hold arrow

How Can Subscription Companies Weather Economic Downturns?

1 min read · 66 views Bong-Geun Choi Mar 16, 2023

Almost 60% of subscription-focused companies anticipate an economic downturn in 2023, while 48% and 37% believe that acquiring and retaining customers, respectively, will be a challenge, according to a new report released by e-commerce and payments company PYMNTS.[1]  However, focusing on a few key metrics may be the key to helping these companies weather an economic downturn.


Focus on Customer Lifetime Value

Customer Lifetime Value (LTV) is often defined as the average amount of money you expect to receive from a customer over the life of the business relationship. Only 8% of companies in the PYMNTS report tracked LTV.  Yet, those who did track and optimize LTV were five times more likely to be among the top-performing subscription-based companies, defined as companies that minimized revenue lost due to failed payments.


According to the report, analysis of LTV can help subscription businesses recover up to 60% of lost revenue due to failed payments which may represent a 13% increase in overall revenue.


Tracking Failed Payments

Customer churn rate is one of the most frequently watched metric for subscription-based companies.[2]  However, according to PYMNTS, one of the major drivers of involuntary churn is failed payments, accounting for half of total churn.


On the whole, only 15% of subscription companies tracked failed payments, with the remainder viewing the metric as a “cost of doing business” and out of their control.  However, nearly 67% of the top-performing subscription companies tracked failed payments.


The report went on to note that subscription companies lost an average of 9% of sales to failed payments, which equated to $278 billion in the 12 months ending 9/30/22.


Top-performing companies that tracked LTV and failed payments were able to recover 61% of failed payments.


Causes of Failed Payments

The top causes of failed payments included software errors and a customer’s credit card being incorrectly declined.  Thus, the means to address failed payments is within reach of most companies.


Focus on the Right Metrics

Focusing on LTV and failed payments may improve a subscription-based company’s chances of weathering an economic downturn and becoming a top performer.


The Fount Subscription Economy ETF (SUBS)

The Fount Subscription Economy ETF (SUBS) seeks to provide investment results that, before fees

and expenses, generally correspond to the total return performance of the Fount Subscription

Economy Index.  The Index was designed to measure the performance of companies engaged in the business of providing subscription services, i.e., companies that sell products or services for recurring subscription revenue.


SUBS may present an attractive vehicle for individuals to gain exposure to companies offering subscription-based pricing models.




[1] All data sourced from: The State of Subscription Business: Best Practices and Business Performance Drivers, PYMNTS, January 2023

[2] Churn is the rate at which customers stop doing business with a company.  It is calculated by comparing the number of lost customers to the total number of customers at the start of the period.


Bong-Geun Choi

Chief Economist


More Posts

How the Metaverse May Impact Corporations

1 min read · 24 views Bong-Geun Choi Mar 24, 2023

How the Metaverse May Change 'Business as Usual'

1 min read · 64 views Bong-Geun Choi Mar 13, 2023

Subscriptions and the COVID Effect

1 min read · 78 views Bong-Geun Choi Mar 02, 2023

Metaverse Technologies May Redefine Traditional Gathering Spaces

1 min read · 128 views Bong-Geun Choi Feb 22, 2023

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.

Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.

Risk Disclosure:


Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 


The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. For MTVR, the Fund may be concentrated in the entertainment and interactive media & services industries. The entertainment industry is highly competitive and relies on consumer spending and the availability of disposable income for success, which may cause the prices of the securities of companies to fluctuate widely. The prices of the securities of companies in the interactive media & services industry are closely tied to the overall economy's performance. Changes in general economic growth, consumer confidence, and consumer spending may affect them. MTVR may also be subject to the specific risks associated with metaverse companies. These risks include but are not limited to small or limited markets, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Smaller, start-up companies tend to be more volatile than securities of companies that do not rely heavily on technology. Metaverse Companies may rely on a combination of patents, copyrights, trademarks, and trade secret laws to establish and protect their proprietary rights. There can be no assurance that these steps will be adequate to prevent the misappropriation of their technology or that competitors will not develop technologies that are equivalent or superior to such companies’ technology.


For SUBS, the Fund may be concentrated in the software industry. Technological changes, pricing, retaining skilled employees, changes in demand, research & development, and product obsolescence can affect the profitability of software companies causing fluctuations in the market price of company securities. 


Both Funds are subject to communication services sector risk, which can involve the same risks as being concentrated in the software industry. Network security breaches, potential proprietary or consumer information theft, or service disruption can negatively affect companies’ stock prices.


The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility.