From Durable to Perishable — the path to sustainable revenues.
Before we dive into “meat” of the topic. Let us first define what we mean by Durable and Perishable goods.
Turning to Wikipedia for help, we see Durable goods as:
In economics, a durable good or a hard good or consumer durable is a good that does not quickly wear out, or more specifically, one that yields utility over time rather than being completely consumed in one use. Items like bricks could be considered perfectly durable goods because they should theoretically never wear out.
Nondurable goods or soft goods (consumables) are the opposite of durable goods. They may be defined either as goods that are immediately consumed in one use or ones that have a lifespan of less than three years.
Industry is filled with examples of these, though sometimes the terms are stretched a bit to accommodate a product into one or another. One of the classic example is Car which is categorised as Soft good given the usage leads to wear and tear and to maintain it in running condition we need constant maintenance. For consumers such goods are not a one-time purchase, but involves a whole vertical of the industry accumulating revenues e.g. tyre manufacturers for new tyres, auto part manufacturers for spare parts, to car servicing. Now, how would you classify a mobile phone?
When iPhone added the battery capacity information to the setting to me it was a little nudge to inform users that they have a perishable good. Let me explain, in the recent years we have reached a processing power capacity where we don’t have drastic performance improvement with launch of each new generation of devices, the battery capacity provides a nudge to the consumer that the device degrades with usage overtime and pushes for an upgrade.
What I see is that these new business models are slowly pushing items from durable to perishable category in search for sustainable revenues.
Consider another example of the movie industry, the lifecycle for a movie used to be a theater release, after a certain duration the movie was available on DVD 📀 / VHS 📼 for consumption in the convenience of your home. This was a durable good i.e. once a consumer buys a movie on a DVD he/she can watch it as many times as they like without any sort of degradation (sans the scratch marks your pet leaves on the disc).
This model worked well for movie makers, but they could only sell so many discs over time. To add to the sales the content producer could advertise “bonus content” or bundled merchandise with limited edition releases to increase the sales, but still could not earn recurring revenue.
In tandem there was another model which is the rental model. This moved the DVD / VHS tapes from a durable good for the consumer to a durable good for the company (a.k.a the content provider). With this the company holding the content could earn recurring revenue from the same product. Companies like Blockbuster had their core based on the revenue model.
Coming to today, we have Disney+, Apple TV+, HBO Max, Netflix and a bunch of streaming services all competing to capture user attention. The above companies are a mix of content distributors like Netflix and Apple (but also producing some of their original content) vs content producers like Disney entering the market. The new subscription model is an evolution of the rental model which moves its focus from the actual physical good and its related revenues to a stabilised recurring revenue stream from each consumer.
Overall, is this good or bad for the consumer? Like many other issues “it depends”. But companies will keep on finding new ways to earn more revenue from their existing consumers and moving from durable to perisable goods might be one such avenue.