Americans are more likely to get divorced then break up with Amazon Prime.

That is a startling fact, and one that points to the extraordinarily enduring appeal of what is being called Recurring Revenue Companies.

These are firms with a relationship with customers that goes on and on. Amazon’s Prime service is one obvious example. Another is Software platform Adobe. Int he last nine years Adobe have made sure an increasing amount of their sales come from customers who have subscribed.

Adobe’s recurring revenue as percentage of sales:

2010 10%

2019 90%

Why? Companies with recurring revenue relationships tend to out-perform transactional companies.The stock market also values recurring revenue companies much more highly, often at a multiple of six or ten times that of transactional companies, who have to reinvent their consumer relationship with every purchase.

Between 2010 and 2019, for example, Adobe went from being valued at 4x sales to 18x sales. That equals $200bn additional cash in shareholder value.

Apple have pulled off a similar trick this year.

Percentage of Apple Recurring Revenue in 2020

Q1 10%

Q2 22%

The reward for this change is a near doubling of Apple’s price-to-earnings ratio from 15x to 30x, which, in turn, is driving a 100% increase in the stock price since the start of 2020.

Apple One is the company’s attempt to accelerate this trend.

For $14.95 a month you get a bundle including Apple Music, Apple TV Plus and Apple Arcade. While this package does little to enhance the core offering from Apple, my guess is Apple will enhance Apple One in to a more robust offering real soon.

Posted in: Infographic of the day