Building the Berkshire Hathaway of consumer subscriptions — Podcast with Eric Crowley, GP Bullhound
A look at what’s next: Regulatory battles, business transitions, and thriving amidst change.
On the podcast: The B2B opportunity for B2C apps, the App Store alone being bigger than most Fortune 500 companies, and which current or future company will build the Berkshire Hathaway of consumer subscriptions.
If you’re looking to build the next big thing, look no further than the growing opportunity for consumer subscription software.
The growing power of the App Store
The combination of Apple’s share of App Store revenue and Apple’s own services revenue (much of which is collected via the App Store), is now bigger than 450 of the Fortune 500 companies by revenue. And it’s growing quickly. Far from being an overly matured market beset by consumer fatigue, the business of apps is bigger than ever.
But what does it take to build the Berkshire Hathaway of app stores and consumer subscriptions, and exactly how close are we to that world?
Eric Crowley, a tech investment banker with GP Bullhound, returns to the Sub Club podcast for the fourth time to provide unrivaled insight into the latest Consumer Subscription Software (CSS) report for 2023. With more than a decade of experience in investment banking, tech, and M&A spanning multiple industries, Eric is uniquely positioned to delve into what makes the app business such an exciting place right now. He believes it’s one ripe with opportunity for those who know how to spot and take advantage of “category-killing” opportunities.
Regulatory hurdles ahead
With Apple services revenue estimated to be $95 billion in 2023 — higher than Boeing at $79 billion and just shy of Tesla’s $100 billion — it seems as if a great future lies ahead. But all may not be well for Apple, as regulatory pressure ramps up against the giant and rival Google with the EU’s Digital Markets Act anticipated to go into effect as early as March 2024. And many other lawsuits and regulatory inquiries are still in process. While Apple and Google payments are ultimately quite consumer friendly — something for which they all too rarely get credit — the fees they charge on those payments and their power to require developers to use those payment systems are in question.
On the flipside, what spells issues for Apple and Google may prove a boon to app developers: bowing to regulatory pressure, Google has already lowered its fees on subscription apps and Apple may eventually follow suit. This would provide a huge cash flow boost to developers — even if it is tactical acquiescence to appease regulators and potentially win back transactions lost to alternative payment systems.
The B2C to B2B shift
Another focus of this year’s CSS report: the boundary between B2C and B2B is becoming increasingly fluid, offering a new avenue for growth. Brands like Peloton and Headspace, which thrived in the B2C space during the pandemic, are now venturing into B2B. This isn’t a pivot but a strategic expansion, rooted in the belief that what consumers love, businesses will too. This trend underlines the potential of consumer-centric design in unlocking new business opportunities.
Success stories in mergers and acquisitions
On the podcast, Eric talks through some of the more notable M&A CSS deals — including Bending Spoons’ acquisition of Evernote — and the CSS report’s stellar track record. If you’re featured in the report, you have a nearly 80% chance of raising or selling for a great exit.
Eric Crowley’s key takeaways for 2023
Eric shares GP Bullhound’s key 2023 theses — as laid out in the report — about the growth extension (not pivots) of B2C players moving into the B2B arena, why the App Store is unstoppable, and how Warren Buffett’s famously successful Berkshire Hathaway has a lesson or two for those in the consumer subscription space.