The Subscription App Paradox
hackernoon.com
hackernoon.com
It's tolerable now, because you still can own most of the things. But will it be 10 years from now? When because of e.g. sudden health expenses, you're left wondering whether to cancel dishwashing or clotheswashing service for a month, so that you don't have to cancel the service that feeds your kid at school? Will everything you "have", and everything you can do, be solely determined by the allocation of your cashflow to various available services?
In Switzerland you even used to pay a monthly subscription to the PTT to rent your landline phone, separately from your phone line subscription. If you paid a bit more per month you got one of the fancy models with buttons instead of a dial. [source in German: https://www.srf.ch/sendungen/kassensturz-espresso/themen/ser...]
The whole service economy thing looks to me like it's going back in the direction of the times when various versions of "servant" were a common occupation.
Don't look at only one side of the coin.
That is why we now even have meal prep services for families. Sometimes I wonder if this is what the economist called "Services Economy" that some / most country must transition into.
Vive la Revolution!
Ultimately, there will always be some level ongoing cost to the clotheswashing service, but ownership can obfuscate that cost. Consumers are bad at buying cost efficient washing machines, and can end up spending a lot on replacements or repairs, but a serviced washing machine rental company is likely to be a lot more discerning.
And I'm not sure your concerns about instantaneous income are fair to apply here. If people are struggling to pay for a reasonable baseline of services, I think that's a wider economic problem, and I don't think a service model would make that any worse. If anything, being able to cancel your clotheswashing service is a choice that someone who bought their washing machine doesn't have.
So they buy a new one on credit. The monthly instalments are quite similar to a subscription model. I'm not sure which one is more expensive.
With service-everything approach, there would be no second-hand market. Independent garages/repair shops wouldn't get much business either. Everybody would be stuck in rent market wether you like it or not/
But I do agree that there are important differences.
Market may be trying to move in that direction, but there's plenty of force against it. Like recent right-to-repair laws. Or people ditching subscription-only software for worse, but paid-once alternatives.
I have bought many macOS applications in the last decade or so. And like so many others, I do not shun to spend 50 Euro or more on an app. However, as of recently I have been more restrained in buying applications, since it seems that they could switch to a subscription model at any random moment. Instead, I have been looking more and more at FLOSS alternatives. Even if their quality is sometimes not as good, the prospect of being able to use an application long-term makes them more attractive. Moreover, I have also started donating more to FLOSS developers as a result.
I hope that strikes a balance because I understand the issue from the customers side but also want to make a living out of it too.
I like the JetBrains "perpetual fallback" subscription model. After paying for a year, you get a perpetual license to the version that was current at the beginning of the 12 months plus all bug fixes for that version.
Microsoft has done this pretty well with Office. You can choose to get an Office 365 subscription or buy Office standalone.
(Office 365 pricing is also extremely good for what you get, compared to most software subscriptions.)
I conducted a Twitter poll, where I asked people to choose between a $2 upfront payment, and a dollar a year, assuming that in both cases, they lose interest in the app and uninstall it after two years. I mentioned that with a subscription, any new features added will be available at no additional charge, but with the upfront payment, it will be an in-app purchase. Four people responded, and all four chose the subscription.
BTW, to people insisting on an upfront payment, would you be okay if:
1) A new feature got added to the app the day after you bought it, and you're asked to pay again to use that feature? After all, you didn't pay for that feature.
2) A new version of the app got released the day after you bought it, and it's listed as a separate app, requiring a second purchase? After all, you didn't pay for those features.
3) The app you bought has a particular feature, like a low-light mode in a camera app. The developer improves the feature, but brands it as a separate feature in order to charge you again, like calling it LowLight+. (This is different from (2) because in that scenario, the camera app didn't have any low light mode when you bought it.)
4) An OS update makes the app crash, or annoying to use, and the fix is listed as a separate app, requiring a separate payment. After all, you didn't pay for it.
5) After you buy the app, the developer abandons it and chooses to invest time in creating a new app since that will bring in more money. Would you be okay with it?
Upfront payment seems fine instinctually, but when you get into the details, there are many problems.
But I think one of the problems here is the inflexibility of app stores. What about the Jetbrains model? As soon as you pay for N months (over time or upfront) you get a perpetual license for that version, and for every subsequent version released while you were still paying. Could you do this on the App Store?
Maybe developers should ignore what an angry minor claims, try it out, and see what actually works. We're certainly doing that with our camera app, Noctacam (noctacam.com. It will be subscription-only, at 49 cents a year. We'll see how it goes compared to an upfront payment.
The JetBrains model still has all the issues I pointed out above. Which is not to say that it doesn't have other benefits. Every payment model has its problems.
As such, the subscription pays for way more than simple upkeep. It pays for a large development team to continue to add features to an app that is essentially already done.
