Subscriptions refer to regular payments made by consumers for access to products and/or services. Traditionally, consumers subscribe to newspapers and magazines. However this business model has gone beyond these items. Most of us subscribe to a mobile phone service provided by the telephone operator for basic services. Today, for instance, you can pay a subscription to Spotify and obtain access to millions of songs available on high quality audio. Even Microsoft adopts a subscription model for the use of its Office 365 software.
Basically the business model works this way. Instead of asking for a lump sum for the purchase, the company settles for small amounts paid periodically by the consumer for the use of the product and/or service. Terms for the use of the product and/or services are dictated by the company. It is common for the consumer to be required to pay additional amounts for usage beyond that specified in the subscription. For instance, mobile phone users may have to pay additional charges for long distance calls made on top of their subscriptions.
The subscription business model is attractive as it locks in the customer for the period of the subscription. Thus instead of lumpy cash flow associated with product or service purchases, the company benefits from the steady income from subscribers.