Apple’s Subscription Service and the Arrival of the Subscription Economy

By Tien Tzuo February 16, 2011

by Tien Tzuo

 

For the last three years, I’ve been talking and writing about the coming Subscription Economy to everyone from straight-up believers to willful converts to absolute naysayers. We’ve shared data with the market – such as $1B in contracted subscription revenue in our Q1 FY 2011 – to demonstrate that this shift was happening, faster than even we ever predicted. But over the last three to four months, I’ve seen so many developments where the Subscription Economy was rapidly reshaping massive billion dollar industries leading more and more people to see that this wasn’t a trend or a vision, but a growing reality.

 

Today, Apple confirmed what Zuora customers already knew: the Subscription Economy is here. Apple has joined the Subscription Economy by launching its new subscription service for all publishers of applications, magazines, newspapers, video, music, and more. Apple has recognized that the relationship between people and businesses and the products and services they use is no longer a one-time event.

 

Just take a moment to consider that. Apple, the company that really defined online content and is leading the charge to constantly evolve the way we interact with it through applications, services and devices – through iTunes, the AppStore, iPhones, iPods and iPads – is shifting from single-transaction billing to the much bigger opportunity of subscription commerce. This is a great day for the Zuora team who has fought hard to promote this market, and build products to help enable companies to cash in on this opportunity.

 

This announcement will have ripple effects outside of the tech world to so many industries which are starting to recognize that customers are asking, “Why should I pay big bucks for something just to get stuck with one model, or one style, when I can pay a low monthly fee and get access to the whole collection?” And it expands to the app developers who are asking, “Why should I charge 99 cents once when I could charge $5 year and then continue to reinvest in my app?” That’s the real power of the Subscription Economy.

 

Apple’s new service also highlights the need for any content player – app developers, publishers, gaming companies – to own their subscription strategy and infrastructure to support it. For example, today the iPad is red hot. Meanwhile, Android phones are now surpassing the still hot iPhones in sales. In other words, the world likes freedom of choice whether its devices or platforms. And chances are developers won’t want to work with only Apple. That means developers and publishers need to be prepared to sell through multiple app stores and through their own sites and address consumers’ demands to work across multiple devices.

 

And this is where Zuora comes in because the Subscription Economy is more than just creating a monthly fee and signing up customers. There’s an entire lifecycle management challenge that must be addressed holistically – from defining products and pricing, to managing subscriptions through the front and back office, to automating billing, ratings and payments, and to monitoring subscription analytics. Come see how we’ve helped companies like yours make the shift to subscription commerce through some of our many success stories.

 

So to Apple: welcome to the party. We are glad to have you, and we’re glad that you finally figured out the Subscription Economy opportunity!