Zuora, Inc. (NYSE: ZUO), the leading cloud-based subscription management platform provider, has released the latest Subscription Economy Index™ (SEI) report, which found subscription businesses in the index have outpaced S&P 500 growth rates by 4.6x over the past decade.
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 latest 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 at Zuora® 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, 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.
- Software as a Service (SaaS) remains the fastest-growing sector in the index: SaaS companies in the SEI report achieved 16.2% growth in 2021 with a 19.4% compound annual growth rate (CAGR) over the last four years (2018-2021). This growth gap is widening compared to all other SEI 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 17.5% 10-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,” said Amy Konary, Founder and Vice President of The Subscribed Institute at Zuora. “Businesses can best harness this opportunity to deliver and monetise long-term customer value with flexible, customised subscriber experiences.”
The SEI report also analysed the impact of businesses with subscription revenue by sector, covering businesses in SaaS, Media, Manufacturing, Internet of Things (IoT), Business Services, and Communications/Video Conferencing, as well as by region (EMEA and APAC).
The Subscription Economy Index report is available for download here.