It's a Subscription Economy and We're Just Living in It

June 10, 2014

Why own something when you can subscribe to it? That’s the question being posed in more parts of the economy than we ever imagined.

While the sharing economy—think Craigslist and AirBnB—has caught a lot of attention lately, I think it’s simply one part of a broader trend by companies away from selling products and toward selling access to products.

The rise of subscription-based and recurring revenue business models are one such trend. No longer are monthly subscriptions the province of newspapers and magazines. You can now subscribe to everything from razors to online software.

Netflix, for instance, changed how we consumed and watched DVDs and went on to do the same for online video—with the latter market expected to soon make more money than the Hollywood box office. Spotify is doing the same for music, Adobe for design software, Box for cloud storage, and many more.

A recent article in Fortune puts the subscription trend in context:

 “Consumer behavior, especially among younger people, is changing, and the need to own and house goods—from music to cars to physical documents—is waning. While Wall Street grapples with how to evaluate some of the subscription-only companies (à la Box), it has clearly worked up an appetite for a recurring revenue model that gives companies all sorts of new ways to engage with old and new customers. But transitioning isn’t easy, and each company needs to evaluate the needs of its customer base—and how subscriptions could potentially open the door to new users.”

The article highlights one startup in particular, Zuora, to show how much this disruption in business models depends on new systems to manage the change. Zuora helps businesses move to a subscription-based model by offering the nitty-gritty tools to manage process and customer relationships that are, as Zuora itself calls it, “the lifeblood of a subscription business.” They do all of this, of course, by selling a subscription to their software suite.

What does the future of the subscription economy look like?

“Zuora and its investors are, of course, extremely bullish on the growth of the subscription economy, and believe there are lots of untapped industries that will also jump on the bandwagon, from manufacturing to legal services to education. And even if you’re not buying your toothbrush via a monthly subscription service, chances are you’re already part of the subscription economy yourself. The way we consume movies, listen to music, or even drive around in cars, is changing. Zuora hopes the trend will continue.”

We are only at the beginning of this new growth in subscription-based business, but the future looks bright.