Subscription Inflation, How to Use a Gap Year, and Deciding When to Retire

Scott Galloway answers listener questions on the wave of subscription price hikes and why recurring revenue gives companies pricing power. He then lays out a simple playbook for making the most of a gap year before law school, and weighs the ethics and practicality of retiring early when layoffs loom. Want to be featured in a future episode? Send a voice recording to [email protected], or drop your question in the r/ScottGalloway subreddit. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:30Speaker 01

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• 0:46Speaker 02

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• 1:13Scott Galloway?

  Welcome to Office Hours with Prof G. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question for next time, you can send a voice recording to officehourswithprofgmedia.com. Again, that's officehourswithprofgmedia.com or post your question on the Scott Galloway subreddit and we just might feature it in our next episode.

• 1:34Scott Galloway?

  Our first question comes from Reddit. Nico I says, 26 year old guy here from the Bay Area. I've got a good job. I work hard and I actually enjoy what I do, but lately feels like every subscription in my life, including streaming software, cloud storage, productivity tools, and gaming, have raised prices all at the same time. How do you see this wave of price hikes? Are we seeing a genuine macroeconomic adjustment or just the pricing power phase of the subscription economy? I'm doing fine financially, but everything's getting tighter at once. It's strange to feel responsible and stable on paper, yet still squeezed in practice. Would love to hear the big dog's thought on these little dog problems. Okay, so according to Deloitte, the average US household now pays for four streaming services,

• 2:16Scott Galloway?

  and the total cost has jumped 13% in the past year from $61 to $69 a month. For Gen Z and millennials, who average five subscriptions, the increase is closer to 20%. So people are spending pretty close to $1,000 a year now on their streaming media subscriptions. Disney Plus just raised prices again, adding $2 to $3 to most plans. Apple TV Plus hiked prices for the third time in three years. Earlier this year, Netflix, Discovery Plus, Peacock, Paramount, and others all followed suit. Credit Karma calls streaming "the top of the essential non-essentials." In other words, even when budgets are tight, people cut other things before Netflix. I think Netflix might benefit from a recession.

• 2:58Scott Galloway?

  That gives streamers permission to test our tolerance, and so far, we've tolerated a lot. There's been a lot of pricing power that these companies haven't been leveraging. A Deloitte survey found 60% of consumers would cancel if their favorite service went up another $5. But here's the kicker: 24% have churned and returned in the last six months. By the way, surveys are really dangerous. Something called consumer dissonance, where people say one thing and then actually behave another. I used to run focus groups when I was running a company called Profit, and we'd ask people, "How much would you pay for this product?" And they'd say, "Oh, $1,000." And then it's on sale for $100, and they don't buy it. Okay, a couple of things here. A company that gets $1 billion from transactional revenue, like an Urban Outfitters, gets a market cap of, I don't know, 0.5 to 2x revenues.

• 3:43Scott Galloway?

  Call it 1 to 2x revenues. Whereas, a company like Netflix, for every billion dollars in subscription or recurring revenue, if it can show that it churns at a low rate, gets 6 to 12x revenues. Now, why is that? Recurring revenues are amazing.

• 4:01Scott Galloway?

  And that is, once you figure out what your churn is, you can predict your business more easily. You know that, okay, if we have a shitty line of tops and bottoms, or whatever, our businesses are going to crash 20%. You can predict out kind of what your cash flows are and better plan your R and D. The market just loves consistency. It loves the stickiness. And whereas you have to make a proactive decision to go into Urban Outfitters and buy more, you have to make a proactive decision to not go into Netflix. So what do I mean by that? You have to actively cancel Netflix. If someone showed up and held a gun to my head and said, "Cancel all your streaming services," I would be dead because I don't know how to cancel them. I don't have the patience to. And my guess is they have made it pretty easily.

• 4:44Scott Galloway?

  I've never seen a button on Netflix or any of the streaming services that says, "Press here to cancel." The other big benefit of subscription revenue is the following. Subscription, tying your business to the clock, is absolutely a better way to go. Now, these companies knew that. What did they do? They went out with what's called a penetration strategy. And that is they priced their services below the cost to produce that content. They were losing money because they wanted the value proposition to be so incredible. Their advantage is the following. Warner Brothers Discovery, their shareholders are assholes. Their shareholders demand profits. Whereas Netflix shareholders, Ted Sarandos was such a visionary, for the first 10 years, they didn't demand profits.

• 5:27Scott Galloway?

