Demand dropped during the recession when people were less willing to pay for software
Los Angeles, CA (PRWEB) August 08, 2012
The Tax Preparation Software Developers industry experienced minimal overall growth over the past five years, averaging 0.1% annually to reach an estimated $2.4 billion in 2012. The slight total growth, though, belies a higher level of volatility over this period. When consumer incomes fell during the recession, they became less willing to pay for tax preparation software, and industry revenue fell in 2008 and 2009. But then revenue returned to growth as the economy stabilized thereafter, and growth is expected in 2012 as consumer incomes continue to improve.
“The total market for tax preparation software has steadily increased,” according to IBISWorld industry analyst Dale Schmidt. “Every year, a greater share of the population has access to a computer, and after a period of stagnation during the recession, the number of households is once again growing in earnest.” At the same time, the rise of free web-based tax programs has eroded industry revenue over the past five years. Although these programs are only offered to a subset of the population, specifically those earning less than $57,000 annually, consumers have increasingly turned to them instead of paying for prepackaged tax preparation software.
The average profit margin for the Tax Preparation Software Developers industry is relatively high due primarily to the dominant market position of major player Intuit Inc. (developers of TurboTax branded software). “Smaller firms have struggled to remain profitable over the past five years, causing consolidation in the industry,” says Schmidt. “These smaller firms typically compete for a limited number of contracts for tax preparation firms, which use more robust and complex versions of the tax preparation software offered to consumers.” Over the next five years, Intuit Inc. is expected to further increase its market share and profit margin while smaller firms exit the industry. Other major companies include H&R Block and TaxACT. The ease of distributing software over the internet and conducting tax preparation services online has allowed firms to increase their customer bases at very little additional cost per user. As the industry's largest players continue to grow larger, the potential for a new player to grab market share will continue to decrease. Consequently, industry concentration is expected to remain high over the next five years.
Revenue growth over the next five years will come from both the expanding consumer base and greater trust consumers will place in the security of tax preparation software. To a lesser extent, improving consumer incomes will encourage more consumers to pay for prepackaged tax preparation software over free online counterparts. For more information, visit IBISWorld’s Tax Preparation Software Developers in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry provides software, usually hosted online, that allows individuals to file federal and state tax returns. The software is designed to guide users through their tax returns step-by-step. Additionally, firms in the industry provide high-end software to tax preparation professionals and small businesses. This industry does not include tax planning software.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.