Over the past two decades, the subscription economy has experienced an extraordinary surge in growth and popularity.
More and more companies now have a subscription offering, and the number of consumers using these services has increased tremendously.
Today, almost everything is available for sale on a subscription basis, from software, delivery services, gaming, food, pet products, personal care items, and education to entertainment.
A recent report by Zuora shows that subscription-based companies grew 3.7x faster than S&P 500 companies in the last ten years despite multiple macroeconomic headwinds.
Likewise, OnlyAccouts.io reported that global subscription-based streaming revenue, just a sector of the subscription economy, is expected to hit $95.3bn in 2023, surpassing its last year’s growth by 18%.
With this growth trend and the unprecedented stability of the subscription economy, it is expected that businesses in this ecosystem may double their revenue by 2028.
If you want to learn more about subscription-based businesses, how they work, their impressive growth statistics, and what’s fueling their growth, then this post is an essential read.
What Are Subscription-based Businesses?
Subscription-based businesses offer customers their products or services in return for a recurring monthly, quarterly, or annual fee.
Unlike the traditional business model, where consumers make a one-off big purchase, the subscription model is based on the idea of retaining customers by offering them a low ongoing investment.
For example, instead of paying $300 for lifetime access to a service or product, the company can ask interested users to pay $10 monthly.
This way, they can opt out of the service if they no longer need it. While this model offers consumers more flexibility, it has also become a major revenue-driving engine for businesses.
Over the years, the model has expanded beyond traditional subscription-based industries, such as Software-as-a-Service (SaaS) and media, to surprising industries, such as cars, airlines, in-home fitness, gaming, education, and professional development.
To further help you understand how the subscription economy works, here is an example of a popular company operating a subscription-based model.
OnlyFans – An Example Thriving Subscription-based Company
OnlyFans is a thriving social media platform that offers creators the opportunity to create content and charge their fans a monthly subscription to access it.
Leveraging the subscription model, the company has helped creators monetize their content directly and generated billions of dollars in revenue by taking commissions from creators’ earnings.
According to OnlyFans search engine Last year, OnlyFans grossed $2.5 billion in revenue, positioning it as the second most profitable company in the creator economy.
How Has The Subscription Economy Performed In The Last Decade?
According to WNIP insights, the subscription economy grew by 435% in the last decade.
Further, the Subscription Economy Index reported that subscription companies grew 5 – 8x faster than traditional businesses.
Even during turbulent times, like the COVID-19 pandemic, the economy proved resilient and stable, with the ecosystem recording a low churn rate (the number of subscribers lost).
A Gartner report showed that the SaaS industry grew from $31.4bn in 2015 to a staggering $161bn in 2022. It projects that the industry’s annual growth rate will exceed $ 195.2bn by the end of 2023.
Similarly, Market insights from Statista show that the global revenue from subscription-based streaming reached $80bn in 2023, tripling its 2017 figure.
Aside from the SaaS and media industries, other sectors such as food, manufacturing, professional development, education, and more also recorded growth.
What’s Driving The Growth Of The Subscription Economy?
The numerous benefits the subscription model offers businesses and consumers fuel the ecosystem’s growth.
For businesses, subscriptions offer them a more stable and predictable source of revenue. With this, they can make better strategic plans and investment decisions.
Additionally, the model offers businesses more insights into their customers’ behavior.
Unlike one-off purchases that make it difficult to obtain deeper consumer insights, the ongoing relationship that subscription offers allows companies to understand their consumers’ behavior and preferences.
For consumers, the subscription model saves them costs and offers them convenience and personalization.
A monthly or quarterly subscription is more accessible for most people than a big one-off fee. Likewise, the set-and-forget nature of this model helps consumers simplify their life.
This way, they have one less thing to worry about. Further, most subscription services come with personalization features. Consumers love that they can decide what they want and how it should be delivered.
The Future Outlook Of Subscription-based Businesses
Statista projects that the size of the digital subscription economy will cross the $1.5 trillion mark in the next three years. This means more people will switch from owning physical assets to subscribing to products and services.
Based on available reports and evidence, our experts expect the revenue of businesses in the subscription ecosystem to double by 2028.
Further, we expect subscription businesses to increase the value they offer their customers as the ecosystem becomes more competitive.
Ella Marcotte
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