By Morten Suhr Hansen
In recent days and weeks, many Europeans have felt a renewed sense of unease as shifting signals from the new U.S. administration, led by President Donald Trump, cast doubt on the global order that has been in place since the end of World War II and the establishment of NATO.
We can no longer be certain of American support when faced with threats from hostile states. As a result, the Danish government has allocated a staggering 50 billion DKK over the next two years to an “acceleration fund” aimed at investing in Danish and European defense.
The kind of uncertainty we’re experiencing right now tends to affect consumers’ willingness to buy goods and services, which is why many businesses are rightly concerned about how the new situation will affect consumer confidence and spending. This can also be coupled with the fear of a trade war created by Trump’s announcement of increased tariffs.
In fact, we only have to go back three years to experience the latest crisis, which we are probably still on the tail end of. Russia’s invasion of Ukraine on February 24, 2022, triggered a sharp rise in energy prices, which in turn triggered unprecedented inflation and rising interest rates. This led to a sharp drop in consumer confidence and many companies experienced a drop in demand, including many subscription companies.
The inflation crisis in 2022 hit the subscription industry hard
When the inflation crisis hit in early 2022, it dealt a severe blow to many subscription businesses—likely because the market went from boom to bust in a very short time. During the COVID-19 years of 2020 and 2021, consumers eagerly subscribed to all kinds of services. Streaming platforms and luxury subscription products, in particular, saw a surge in demand. But when the downturn came, the drop was just as sharp.
As high prices took hold in 2022 and consumer confidence plummeted, many people panicked. Fixed expenses came under close scrutiny, and a large number of subscriptions were canceled. Most subscription businesses faced soaring churn rates while also struggling to acquire new customers—a toxic combination that led to shrinking subscriber bases and financial losses.
As inflation has come under control and interest rates have begun to decline slightly, the outlook has improved in many areas. However, there is now growing concern that we may be facing another major crisis.
What will a new economic crisis mean for subscription businesses?
The key question is whether the current political crisis could trigger a new economic downturn, putting further pressure on subscription businesses. While I can’t predict the economic outcome, my belief is that if a crisis does emerge, the subscription industry will be better prepared this time than it was in 2022. But why?
First and foremost, many subscription businesses have adapted to a new reality where customers are significantly more price-sensitive and quicker to cancel subscriptions they don’t use. While 2020 and 2021 were all about acquiring as many new customers as possible, in recent years, many subscription businesses have focused on improving the customer experience, strengthening retention efforts, and implementing anti-churn strategies (those that haven’t made these adjustments will likely face significant challenges).
At the same time, subscriptions have become an even more integral part of consumer spending and have expanded into more categories. And as consumers, we still love our subscriptions. This is reflected in our large-scale study, the Scandinavian Subscription Survey 2024, which we published a few months ago. In fact, households now have even more subscriptions than they did before the pandemic (20 per household today, compared to 17 in early 2020). This suggests that other areas of spending might take the first hit in a downturn.
Could this even open the door for more subscriptions? One of the first things consumers cut back on when confidence drops is long-term purchases—furniture, electronics, kitchens, vehicles, and other luxury goods. This is where subscription models could gain even more traction, offering consumers access to products immediately without long-term commitments or large upfront costs.
That’s not to say a new economic crisis would go unnoticed – it would have a broad impact. However, I believe subscription businesses, in general, are in a stronger position to weather the storm.
