Can Wall Street’s subscription craze survive a recession?

Fears of an economic downturn and consumer belt-tightening will test Wall Street’s favorite new business model: subscriptions for everything.

Since the 2008 recession, the world of commerce has been consumed by subscriptions. Dry cleaning, razor blades, car washes, food delivery, sneakers, dog toys, bottles of wine, dental cleanings — things we used to buy as needed — are now sold as subscriptions (“memberships” for pricier items) that promise a set-it-and-forget-it world of abundance and convenience. They have hit on a fact that gyms have long known: people don’t use memberships as often as they think they will, and they don’t usually cancel.

Fueling this trend is a Wall Street money machine ensorceled by these steady payments. Because those cash streams can be forecast more reliably than episodic sales, they can be borrowed against. A marketplace for loans underpinned by what investors call “recurring revenue” has grown quickly.

But now two forces are testing that model. First, consumers are terrified about the economy and cutting back on some spending.

Second, regulators are cracking down on the mazes of corporate trickery and psychological nudges that make it hard for customers to cancel. The Biden administration sued Amazon and Match for alleged use of these “dark patterns,” and the Federal Trade Commission’s lawsuit last month against Uber over its subscription product, Uber One, shows that Trump appointees are just as focused. A 2024 study of 642 websites and subscription services by international regulators, including the FTC, found that 76% of them used at least one “dark pattern.” (The companies have denied the allegations. Uber CEO Dara Khosrowshahi told Semafor the FTC lawsuit was a “head-scratcher” in April.)

Just as consumers are taking a closer look at their expenses, the government is serious about making it easier for them to cancel them. A slew of financial-management apps will even do the cancelling, giving rise to a new business model: Rocket Money takes a cut of the money it saves people.

As subscription fatigue has set in, “people are increasingly aware of what they’re getting value from and what they’re willing to pay for,” said Tom Hale, CEO of Oura, which makes the wellness tracker ubiquitous among the moneyed tech set. He believes Oura is protected by what he calls the “Peloton effect.” Without a subscription to its sleep-tracking software, Oura rings are just hunks of metal — nice-looking ones, Hale is quick to note, but not that useful.

“It’s not just that people have health goals — it’s that and ‘I spent $300 on this thing,’” he said. “That’s so different from other subscriptions, where the value isn’t as obvious and all of a sudden people are going to say, ‘When’s the last time I used this?’”

It’s early going yet — and Trump’s climbdown on tariffs may brighten the economic mood — but already the market is distinguishing between recession-proof subscription models and those likely to be canceled.

Netflix CEO Ted Sarandos stopped short of calling the company “recession-proof” in a recent interview, but said it was “resistant.”

“In tough economic times, it’s very important to focus on the things that you can control, and for us, what we can control is that Netflix is a great value,” he said at Semafor’s World Economy Summit last month. “It’s like 30 cents an hour of entertainment, and it’s high quality entertainment.”