Subscription Companies Witness Growth, Although Global Economy Is Impacted Amid Covid-19
Global spread of coronavirus disease (COVID-19) is quickly damaging the overall growth of the global economy. However, among various operational disruptions, supply chain restrictions around the globe, and a predicted upcoming recession, business of the subscription service provider is proving to be unaffected, at list to some extent. When we analyzed 100’s of subscription-based service providers, more than half of the companies have not witnessed any impact on their subscriber count growth, where in some companies have reported that they are witnessing an increase in their subscriber count even faster than before. To add on, the remaining quarter of the companies have witnessed growth but at a slow rate, but they have still reported growth.
As per various report published from private research firms and our analysis it is stated that the revenue growth witnessed by the subscription service providers have growth at a rate of more than 350% in the span of last 7 years, owing to the advancement in the digital payment service. It can also be noted that this revenue growth is 5 times faster than that of S&P 500 Industry benchmarks. Product ownership is now witnessed as a thing of past. This is due to the growth of digital service and down fall of product ownership. Top subscription service providers focus more on adapting this rapid change and advancement of digital service and focusing on overall growth in the number of loyal customer base, compared to that of shipping more number of products the company offer.
As per the researchers and available data on the top subscription service provider revenue growth analysis, it is interesting to see that the recurring revenue built for the company from the loyal customers will help them withstand this storm of Covid-19 outbreak. However, for the other bunch of low performing companies in this sector there is an urgency than ever before to revive their customers, and make them shift to subscription based service, and revive the power of recurring revenue growth model in the ever growing subscription based service.
Some of the Key Findings on Impact of Covid-19 on Subscription service industry
Subscription service providers have shown their rigidity amid Covid-19 outbreak:
As per our analysis on the overall impact of COVID-19 on Subscription service providers it was found that more than 53% of subscription service providers have not witnessed a substantial impact to the subscriber growth. More than 22% of companies have reported an increase in the number of subscribers, around 12.5% of the analyzed companies have reported a slow growth rate in their subscriber count, but still they are growing. The remaining 12.5% of the subscription service providers have reported decline in their subscriber acquisition rate
Trend in Subscription providers:
- Firstly, OTT Video Streaming, Communications Software, E-Learning and Digital News & Media service providers have witnessed accelerating growth in their subscriber rate. Companies in this segment witnessed a revenue growth of 25% in the past few months after the breakdown of Covid-19. OTT Video Streaming service providers witnessed 7 times more growth in March 2020, compared to that of over the past 12 months before the disease outbreak. This in owing to the fact that most of the country are under lockdown and people are requested to remain at home, in turn time spent on TV and other entertainment medium have witnessed a spike. Digital News and Media service providers have also witnessed a 3 times more grow in their subscriber count during the same period. In addition, as most of the schools and colleges are closed, the E-learning segment have also witnessed growth of around 3 time in their subscriber. Furthermore telecom and utility service providers have also witnessed reasonable growth
- Secondly, information Services providers and B2B & B2C Software service providers have reported limited or low impact on their revenue growth amid Covid-19 outbreak. Companies under these have reported that they are not must impacted from the disease outbreak and have witnessed similar growth in revenue in March 2020, compared to that of the past 12 month period
- Thirdly, companies offering Business IoT Services, Software services to SME’s and Membership service providers among others have reported slow growth rate, than in the past few quarters. Companies falling under this segment have witnessed slow growth, where the growth rate have declined by approximately 25%. Business IoT Services providers have witnessed half the growth in March 2020, compared to that of the past 12 months before the Covid-19 outbreak globally. In the current scenario when most of the office are vacant, manufacturing is low or paused in most of the country, Business IoT Services are witnessing decline in demand or in some cases the cancellation of the subscription. Furthermore companies offering software services to the SME’s have witnessed half the growth in March 2020, compared to that of the past 12 month period. As their subscriber base consisting of restaurants, health clinics and others are also nonoperational at the current situation, the software service provider have also witnessed decline in their client base or in some cases the cancellation of the subscription
- Fourth, subscription service providers offering sports related services or travel & hospitality service have witnessed decline in their subscriber rate. Companies in the specified segment have witnessed decline in their subscriber base by almost 25% in March 2020. As majority or country are under lockdown and no one is allowed to travel outside the country and participate in any of the cultural or sports related activities.
Subscription Service providers response to the disease outbreak
As the Covid-19 outbreak continues to hamper the businesses around the globe, subscription service providers show their rigidity and resilience through the implementation of different sets of strategies to retain their existing customer base, through increasing the customers lifetime value (LTV). Unlike other product-focused companies, the subscription service providers have adjusted quite well amid the current situation and have somehow won the race of retaining their existing customers. Some of the measures are listed below:
- Subscription service providers have shifted their focus on optimizing for long-term customer lifetime value and retain their existing customers. Companies have witnessed an increase in the customers who are not able to pay on time, which has resulted that the company are doing large number of adjustments, credits, and refunds for their customers
- Subscription providers who have adopted the policy of pausing the subscriptions have been able to build trust among the customers and are able to reduce the overall churn rate of subscriber base. Companies who have opted for this option have witnessed a lower churn rate of ~20%, compared to more than 30% churn rate of the company who have not opted for the subscription pause service
- Subscription companies who have come up with new strategies including offering new product, launching new pricing plans, and attractive new promotional activities are able to retain their customers, more than others. Several companies have reduced their price by almost 50% for their existing bunch of customers. This would help them in retaining their customer base in the current declining economic condition amid Covid-19 outbreak
- Some companies are also offering free trial (for certain period of time) for majority of their customers to withstand the current situation and increase their customer base. OTT Video Streaming, E-learning service providers and Communication Software service providers have adopted this strategies and have witnessed an increase in their customer base amid Covid-19 outbreak
The goal of the study is to understand the overall impact of Covid-19 outbreak on the subscription service providers and the strategies undertaken by these companies to withstand the overall impact of the disease outbreak. Majority of the companies operating in this sector have reported an increase in revenue growth in the March 2020, compared to that in the last 12 months period. These companies have also adopted various strategies to retain their existing bunch of customers through both financials and service extension benefits.