  And so he could offer someone a billion dollars in content for 70 cents. This was sort of the Amazon strategy. And that is price your service below the cost, and it'll be such an amazing value proposition that people will sign up. And then they went to recurring revenue. And probably the strongest recurring revenue program in the world is Amazon Prime. And they know something like 3% of people churn out of Amazon Prime. I mean, that means basically people who die or their credit card expires. Everyone sticks with it. I think it's right up there with Netflix. The problem Netflix has, I think, the lowest churn of anyone. And everyone else has tripled or quadrupled the churn of Netflix. And as a result, Netflix trades at a much higher multiple. And they're able to just invest at a rate the other guys aren't able to invest in.

• 6:12Scott Galloway?

  So these guys went in and said, recurring revenue's amazing. SaaS companies, and they would offer... Just sort of undeniable value propositions. My guess is a lot of the subscription services you have for a long time were priced undermarket. You were getting $20 a service for eight bucks. And now that they have penetration, they have loyalty, and they have subscribers that love watching Wednesday or The Last of Us, or trying to think, or K-pop Demon Hunters, they kind of know they have you hooked, and they know they have pricing power. You're in, you've given them their credit card, and now they are starting to raise their prices because their shareholders have pivoted from focusing on growth to be more focused, not entirely, but being more focused on profitability. This is just a standard part of the business cycle.

• 6:57Scott Galloway?

  Now, what's difficult is to enter into this atmosphere now, to enter into the Thunderdome. You need so much capital because to acquire people and go through the desert of value proposition that's much greater than the price, just takes a massive amount of capital, even more capital now because you're trying to unseat incumbents. So, long-winded way of saying one, attach your business model to the clock, not to transactions. Two, it taps into a flaw in the species. Three, there are quite a few services that will review all of your subscription payments. And a decent way to manage, or a decent hack, if you will, of managing your own financial responsibility is to get out of recurring revenue payments. Recurring revenue payments just kill you. Do not rent an apartment that you can't afford.

• 7:42Scott Galloway?

  Do not get into a car lease. It's going to put you in over your head. You know, you shouldn't, I think the rule is you shouldn't pay more than 30% of your take-home pay on your rent. And there are numbers for all of this you shouldn't exceed because it's the recurring revenue obligations that kill you. Whew, lot there, lot there. Second cup of coffee, kicking in, kicking in for the dog. That's right. Like a dog on, like a dog that's found my meth dealer owner's supply, running around the house, chewing up everything, saying hello to strangers. Thanks for the question. Question number two also comes from Reddit. MeditAKKTTVBTW. Jeez, where did they get this name? Asks. Hi, Scott.

• 8:24Scott Galloway?

  I recently graduated from college with a degree in finance and I'm taking a gap year before I attend law school next fall. My question is this. How can I make the most of the relative freedom I have over this next year to set myself up for success in the years to come? I work online and I'm fortunate enough to make good money with relatively few hours, so I have a lot of time to pursue other things. But it feels like I have so many options that it becomes overwhelming. Big fan of your work. Thanks for all that you do. I would try and get in fucking amazing shape. I would try and travel a lot and I would kind of enjoy yourself and spend a lot of time with friends and try and maybe make a lot of friends, maybe try and establish a romantic partnership, because once you go into law school, you're going to kind of be very focused on law school.

• 9:07Scott Galloway?

  And a lot of this comes down to the economic freedom you have, how much money you have. But if you're single and you're alone, you can just kind of get a backpack. And I mean, I would definitely head to Europe for a couple of months if you haven't done that. I, the funnest trip I've ever taken was a trip I took where I had absolutely or very little money. I bought a 300, I think it was $300 euro pass back in 1987 in a backpack. And my friend Lee and I would occasionally stay at a two-star hotel versus a one-star. I remember in Italy, they used to turn the air conditioning off between the hours of 1:00 and 5:00 a.m. and we'd sit there sweating, staring at the ceiling. So I would travel if you have the wherewithal. And I would try and get in amazing shape, because when you're in law school, you have a lot of stresses on you. I would try and invest a lot in being social and relationships.

• 9:50Scott Galloway?

