Subscription economy more resilient than expected | WARC | The Feed

Subscription economy more resilient than expected

Subscription-based companies have grown faster than the S&P 500 over the past decade and did so again in 2022, says a new report.

The 500-plus companies in the Subscription Economy Index (SEI) report, compiled by Zuora – a supplier of subscription management software – experienced 3.7x faster growth rates than the S&P 500 over the past 11 years. Last year, the SEI experienced 12% revenue growth compared to 10.6% in the S&P 500, despite economic headwinds.

Context 

Businesses and consumers grappled with inflation, ongoing supply chain disruptions, rising geopolitical tensions and the continued threat of Covid-19 variants in 2022. The result was often tighter budgets and a difficult year. 

Why it matters

The latest SEI report shows recurring revenue businesses – including those in SaaS, Media and Manufacturing – continue to grow by acquiring new customers, retaining existing ones and expanding revenue with new add-ons and packages.

Takeaways 

• Subscriber acquisition is trending up since pandemic lows: companies acquired new subscribers at higher rates in 2022 compared to the two years prior. 
• Churn rates remain relatively consistent: SEI average quarterly churn was 6.36% in 2022 compared to 6.13% in 2018.
• Average revenue per account (ARPA) growth slowed in 2022, decreasing from 1.89% in Q2 to 0.97% in Q4. This can happen when companies offer customers the flexibility to downgrade or pause their subscriptions, or when using promotional pricing to attract new subscribers. 
• SaaS outperformed other SEI sectors in terms of cumulative revenue growth in 2022, with 12.3% revenue growth on average.

 Sourced from Zuora