Why you should stop selling courses as subscriptions

The Recurring Revenue Mirage in Online Education

The Growing Revenue Fantasy

Many online course creators are seduced by the subscription model, imagining an ideal scenario where their revenue grows month after month. The idea seems attractive: instead of selling a course for $300 upfront, why not offer it for $50 per month? The theoretical calculations are enticing: with 10 new customers each month, you'd reach $3,000 monthly after 6 months, then $6,000 after a year. Unfortunately, this idyllic vision doesn't hold up against reality.

The Financial Reality

Simplistic financial projections ignore a crucial factor: customers don't stay subscribed forever. In practice, the average subscription duration is much shorter than imagined, significantly impacting the model's actual profitability.

Understanding Churn and Its Impact

The Churn Rate Phenomenon

Churn rate, the technical term for the percentage of subscribers lost each month, is the key variable that often causes the subscription model to fail. This phenomenon, underestimated by course creators, gradually erodes the subscriber base and compromises the project's financial viability.

Industry Statistics

To put things in perspective, even streaming giants like Netflix (2% churn), Disney+ (4.8%), and Apple TV+ (8%) face this challenge. In the online education sector, churn rates are typically much higher, ranging between 10% and 30% according to estimates.

Impact on Profitability

With a 20% churn rate (average scenario), customers stay for an average of 5 months, generating total revenue of $250 - less than the $300 from a single sale. Even with an excellent churn rate of 10%, the additional gain doesn't necessarily compensate for the model's additional constraints.

Content Creation Challenges

Monthly Production Pressure

One of the most constraining aspects of the subscription model is the obligation to regularly produce new content. This constraint quickly becomes a burden for course creators.

The Netflix of Education Paradox

Many dream of creating the "Netflix of education," but without Netflix's colossal resources, it's an impossible mission. Netflix produces massive amounts of content to satisfy all tastes and maintain subscriber engagement.

Value Dilution

The need to constantly produce content can lead to dilution in quality and relevance. Not all modules can interest all subscribers, creating periods of disengagement that promote unsubscribing.

Commercial Obstacles

Psychological Resistance to Subscriptions

Customers are often reluctant to commit to a new subscription, even if the total cost might be lower than a single purchase. The psychological perception of a long-term commitment creates an entry barrier.

The Recurring Sales Challenge

It's often harder to convince someone to subscribe for $50 per month than to buy a course for $300 upfront. Customers seek immediate solutions rather than monthly commitments.

Viable Alternatives

The Specialized Newsletter Model

For those who absolutely want recurring revenue, the newsletter format can work, particularly in constantly evolving fields like finance, technology, or artificial intelligence.

Hybrid Course and Tools Approach

A more viable approach combines a main course with complementary tools or ancillary services that justify a subscription (tracking software, analysis tools, etc.).

Community-Based Approach

Creating an active community, supported by physical events and personalized coaching, can justify a subscription model while providing real added value.

Conclusion and Recommendations

For most course creators, the subscription model presents more disadvantages than advantages. It's better to focus on creating quality training sold at an appropriate single price or developing several complementary courses.

You can check out this article to learn how to price your online course.

If recurring revenue is important, favor hybrid models combining one-time courses with subscription-based ancillary services.

FAQ

Why is the subscription model so attractive to course creators?

It promises recurring revenue and continuous growth, but this promise is often misleading due to churn rate.

What is an acceptable churn rate for a subscription-based course?

A churn rate below 10% would be excellent, but most courses experience rates between 10% and 30%.

How can I create recurring revenue without using the subscription model?

By developing complementary services, an active community, or offering coaching alongside your courses.

Is the Netflix model applicable to online education?

No, as it requires considerable resources to produce enough varied content and maintain engagement.

What's the best alternative to the subscription model?

A comprehensive course sold at a single price, potentially combined with optional subscription-based services like community access or coaching.