Three Data Points That Point to the Health of the Subscription Economy

Has subscription growth peaked?  Are people canceling their subscriptions en masse?  Recent articles like “The Great Unsubscribe”[1] and “This is Peak Subscriptions”[2], along with disappointing results from Netflix, seem to indicate that the answer is yes.  However, the reality points to a different answer.


This article elaborates on three data points that appear to illustrate that the subscription economy is actually quite healthy.


The Source of the Data

Zuora Subscribed Institute publishes the Subscription Economy Index (SEI), which looks to track the performance of companies that offer subscription-based pricing plans.[3]  The Institute also compiles data about the companies underlying their index.


Their latest findings suggest that, although the subscription industry is moderating from the heady growth it experienced during the COVID-19 pandemic, it is still doing well.[4]


Churn, Churn, Churn

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.


Zuora found that the churn rate for companies in the SEI declined by 19% in the March to May 2022 (post-pandemic) period versus the same period in 2019 (pre-pandemic).  It has also declined by 11% when comparing May 2022 to March 2022.  Zuora reported that much of the recent churn is concentrated in high-profile streaming services.


Yes, The Rate of Subscription Growth Declined

According to Zuora, the rate of subscription growth is declining.  In fact, the data shows that growth has slowed by up to 60% in the post-pandemic period relative to the pre-pandemic period, depending on geography and industry.  However, it should be noted that the number of subscriptions is still growing, just by a smaller amount.  This should not be surprising given the growth experienced during the pandemic.


Spending Per Subscription Is Rising

Zuora noted that revenue per subscription is three times higher in the post-pandemic period compared to the pre-pandemic period. 


The Bottom Line

The data from Zuora indicates the following:

  • Companies appear to be doing a good job in retaining subscribers, as indicated by the lower churn rate
  • Subscriptions are still growing, just at a more moderate pace
  • The average spending per subscription has increased


All of this suggests that the subscription economy is still healthy and growing.


Companies that offer subscription-based pricing plans may present an attractive investment opportunity.


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]Danzinger, Pamela N., The Great Unsubscribe, Forbes, 5/10/22

[2]Mull Amanda, This is Peak Subscription, The Atlantic, 3/3/22

[3]Unless otherwise noted, all data sourced from: Tzuo, Tien, Look at Data: Three Lessons on How Subscription Businesses Are Maintaining Growth, Zuora, July 2022

Bong-Geun Choi Chief Economist

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