The latest Subscription Economy Index report from Zuora shows that whilst subscription acquisition rates are still rising, and churn stays level, publishers need to place greater emphasis on intelligent bundling as well as offer subscription flexibility, including subscription pauses.
Zuora, the subscription monetisation platform, has released its latest Subscription Economy Index (SEI) report which finds that subscription-based companies continue to grow through a combination of acquiring new customers, retaining existing ones and expanding revenue with add-ons and packages.
The SEI report consists of anonymized data aggregated across Zuora’s platform covering 500 businesses and represents a range of flexible recurring pricing models, including consumption and timebased memberships. The report views trends in the Subscription Economy as a whole.
SEI Report: Key findings
- Subscription businesses in the SEI continue to grow: In 2022, the SEI experienced 12% revenue growth. Media and publishing witnessed modest subscription growth last year, reflective of a highly competitive sector, with 4.6% revenue growth.
- Even as budgets tighten, churn rates remain relatively consistent: SEI average quarterly churn was 6.36% in 2022 compared to 6.13% in 2018.
- Subscriber acquisition is trending up: Companies are acquiring new subscribers at higher rates in 2022 compared to the two years prior.
- Average revenue per account (ARPA) continues to show a positive trendline, but slowed in 2022: ARPA growth rates were lower than 2021, decreasing from 1.89% in Q2 to 0.97% in Q4.
ARPA growth can slow when companies offer customers the flexibility to downgrade or pause their subscriptions, or when using promotional pricing to attract new subscribers. Both are best practices to add and maintain subscribers, especially in an uncertain market.
Zuora SEI report
- SaaS continues to be the fastest-growing sector in the SEI: SaaS outperformed other SEI sectors in terms of cumulative revenue growth in 2022, with 12.3% revenue growth on average.
Key finding recommendations
Zuora reports that whilst its SEI continues to grow 3.7x faster than the S&P 500, publishers need to place greater emphasis on developing ‘thoughtful’ strategies for maintaining and expanding relationships with current customers, as well as to ensure sufficient resources are allocated to it.
Speaking to WNIP, John Phillips, General Manager EMEA at Zuora, says, “The publishing industry is entering a new phase. 10+ years ago the transition to digital was in full swing, and everything was geared towards subscriber acquisition. But as the industry inevitably matured, competition has come in.
To be successful in this new era, publishers are having to be more creative to keep hold of subscribers. One way in which they can do this is through intelligent bundling. Intelligent bundling is the concept of packaging subscriptions that go together based on themes or context, which helps the subscriber to draw out more value from the offered service.
John Phillips, General Manager EMEA, Zuora
Phillips adds that publishers also need to offer flexibility, “It’s important to remember that not every subscriber wants the same thing. You can create the best bundle, with the best content and the best add-ons, but for some, this just isn’t important. This is why publishers need to consider the overall subscriber experience. Sometimes it’s not about maximising revenue, but about allowing people to opt-out, reduce or pause their accounts.
In this new era, a strong customer relationship remains the thing that will set companies apart. Publishers who put their subscribers first – and invest in strategies like intelligent bundling – will ultimately be the most successful.
John Phillips, General Manager EMEA, Zuora
