AI's subscription shakeout

Brands have spent the past decade making it easier for consumers to buy subscriptions. Now, AI is forcing them to give customers a reason to stay.

Why it matters: AI assistants will remove cancellation friction and increase churn, forcing publishers, retailers and brands to consider new ways to drive value, including bundles and product improvements.

State of play: Wall Street is bracing for a cancellation tsunami in the wake of Meta's Muse AI agent launching last month.

Unlike most agents, which are built to help users with content discovery, Muse is designed to help consumers manage tasks, payments and logistics across accounts and devices.

That could make it easier to remind consumers about recurring charges or subscriptions they don't use.

By the numbers: Shares of several subscription-dependent companies plunged following the launch of Muse, Axios' Matt Phillips wrote.

Some stocks have since recovered, but others remain well below their pre-launch levels.

As of Oct. 12, Chewy was down 17%, Allstate 13% and Life Time 8% from Aug. 8, compared with a 1% gain for the S&P 500.

Data: Financial Modeling Prep; Chart: Erin Davis/Axios

Between the lines: Media publishers already facing declining search referrals could see another source of revenue threatened.

Publishers are leaning into bundles, family plans and more perks to get subscribers to stick around.

Jodie Hopperton, who leads the International News Media Association's product and technology initiative, said consumers tend to choose formats before brands.

She noted podcast-focused subscriptions, like those introduced by The Economist and The Atlantic, are narrower products that consumers may value over broad news bundles.

Yes, but: Subscription companies that demonstrate value and already make it easy to cancel are less likely to be impacted.

"The tools that help consumers shed subscriptions will work best against forgotten, low-dollar, low-engagement autopays that survive on save offers, automated retention tactics, and phone-tree gauntlets," Jefferies analyst Randal Konik remarked last month.

The other side: More subscriptions could become accessible through AI assistants, Hopperton says, giving publishers another way to reach customers without requiring them to visit their websites.

The bottom line: The digital subscription economy has boomed over the past decade, thanks in large part to consumer inertia, or people forgetting to cancel subscriptions they rarely use.

Now, AI is poised to wreak havoc on that model, but it may also force subscription companies to improve their offerings or offer consumers more choice.