It’s that time of year again when seemingly every media outlet publishes dozens of Top Ten lists reflecting on 2013 and everything from the hottest fashion trends to the funniest memes. Here at Zuora, we could certainly make our own Top Ten of 2013, as it was an exciting year for us. With everything from our 50th product and Titanium releases and $50 million funding round to the Subscription Manifesto and conferences including Accelerate, Subscribed and participation at Dreamforce, this past year has been a transformative year for Zuora.
But it wasn’t just a groundbreaking year for Zuora, as the entire Subscription Economy continued to grow. During 2013 we saw companies of all sizes and industries embrace new recurring revenue strategies as more subscription industries emerged. That’s why we want to take a moment to look back on some of the interesting and noteworthy Subscription Economy stories of 2013.
It’s no secret more and more media companies have introduced paywalls and subscriptions in recent years as the advertising industry continues to change. But in 2013 it finally became evident no company can rely solely on advertising revenue and it seemed paywalls were finally accepted as a preferred revenue strategy as opposed to a bold experiment. The newspaper industry especially recognizes it needs to reinvent itself. This past year Amazon CEO Jeff Bezos purchased the Washington Post and media analysts predicted he would turn around a company that has struggled to thrive in the new digital age. Some hypothesize he will eventually use his expertise and customer-first approach to introduce a customized experience for viewers that allow them to only pay for articles on an individual based on what appeals to them. “Everything is about personalization, and what Jeff has learned about customization of consumers’ personal needs can easily translate into the personal needs of an individual reader of a newspaper,” technology analyst Tim Bajarin said. Regardless, it’s clear the business of journalism will continue to evolve and rely more and more on non-advertising recurring revenue strategies.
The healthcare industry also saw a rise in providers delivering subscription-based services in 2013, in part due to the launch of the Affordable Care Act. With state-insurance exchanges offering subscription health plans and doctors around the country now required to house medical records electronically, cloud-based healthcare IT companies found an expanded audience for their services.
CareCloud, a Zuora customer, offers practice-management and medical billing software that medical offices can pay for on a month-by-month basis (a pay-as-you-go model) as opposed to a lump sum pricing structure. Doctors no longer have to worry about the vendor delivering the service they signed up for as they’re not bound by a long-term contract. Instead they have flexibility and don’t have to worry about maintenance or upgrade costs. “With this cloud-based model, all I do is open my Internet Explorer and suddenly you see the new interface,” Carlos Sesin, of Vanguard Rheumatology Partners, told CruxialCIO as he explained how he’s saved time and money by switching to a EHR service like CareCloud. “I think subscription is the way to go. I feel very comfortable with it,” he added. Sesin isn’t the only one as according to BlackBook Rankings 17 percent of physician practices switched to a new EHR system in 2013.
As we ring in 2014, it seems like there’s a subscription for everything! Do you want new toothbrush delivered to your doorstep every few weeks? Well there’s now a subscription for that. How about an automated, energy-saving thermostat you can control from your smartphone? You’re in luck because there’s a subscription for that as well. Or would you prefer to not have to worry about replacing your razor blade every month? There’s a subscription for that too. From pet food and underwear to cars and makeup to photographs and shoes consumers, not to mention businesses, can find a subscription for just about anything these days. Businesses are certainly getting more creative as they see the overwhelming benefits of a recurring revenue model. The airline industry for example might not have been a likely candidate for subscription-based offerings, but this past year United Airlines introduced a new service where, for a flat annual rate passengers have the option to check bags and guarantee extra leg room. Maybe 2013 will be remembered as the year the Subscription Economy grew from a little known secret to a widespread revolution.
Companies aren’t just experimenting with the Subscription Economy though – they’re going all in. They’re moving on from old, traditional business models and fully committing to subscriptions and recurring revenue. Adobe for one now has 1.44 million subscribers signed up for its Creative Cloud program, after announcing earlier this year it was moving to a subscription-only offering of its design software. “We now expect fiscal year 2014 will be the last year of any meaningful Creative perpetual revenue,” CFO Mark Garrett told Adobe investors a few weeks ago. Users now pay a small monthly fee as opposed to one big upfront payment and in return receive continuous access to the latest version of the entire creative suite. Many commentators thought the company took a risk by completely ditching its old perpetual license model but initial returns show Adobe, like other enterprises embracing the Subscription Economy, will end up being on the right side of history.
2013 was certainly a great year for Zuora and the Subscription Economy, but we’re even more excited for 2014. Yes, more companies will continue to adopt subscription offerings as 35% of Global 2000 companies with non-media digital products are expected to offer some sort of subscription offering by 2015 according to Gartner. In addition to the droves of enterprise companies making the shift, maybe we’ll see new types of services join the movement next year – gas stations, bars, or movie theaters, anyone? And at Zuora we can’t wait to continue helping companies with recurring revenue models grow and succeed.
While everyone might have their personal resolutions for the New Year, we want to hear what your subscription predictions and wishes are. Now that the ball has dropped in New York City’s Time Square, how will your company be embracing the Subscription Economy and what do you want to see from Zuora in 2014? Comment below and let us know!