Zuora’s latest research has found that subscription-based companies are growing their revenue nearly 9x faster than the companies of the S&P 500, according to the Subscription Economy Index (SEI) released today. The report also shows that the SEI tracks with economic trends like the overall US GDP slowdown around the end of 2016, and the subsequent acceleration in 2017. Now, for the past two quarters, both the GDP and the SEI had their strongest growth since 2015.
The quantification of the model’s advantages come as no surprise since many reports over the last few years have documented what looks like a global subscription movement: The Economist found that 80 percent of customers are asking for new consumption models and moving away from traditional ownership. Credit Suisse reported that people in the U.S. spent $420 billion on subscriptions in 2015, up from $215 billion in 2000. And in 2016, YouGov found that 58 million adults in Britain, 89% of the adult population, were subscribing to at least one product or service.
“Growth in the future will only come from subscription models,” says our founder and CEO Tien Tzuo. Indeed, we have all witnessed the model’s impact firsthand: We’ve watched companies like Ford, Caterpillar, Dow Jones, GM and HBO, all choose subscriptions as the future of their business and a new stable recurring revenue opportunity. Others like PTC, an IoT software company, are the market’s next Adobe stories, betting their entire company on subscriptions. In fact, the SEI finds the highest growth in companies with over $100 million in revenue, 31 percent faster than the index average.
It’s truly a global phenomenon. The US has been met by EMEA whose subscription companies are growing just as fast. One of our biggest growth markets is Japan with customers like Toshiba and Komatsu. And from an industry perspective, the Subscription Economy is booming due to The Internet of Things.
Any company can transform itself into offering services that deepen its relationship with its customers. As more devices come online, they only way to monetize the data is to create a subscription service. It’s the future all companies. As Tien recently explained to SandHill.com’s M.R. Rangaswami, “Over the next 50 or 100 years, the entire product economy could change to a service economy.”
Carl Gold is Chief Data Scientist at Zuora.