Zuora’s Subscription Economy® Index (SEI), released at its Subscribed conference in London reveals that subscription businesses grew revenues nine times faster than S&P 500 company revenues and four times faster than U.S retail sales over 15 consecutive quarters (January 1, 2012 to September 30, 2016). The SEI is the first of its kind and has been designed to measure the collective health of subscription businesses and track the impact of these businesses on the overall economy.
“For nearly a decade, we’ve watched the rise of a worldwide Subscription Economy as customer preferences have shifted from product ownership to subscription experiences,” said Tien Tzuo, CEO of Zuora. “Now, for the first time with the Subscription Economy Index, there is data proving that the companies adopting subscription business models are growing their revenue significantly faster than with traditional business models.”
While several innovative companies around the world began participating in the Subscription Economy trend early on, and have benefitted from being first movers, there has never been hard evidence of the impact on the overall economy. The SEI offers proof that the Subscription Economy is growing significantly faster than the overall economy and details its long-term magnitude and viability.
“Zuora is uniquely qualified to issue the Subscription Economy Index because it is the only company with a base of customers that is both broad enough and deep enough to reflect significant subscription-revenue growth trends,” said Carl Gold, Zuora’s chief data scientist. “The SEI was created using Zuora’s deep understanding of the subscription economy combined with the system activity we have observed across multiple years, billions of dollars in revenue, and millions of financial transactions. Every company in the world, large or small should be considering developing a subscription based business model in order to grow faster and deepen their customer relationships.”
The shift in consumer preferences is not only accelerating the growth of cloud-born companies like Salesforce and Netflix, it’s also opening new revenue opportunities for leading product and service providers. IBM, Microsoft and Apple have all recently announced earnings detailing the significant growth of their subscription service offerings. Microsoft, for example, announced its fastest growing segments were cloud-based Azure at 116 percent YoY and Office 365 commercial at 51 percent YoY, while its personal computing revenue declined 2 percent. Apple iPhone sales declined 13 percent YoY while its services like iCloud pulled in $6.3 billion in revenue for the quarter, up 24 percent from a year ago.