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New research finds subscription businesses have grown rapidly in the last decade, enduring beyond pandemic surge
Increased growth and decreased churn rates suggest continued enthusiasm for recurring digital services
According to the Subscription Economy Index (SEI) report by Zuora, the leading cloud-based subscription management platform provider, subscription businesses in the index have outpaced S&P 500 growth rates by 4.6x over the past decade.
The latest edition of Zuora’s Subscribed Institute’s landmark index tracks the rapid ascent of the Subscription Economy.
The index measures growth opportunities for subscription businesses across a range of different industries including tech and media.
It suggests that last year, new consumer purchasing habits sparked by the pandemic boosted the success of business models rooted in recurring relationships.
Companies and consumers alike subscribed to ongoing digital services, including consumption-based business models, at increased rates during 2020 stay-at-home orders.
Zuora’s report shows that these behaviours continued throughout 2021. Even as the economy began to recover, SEI companies exceeded growth rates compared to the S&P 500.
Churn rates (a metric that can measure the health of subscription businesses) have also decreased, suggesting that businesses are keeping their pandemic subscribers and that behavioural changes could be permanent.
In the latest SEI report, The Subscribed Institute found:
- Subscription-based businesses continue on a positive growth trajectory, headed toward pre-pandemic growth rates: Subscription businesses in the SEI experienced faster growth rates compared to the S&P 500 in 2021, with 16.2% and 12% revenue growth rates year-over-year (YOY), respectively. Recent quarterly revenue growth (2020-2021) for SEI companies suggests growth could soon return to pre-pandemic levels.
- Decreasing churn rates support that consumers and businesses are maintaining subscriptions after 2020 spikes: Churn significantly dropped in 2021 for SEI companies, with a 14% improvement YoY.
- Software as a Service (SaaS) remains the fastest-growing sector in the index: SaaS companies in the SEI report achieved 16.2% growth YoY with a 19.4% compound annual growth rate (CAGR) over the last four years (2018-2021). This growth gap is widening compared to non-SaaS sectors, likely attributed to SaaS’ early subscription adoption and therefore more refined offerings.
- SEI companies experienced double-digit growth annually over the last four years across all sectors: Each sector in the latest report has seen a double-digit 4-year CAGR (2018-2021). The SEI experienced a 17% 4-year CAGR overall.
While pandemic lifestyle changes accelerated subscription adoption, the latest SEI report makes it clear that subscribers continue to seek out these valuable digital services.
Businesses can best harness this opportunity to deliver and monetize long-term customer value with flexible, customized subscriber experiences.
Amy Konary, Founder and Vice President of The Subscribed Institute
The SEI report also analysed the impact of businesses with subscription revenue by sector, covering businesses in Software as a Service (SaaS), Media, Manufacturing, Internet of Things (IoT), Business Services, and Communications/Video Conferencing, as well as by region (EMEA and APAC).
Click here to download the latest edition of the Subscription Economy Index.