  And if there's something you want to learn about, I wouldn't be too focused on trying to, I mean, I don't know your financial situation, but the amount of money you're going to save is probably inconsequential to the, I don't know how you're planning to pay for law school. I don't know if it's loans or your parents can help you out, or if you need to make money. Obviously, that changes the equation there. But I don't, you know, I don't know if I have any like pearls of wisdom here, like, you know, study the Stoics. Youth is wasted on the young. Don't waste it. The opportunity and flexibility you have to just take off and go spend. A month in Thailand, I just don't think you're ever gonna regret when, I don't know if you've seen those TikToks where they talk to seniors about what they regret, they like, they wish they traveled more because at some point you will not be able to travel. No, my brother, just enjoy the year. It's gonna go really fast. But one thing, just

• 10:35Scott Galloway?

  do it. Just like, get to Europe quickly, or get out a lot, or start working on something, or if you wanna, I don't know, if you wanna write, you know, if you think, I'd really like to write a book, or just get, start today, not sit around thinking about it, because my brother, that year is gonna go so goddamn fast. So, what's the key to this year off? Now. As in, if I'm gonna travel, write, make some money, get it, whatever it is gonna do, do it now. Because thinking, oh, I have a year, sounds like a lot. No, it's not. No, it's not. Three months are gonna, if you're not careful, three months are gonna go by and you haven't done a fucking thing. And then you're gonna hit six months and it's like, now I'm barreling towards law school. So, whatever it is, just get on it. Anyways, good to be you. Thanks for the question. We'll be right back after a quick break.

• 11:25Scott Galloway?

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• 12:07Scott Galloway?

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• 12:28Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 13:13Scott Galloway?

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• 13:35Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 14:20Scott Galloway?

  Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/profg and get $1,000 off. That's spelled V-A-N-T-A dot com slash profg for $1,000 off.

• 14:42Scott Galloway?

  Welcome back onto our final question. Capital Ladder 123 asks, Scott, I'm a 62-year-old male, engineer with a Fortune 200 company in a small Rust Belt city. The recent tariffs are starting to catch up with us and I foresee a reduction in headcount coming. I plan to work for another five years, but between pension, social security and 401K, I could retire today with no reduction in living standard. I don't love my job, but I'm well-paid and get satisfaction from doing it well. If cutbacks come, assuming I'm not on the list, am I morally obligated to retire to free up a spot for a younger person who does not have the financial options that I have? I think that's pretty noble, but I don't think you need to be a martyr around your job. It sounds like you're going to be gone in three years, no matter what.

• 15:24Scott Galloway?

  So, I mean, my first thought is hope they fire you and then you get some sort of severance and then you can focus on doing something else you like more, or just hanging out with your partner and your kids or grandkids and playing golf, or exercising or traveling. So you're in a good spot, but I wouldn't feel like you should. I'm thinking about shutting down at 65 and that it's giving... I do think there's something to... Old people have soaked up so much of the income and prosperity because we have this terrible habit of voting ourselves more money. And it's weird to refer to myself as older. I still think of myself as a kid and make that as an excuse to behave irresponsibly, which is sort of pathetic.

• 16:07Scott Galloway?

  There is something to us voting ourselves more money and also to what you're saying in that is making room for younger people. One of the really terrible things about academia is the tenured faculty won't fucking leave because they don't have to. And about the time they've become... They are awarded tenure is about the time they usually become unproductive. When you give tenure to somebody, you had literally, the university is mandated to put aside $2 or $3 million, which is an acknowledgement that this person is no longer going to pull their weight. And then they won't leave. And so we end up with professors in their 60s and 70s who were the bomb in CAP 2 Accounting in 1988 and now just sit around and like have petitions to get rid of the dean or are very opinionated, like desperately looking for relevance. It's probably a little harsh, but I work with one of the best faculties in the world

• 16:51Scott Galloway?

  at NYU and a third of them should be put on an ice floe. Too much, too much. As you can see, I'm very popular in the faculty lounge. So I do, I like the idea of you saying, I'm gonna make room. You don't need to fill the onus to make room at 62. Maybe it's 65, maybe it's 70. But boss, just put that shit aside for now. Do what's best for you and your family and what you think it'd enjoy the most. But it sounds like, I don't know, maybe you'll get lucky and be able to fire you and give you severance. But if not, I'd probably stick it out for another three years, bank some money such that when you travel, or you can travel to nicer places, or when you want to give your grandkids a little bit of money and give them a little bit more. But no, don't feel like at the age of 62, you have an immoral obligation to make room.

• 17:35Scott Galloway?

  That's all for this episode. If you'd like to submit a question, please email a voice recording to [email protected]. Again, that's [email protected]. Or if you prefer to ask on Reddit, just post your question on the Scott Galloway subreddit and we just might feature it in an upcoming episode. This episode was produced by Jennifer Sanchez. Our assistant producer is Laura Janer. Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from Prop G Media.