In this video, Patrick explains why the Subscription Economy is 800x More Valuable Than a Traditional Business Model.
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You ever see some of these companies Valuation this company's worth 220 Billion dollars this one worth six Billion dollars this one only after two Years worth 680 million dollars why and How it's called the subscription economy According to a Forbes article it says Two companies same top line revenue 100 Million 100 million this one has to go Chase for its Revenue every single month They got to go sell again but this one It's subscription every month people are Paying 49.99 according to this Forbes Article this one could be worth eight Times more just because it's reoccurring Versus this one there's a reason for That we're going to talk about that Today all right so if you get value out Of this video give it a thumbs up Subscribe to the channel but let's get Right into it on average you and I spent 237 dollars per month in subscription Model products that's three thousand Dollars per year give or take and According to McKinsey and Company Subscription model products in the last Seven years have increased 350 percent But the question becomes has this always Been around since the 20s maybe the 50s Or maybe 90s nope it started in the 2000s let me explain to you what's Happened to some of these numbers since 2000 according to report McKenzie Company that in 2000 only one percent of
Companies offered a subscription service So if you look at this 2000 was one Percent 2005 went to five percent two Thousand and ten ten percent two Thousand fifteen twenty percent two Thousand and twenty thirty five percent It's estimated to be at fifty percent by 2025. now watch according to a report by The conference board the average Consumer has 2.2 subscription in 2000 And look how it's gone up in 2005 3.4 2010 4.3 and 2015 5.5 then 6.7 in 2023 10.6 that means you and I have roughly 11 different things we subscribe for on A monthly basis that helps increase the Valuation of these companies now you may Be watching the same but Pat when I Think about subscription I only think About Netflix Spotify or Amazon so let's Take a look at this launch your Netflix Got started in 1997 Spotify in 2008 Amazon Prime in 2005. pricing when they Started doing their monthly subscription Netflix is 8.99 a month it starts at 9.99 at Spotify and 12.99 and Amazon Prime let's take a look at a number of Subscribers of 2021 Netflix that's over 200 million Spotify has over 365 million Obviously that includes both free and Paid and Amazon Prime is estimated to be Over 150 million so let's take a look at Revenue in 1998 when Netflix got started They did roughly 1.8 million in 99 to 14.4 million two thousand they did 49.3
2001 they did 103 million give or take And by the way today their top line Revenue is 32 billion dollars Netflix 32 Billion dollars worth roughly 200 Billion dollars let's take a look at Spotify Spotify in 2010 Revenue was 155 Million it jumped with 330 million in 2011 last year roughly 12.35 5 billion Dollars in a year Spotify and last but Not least Amazon so now keep in mind Amazon originally got started in 95 but They did not get into subscription until 2005 when they launched Amazon Prime Look what happened to their numbers Before Prime in 2004 they were doing 6.9 Billion in 2005 when they started Prime They went to 14.1 billion and you know What they did last year a little over 350 billion dollars so now if you're Like me like that but give me a break We're talking about Netflix Amazon it's Not not every industry can really do a Subscription model really let's take a Look at other Industries here's some Industries software we got Adobe Creative Cloud and Microsoft 365 Beauty We have Birchbox and Ipsy fashion we Have Stitch fix and Rent the Runway you Can literally rent the dress they're Wearing Hollywood three thousand dollar Dress for a hundred dollars a day or you Can ask them to send you clothes every Single month you give them the size your Flavor what you like 300 a month every
Month something's being sent to your way It's purely a subscription model meal Kids blue apron or hello fresh Fitness Peloton or Beachbody on demand books Audible or Kindle wine you got wink and Vinebox cough you got Trade coffee and Atlas coffee Home Goods you got Grove Collaborative and you have bespoke posts Pet supplies you got BarkBox and kidnap Box health and wellness you have Headspace and calm personal development You have master class and blankets Language learning you have Rosetto Stone And Duolingo plus crafts and do it Yourself you have craftsy and Crafters Box education you have udemy and Coursera and by the way I've been in the Insurance space for a long time why do You think these businesses are worth as Much as they do because insurance is What reoccurring auto insurance Reoccurring health insurance reoccurring So now what are the advantages of having A subscription model as a company number One you have recurring Revenue number Two scalability number three customer Retention number four enhanced customer Engagement five improved brand Image six Rapid growth seven diverse industry Presence a data driven insights nine Flexibility and scalability 10 Innovative pricing structure 11 Market Disruption 12 expansion into B2B space And just like any other business if you
Don't take care of your customers They're going to go somewhere else which Means you're dealing with the downfall Of churn you got to keep showing up Competition you got to keep getting Better compliance you got to make sure You meet those guidelines so now you may Be watching St Pat I'm not Netflix I'm Not Amazon I'm not Spotify what do I do About this look the whole purpose of This video is to get you thinking before You say you know what what can I do with This material maybe talk to your wife Talk to your business partner talk to Your peers and say how can we make this Thing more recurring FYI You want to figure right away how to do That at the David Consulting we have Multiple different masterminds where These are the types of conversations we Have with other entrepreneurs on how They're doing it so you can also pick up Some of their strategies if you want to Find out how to get on one of those Masterminds at the David Consulting Click on the link below in the Description and number two if you just Want to ask me a question or Tom Ellsworth on how to get this going as Well on my neck if you've not downloaded The app connect click here download the App connect and you and I will get a Chance to have a minute to connect on Any questions you may have for us take
Care everybody Foreign [Music]