There are a lot of 2019 tech industry predictions floating around — who’ll get bought, who’ll go under, etc. Zuora CEO Tien Tzuo decided to take a different route and make seven predictions about what our world will be like in five years, based on the trends he’s seeing in the marketplace right now. We’re rapidly shifting towards a subscriptions and service-based economy, and this transformation is affecting every industry on the planet.
The GDP will become obsolete in 5 years. The current definition of GDP (much like the current definitions of GAAP revenue) is a past-tense framework. It simply does not capture the value of recurring revenue. To our national GDP, a dollar is a dollar, representing a discrete, finite value. Needless to say, there are no discrete, finite values in the Subscription Economy — the goal is to sustain ongoing lifetime customer value for decades. Subscription companies have all sorts of revenue that they can count on but can’t formally recognize, and if you throw upgrades and bundling into the mix, these revenue figures quickly start diverging from standard GDP metrics. Hundreds of billions of dollars of economic activity is not being defined or categorized correctly.
Car sales will continue decline, and car companies will continue to thrive. Right now all the major auto firms in the midst of reimagining themselves as not just car manufacturers, but transportation solutions. They get that automation is coming. They get that in the future they’ll probably be doing more ﬂeet management, and fewer individual vehicle sales. But they also understand that they’ll still be the ones making the vehicles for all these new ridesharing platforms as well as new digital services that are set to explode in value. And they also recognize that true “mobility as a service” entails taking advantage of all sorts of modes of transport, not just driving. And they see that as a huge opportunity. Chances are that y0u won’t buy your next car, you’ll subscribe to it.
Malls will enjoy a second life. The coming retail apocalypse has been wildly exaggerated. Mike Elgan, a columnist for Computerworld, sums up the situation well: “The bottom line is that there is no ‘retail apocalypse.’ That’s based on an obsolete dichotomy between ‘online’ and ‘physical’ retail. The real division is between data-driven, app-centric, flexible and omnichannel retailing on the one hand, and old and stale retailing on the other.” As dozens new digitally native franchises start building thousands of new brick and mortar stores around the country, malls will also start turning into part museum, part entertainment complex, part showroom, part social watering hole. They understand that they need to invest in access and amenities to keep feeding the Disney Park “flywheel” growth model of foot traffic, entertainment value and dining and retail sales.
The big banks will get Netflixed. The financial industry has been coasting on consumer inertia for a long time. Like the old TV networks, they’re all about the lowest common denominator, offering a completely default customer experience. A new wave of smart, friendly fintech options are acting like Netflixes for money (personalization, guided discovery, etc), and are waking people up to the fact that their assets don’t have to just sit in bank accounts. They’re looking for new financial services that help them budget smarter, help them pay easier, and help them plan better. Fintech platforms are decentralizing power within the finance industry, and the losers will be the firms that don’t pay attention to the new “divinely discontented” customer.
The Patreon model will invade the content industry. There will always be mass media: pop stars, blockbuster movies, best-sellers. But what started out as a “cottage industry” of content creators primarily funded by subscription platforms like Patreon will become an increasingly mainstream force in the culture at large. And unlike flashy YouTube stars, they will enjoy long-term support from dedicated fans. Supported by a stable base of recurring revenue they’ll be able to make smart, uncompromising art in a new golden age of media. They’ll also be able to showcase neglected or cancelled content — the late, great Filmstruck should consider adopting this model!
AI will accelerate the end of ownership. Today, we don’t own movies or music anymore — we subscribe to Netflix or Spotify. Tomorrow, we won’t own products anymore — we’ll subscribe to them. AI platforms are in the midst of turning every manufactured product on the planet into a connected “smart” product. Today you can see that trend happening in transportation and consumer electronics: cars, scooters, washing machines, coffee makers, thermostats, etc. But soon you’ll start seeing it happen everywhere: tables, chairs, floors, walls, clothes. As a result, we won’t need to own anything. We’ll simply subscribe to services: housing services, food services, transportation services, furniture services, clothing services. We’ll be living in a true Subscription Economy.
As products dissolve into services, more consumer electronics (game consoles, wearables, etc) will become “free.” Here’s a somewhat controversial prediction — all the new digital services that are currently being created and marketed as “add-ons” to hardware products are eventually going to wind up becoming the product themselves. Consumer goods companies are going to start giving away more stuff for free in exchange for long-term relationships. We’ll always need great product design, but the digital experience, the consumer relationship, will be where the value lies. Xbox is now throwing in the console with the subscription. It’s still early days, but things are changing fast.
Four-year colleges will turn into four-decade colleges. How much do you remember what you learned in college? The idea of consigning yourself to decades of debt for a fleeting four years of term papers and parties is starting to wear thin. As affordable online learning programs become an increasingly competitive threat to the four-year college experience, many of them will co-opt these platforms in an effort to differentiate themselves. Instead of offering four years of forgettable coursework, many of them will start to offer four decades of access to a constantly updated professional learning platform that helps their graduates stay smart and competitive throughout the entire course of their career.