priced monthly plans; Netflix’s subscription model versus a large annual lump‑sum; and the emerging trend of restaurant subscriptions, highlighting Taco Bell’s pilot of a $5‑$10 per month taco subscription in Arizona (requiring app usage) and similar experiments by Panera Bread. Haroun notes that subscriptions enable higher‑margin upsells (e.g., drinks), provide richer customer data via apps, and reduce the likelihood of cancellation because of inertia, much like traditional magazine subscriptions. He concludes that the subscription economy will likely touch all industries, improving revenue visibility and boosting company valuations. The video ends with a call to like and subscribe.
Chapters
Why do all companies need to have a subscription element to their business models? Because it helps to make monthly or quarterly revenue volatility decrease. And investors love this. And many software and media companies have set up subscription plans for many years now. And investors, what they do is they assign a premium revenue valuation multiple to subscription based companies because revenue is much more predictable when you have subscribers. And Taco Bell is looking into a subscription Taco service, which I'm going to talk about in a minute. And the best way to explain why subscription models work is to take a look at the pre office 365 days when it costs you hundreds of bucks to buy Microsoft Office and you didn't want to pay for a new version of Microsoft Office every few years. You know, as we only use about 5% of the capabilities of applications like Excel anyway. However, instead of spending a few hundred dollars to buy Microsoft Office, it feels much less painful to just pay $9.99, for example, or less per month using charm pricing. Charm pricing means $9.99. And the sticker shock is actually less painful. Our monthly credit card bills and in the old days, buying Adobe Creative Suite, for example, for hundreds of dollars more than hundreds of dollars, it was close to a thousand at one point, was really painful. And the monthly fee they charge now is much less painful. And of course the same thing with, with Netflix. You know, imagine if we had to pay over $100 every January to renew Netflix for the year. They wouldn't make as much money that way, of course. So what is Taco Hell, Taco Bell, sorry, doing with subscriptions? Well, what Taco Bell has done is they've just started testing Taco subscriptions for five to ten dollars per month in Arizona at 17 stores. Now why would they do this? Because you have to use their app to do it. And you might buy a higher margin drink from them when you get the free Taco. And by them using an app for everything, they get much better, better data on customer behavior. And also, not everybody's going to cancel the subscription. Kind of like how in the past we got magazines sent to our house for years and we never bothered to cancel the magazine subscriptions. Now it's not just Taco Bell doing this as Panera Bread and many other restaurant companies have been testing this for years now. And the bottom line is that with the subscription economy, all companies will likely have some sort of subscription plan, which leads to better revenue visibility and higher company valuations too. Now, if this was helpful, please like and subscribe and thank you as.
