19 June, 2020

Subscription Growth Remains As Lockdown Restrictions Ease

By B&T Magazine

One in two subscription companies are still growing despite the economic effects of COVID-19 and almost one in five have actually experienced an acceleration in growth during this period.

Those insights come from the third issue of the Subscription Impact Report created by subscription management platform provider Zuora, Inc. The monthly study has analysed the performance of more than 700 subscription companies from the 1st of March to the 31st of May 2020, comparing figures with the 12 months between February 2019 and February 2020. The report also analysed average revenue per subscription.

For the third month in a row, OTT video streaming showed the most significant gains of any category. Between March and May businesses in this class increased subscription growth by 400 per cent. Digital News increased growth by 110 per cent and E-Learning increased by 80 per cent.

Even companies in categories with lower comparative growth rates, such as Consumer Memberships, continued to increase subscriber numbers. Internet of Things (for both businesses and consumers) also experienced slower growth rates than during the same period last year, however enjoyed an increase in revenue per subscriber (42 per cent compared with last year). This indicates that existing customers actually adopted, used and invested more in these connected services over the past three months.

The report showed that subscription companies have, in many respects, outperformed traditional business models. Zuora’s vice president and general manager of the Asia Pacific Region Iman Ghodosi said that the resilience of subscription businesses had implications beyond this lockdown period.

“Subscriptions continue to deliver above market growth. We often see that significant events like this pandemic accelerate underlying trends, and we believe one of those trends is the modern global economy shifting towards digital services and subscription models,” Ghodosi said.

One company weathering the economic storm in Australia is car subscription service provider, Carbar. It launched the subscription side of its business in August 2018 and has experienced some of the highest levels of usage and enquiry in the last five months months.

“We’re seeing a stark contrast in the auto market between traditional auto dealers and emerging subscription providers,” Carbar co-founder and CEO Des Hang said.

“While the auto dealers have seen the most sluggish car sales figures in recent history, Carbar has witnessed a 160 per cent jump in active subscriptions from January to May. From June 2019 to now, our total active pool of subscribers has increased 1048 per cent.

“We believe 2020 may be a turning point for car subscriptions in Australia, change in consumer behavior that will last well beyond COVID-19.”

Ghodosi said the report numbers were encouraging but no longer surprising.

“I mentioned after our last report that the numbers weren’t deviating – our first report wasn’t some kind of blip or anomaly – and this third report underscores that point. It’s true that some subscription companies are well-placed to some degree because of what they offer, but in the main these figures point to a model that is simply better able to cope with massive market fluctuations.”

Ghodosi said because subscription businesses place such an emphasis on what their customers need and expect, they become – by their nature – more flexible than their product-focused counterparts.

“If the Subscription Economy is about anything, it’s about a fundamental return to customer relationships. It’s the agility of the subscription model that uniquely positions businesses to adapt quickly to customer needs and provides them with consistent value – regardless of economic climate.”

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