By Matthew Carr
Last week, Amazon (Nasdaq: AMZN) CEO Jeff Bezos was briefly the wealthiest man in the world.
He momentarily inched past Microsoft (Nasdaq: MSFT) CEO Bill Gates. And in the process, Bezos became the first person ever to be worth more than $90 billion.
Three of the top five wealthiest people in the world – Gates, Bezos and Facebook (Nasdaq: FB) CEO Mark Zuckerberg – are founders of tech companies.
More importantly, their companies are at the forefront of the changing economic landscape.
And one of the biggest drivers of growth for companies is our continued transition to the Subscription Economy.
One of the keys to Amazon’s retail-side success is its Prime service… a yearly membership, just like what you get from Costco (Nasdaq: COST) or BJ’s Wholesale.
That model is nothing new. Amazon didn’t invent the wheel.
Amazon has 85 million Prime members today. That’s a 35% increase over the 63 million the company had last year.
And the number has more than doubled in the past two years.
These are essential to Amazon, as Prime members spend almost twice as much as non-members.
Costco has roughly 85 million members. And there are probably a lot of us who are members of both.
Microsoft is cashing in on this trend, too. You no longer go to the store and buy a copy of Office. You pay an annual subscription fee. And it automatically renews.
We’ve transitioned to a subscription-based economy.
You can get a subscription to meal kits, like Blue Apron (NYSE: APRN) and its host of competitors I wrote about last week. The same goes for clothes, toilet paper, pet food, razors and toys.
You can even pay $1,500 per month for a Cadillac subscription, allowing you to drive multiple models.
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Even machinery manufacturers like Deere & Company (NYSE: DE) and Caterpillar (NYSE: CAT) offer data analytics on their equipment. And robotics companies like ABB (NYSE: ABB) are transitioning to a services model.
In fact, Zuora’s CEO, Tien Tzuo, believes $8 trillion worth of economic activity can transition from traditional sales to a pay-as-you-go service/subscription model.
Year to date, shares of Adobe (Nasdaq: ADBE), Netflix (Nasdaq: NFLX), Sirius XM (Nasdaq: SIRI) and Electronic Arts (Nasdaq: EA) are leaving the broader markets in the dust.
In fact, shares of Adobe, Netflix and Electronic Arts are up more than 40% apiece…
That’s because these companies are benefiting from the transition to the Subscription Economy.
Media companies, like Netflix and Sirius XM, are at the forefront of this. The cord-cutters, who are ditching cable in droves, have more options than ever.
Netflix is right there benefiting, along with Hulu, Sling TV, Amazon Prime TV, Pluto TV and a host of other options.
In 2013, Adobe switched to a monthly subscription model for its Creative Cloud suite, which includes iconic programs like Photoshop and Illustrator. Since then, annual revenue has grown 44.4%, from $4.055 billion in 2013 to $5.854 billion in 2016.
And the company reported record revenue of $1.77 billion in the second quarter. That’s a 26.7% increase year over year.
Electronic Arts has cut out the middleman… which is why gaming retail companies …read more
Source:: Investment You
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