Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / Why Stagflation Is Reshaping Subscription Pricing Models
Transcript
- Lucas: So we got the May CPI print last week — 4.2 percent annualized, the highest we've seen in three years. And one of the quieter stories in that number is what's happening to subscription pricing. Luna: Right, because subscriptions are supposed to be the stable part of your budget — fixed price every month, predictable. Lucas: Exactly. But when you look under the hood, that stability is cracking. Companies that built their whole model on recurring revenue are now realizing that a fixed $15.99 a month in 2023 is worth about 8 percent less in real terms by 2026. So they're adjusting. Luna: And the adjustment isn't just 'raise the price by 50 cents.' They're restructuring the entire tier system. I've noticed Netflix, for example, has started testing 'dynamic pricing' in some European markets — where the price adjusts based on usage or device count. Lucas: That's the big shift. Netflix's 2024 price restructuring was really a trial run. They added the ad-supported tier at $6.99, bumped the standard to $15.49, and premium to $22.99. But what people didn't notice is that they also quietly removed the ability to lock in an annual rate. Everything went month to month. Luna: Which gives them the flexibility to raise prices every quarter without notifying you a year in advance. It's a stagflation playbook move. Lucas: Exactly. And it's not just entertainment. We're seeing the same thing in software — Adobe used to offer a perpetual license for Photoshop. Now it's $55 a month, and they just added a 4 percent 'inflation adjustment' clause to their enterprise contracts. Microsoft is doing the same with Microsoft 365. Luna: The 1970s had a similar moment, right? I read that gym memberships and magazine subscriptions — which were the recurring revenue models of that era — started including 'cost of living escalators' in the fine print. Lucas: Great parallel. In the late 1970s, many gyms moved from annual contracts to monthly with a variable fee tied to the CPI. Sound familiar? The difference now is that software companies can change pricing in real time — no need to mail a letter. They can update the terms on a webpage. Luna: And consumers are starting to push back. There's a Reddit thread called 'Subscription War Stories' that tracks hidden price hikes. One person showed how their bundle of Netflix, Hulu, and Disney+ went from $25 to $37 over 18 months — a 48 percent increase. Lucas: That's the consumer side. On the business side, companies are also dealing with higher input costs. The wholesale price index jumped 1.1 percent in May alone, driven by energy. If you're a streaming service and your energy costs to power servers are up 15 percent year-over-year, you have to pass that through somehow. Luna: And the ECB just hiked rates for the first time since 2023 because of energy costs tied to the Iran conflict. So global inflationary pressure is compounding the domestic CPI story. Lucas: Right. So what does this mean for the average listener? I think there are two takeaways. First, check your subscriptions for any 'inflation adjustment' or 'pricing update' language in the terms. Second, consider consolidating — some services are offering discounts for bundling that can lock in a rate for 12 months. Luna: But even bundling might not be a safe haven. I've seen reports that the telecom companies — Verizon, T-Mobile — are also adding cpi plus clauses to their family plan bundles. Lucas: So the long-term trend is that the fixed-price subscription is becoming a relic. We're moving toward a world where the price you pay for software, streaming, and even some physical goods like meal kits is recalculated every quarter based on inflation indices. Luna: It really does echo the 1970s. Back then, people started clipping coupons and buying in bulk to hedge against fluctuating prices. Today, it's about choosing annual plans when available and reading the fine print. Lucas: And that's exactly the kind of practical insight we try to bring to the show — making sense of these macroeconomic shifts in a way that actually helps you manage your money. If today was actually useful to you, the way these stay ad-free is listener support. Luna: Yeah, it's a small gesture that keeps us independent. If you've ever found yourself describing one of these concepts to a friend, that's the kind of value we're going for. Lucas: So if that resonates, you can find us at buy me a coffee dot com slash fexingo. No pressure at all — just a way to keep the economics conversation going, no ads. Luna: Alright, back to the pricing puzzle. One more data point that connects: average hourly earnings are up to $37.50 — that's about a 2.4 percent annual gain. But with CPI at 4.2 percent, real wages are still shrinking. So consumers feel the subscription hikes even more acutely. Lucas: That's the stagflation trap. Wages aren't keeping pace, so every dollar that goes to a higher Netflix bill is a dollar pulled from discretionary spending somewhere else. That's why restaurants and pet food — which we covered in prior episodes — are also feeling the squeeze. Luna: So the subscription pricing shift isn't just a tech story. It's a window into how sticky inflation is changing the contract between companies and consumers. Lucas: And it's happening faster than most people realize. By this time next year, I suspect the standard for most digital services will be a variable price with a 30-day notice period. The era of 'set it and forget it' billing is ending. Luna: And maybe that's not all bad — it forces companies to justify their value every quarter, and consumers to audit their spending more regularly. Lucas: That's a great note to end on. For Stagflation Conversations, I'm Lucas. Luna: And I'm Luna. We'll be back next week with another angle.