The worldwide spread of coronavirus (COVID-19) has had a quick and damaging effect on the global economy. However, amongst operational disruptions, supply chain restrictions, and a global recession, subscription businesses are proving to be resilient. In an analysis of hundreds of subscription-based companies, more than half have not seen an impact on their subscriber growth, while one quarter are actually seeing subscriber acquisition rates accelerate even faster than before. And, of the remaining companies who are seeing their growth slow, half of those are still growing.
For the past three years, Zuora has published The Subscription Economy Index™ (SEI), a report on the collective health of the Subscription Economy, developed by Zuora’s Chief Data Scientist and widely cited by publications such as Business Insider, Barron’s and CNBC. The SEI has found that subscription revenue grew by more than 350% for the past seven and a half years as recurring revenue-based business models exploded due to digitally enabled, pay-as-you-go services. In fact, the SEI consistently showed subscription revenues to grow 5x faster than S&P 500 Industry benchmarks.
Product ownership is now seen as a thing of the past. What we’re witnessing is The End of Ownership as industry after industry sees their unit sales go down, and consumption of digital services go up. Successful companies today are focused on adapting to this rapid pace of change, deciding to focus on growing and monetizing a loyal customer base versus shipping more products.
While the SEI provides a long-term view to illustrate the sustained and predictable returns of recurring revenue models, this special Impact report focuses on the earliest trends of how COVID-19 has impacted subscriber acquisition rates (“subscription growth”) from March 1-31, 2020 compared to the previous 12 months (February 2019-February 2020).
For existing subscription businesses, the data shows that the recurring revenue built on the loyalty of their customers will help them weather this storm. For all other companies, there is more urgency than ever before to rediscover their customers, shift to subscriptions, and discover the power of the recurring revenue model.
Overall, the COVID-19 Subscription Impact Report found that 53.3% of companies have not seen a significant impact to their subscriber acquisition rates. Meanwhile, 22.5% of companies are seeing their subscription growth rate accelerate, 12.8% of companies are seeing slowing growth, but are still growing, and the remaining 11.4% of companies are starting to see subscriber churn outpace their subscriber acquisition rates. Of the companies Accelerating, Slowing, and Contracting, we found trends across industries.
For the key findings, please visit the full report page here.
Redpoint Ventures Partner Tomasz Tunguz said: “The Zuora team is ahead of the trends on in the Subscription Economy, and their analysis into COVID-19’s impact on it is largely consistent with our own analysis.”