But what does all that new code do?? I'd challenge anyone who's not a developer to name a single new feature added to chrome in the last year. I'm a web developer and I struggle to name more than 5 changes.
Its easy to pick on chrome because the numbers are mostly-public. But the same is probably true of facebook.com, ms office and all sorts of other big company products. As features compound, the marginal value of each additional line of code added becomes vanishingly small. (All the really useful features have already been added, and project iteration gets much slower in big projects).
There are thousands of engineers working on facebook.com. If they all quietly left and were never replaced, how long do you think it would take before anyone in the public would notice? 6 months? 1 year? Longer?
And if thats the case, what a waste of that huge pool of talent. If you could leave your job without any of your users noticing or caring, what a waste of your education and your potential. Quit and start that company you've always been dreaming about starting. Go do literally anything of substance.
[1] https://www.openhub.net/p/chrome/contributors/summary [2] https://www.openhub.net/p/chrome/analyses/latest/languages_s...
And of course, there are countless bug fixes and other small improvements, and all of this has to work on six operating systems.
"I saw the best minds of my generation consumed putting advertising next to pictures of cats"
For example, a small feature or redesign that increases engagement of a feature by 10% can make millions for Facebook.
The web platform has been growing (progressive web apps, more features in JavaScript include WebAssembly), and yes I'm sure there are some new features in Chrome. Does that include the mobile app codebases? Chrome for mobile has been adding features.
1000 people is a lot of money, so Google clearly sees value in what they're doing.
They've definitely been busy, somehow. And they've definitely added a few marginal features here and there in the last year (position:sticky, grids, css modules, headless snapshot rendering all come to mind for me). But 1.5 million code reviewed lines of programmer effort seems disproportionally expensive for what they've done.
How many startups could you start given 1000 google engineer-years of effort? 100? Don't get me wrong, I like webassembly. But the output of 100 new startups with world class engineering teams and 1 year of runway sounds much more interesting by every metric that I can think of.
How many more "uber for cats" startups do we need? (That's purposefully not a fair characterization… A lot of startups are doing less interesting/useful work than improving the platform.)
A team of 10 people can creatively put together some really cool stuff. But you know what? Not all problems can be solved by a team of 10 people. And what happens for the ones that manage to bring in either revenue or more VC? They start hiring. And then you can complain about "why does company X need 1,000 people to do what they do?"
I do get what you're saying, but I'm pretty sure the list of things those 1,000 developers produced and those 1.5 million lines of code represented would be substantial if you dug in. A great deal of it might not have any appeal to you, but undoubtedly has appeal to someone.
If moonshots weren't such a high priority, and instead startups focused on building a successful business, perhaps there wouldn't be so many dead startups. Doing a few tens of million a year in revenue isn't a terrible place to be after a few years!
To be fair, their R&D doesn't exclusively pay for an improved 140 character text box. It also goes towards staying attractive for advertisers and trying new ideas.
But still, the gap between the rather modest progress that Twitter is making on any front and their enormous costs (not just on R&D) is striking.
Now the incentive is to keep the customer happy so they continue to subscribe. This could mean more bug fixes and less dubious features.
Or you just keep the customer hostage using proprietary data formats and/or silos? Of course, this does not apply to every application (eg. Markdown editors), but it is a tried an tested strategy. And before you needed to incentivize paid upgrades, but with a subscription, it's 'keep paying or lose access to your data'.
And what if the company goes under? Previously, you could just keep running the software (heck, some companies are still running old VMS, DOS, and OS/2 software). Now, it's over once the license server that checks that you paid your subscription is down. Of course, some non-subscription software requires activation as well, but a lot of ISVs just use registration codes.
That's been a problem since before subscriptions became mainstream, even software with a perpetual license has often required activation.
That's not insignificant. Look how many iOS apps will be abandoned when iOS 11 forces 64-bit compatibility.
The thing is, that model relies on the big upgrades being sufficiently attractive to users that they will pay more money just to get the new features. It's clear what you're getting and what you're paying for it. That works well if you keep making big steps forward with whatever your software does that are valuable to your users. It doesn't work so well if all you've got to offer is a few incremental refinements that don't much change the value of your product. As others have been mentioning, sometimes software is essentially complete, and this way you can't just keep selling something that's done to the same customer over and over again.
This is why some of these calculations about the cost effectiveness of subscriptions for business software make me laugh (and then not subscribe). They'll compare the cost for an ongoing subscription today with the cost of buying every new version before, ignoring the fact that new versions before might not have been a big advance and plenty of customers probably only upgraded every other version or less, or in some cases not at all.
Why keep all your eggs in a single bucket when you have a great opportunity to diversify and not risk pissing off your customers with pricing changes?
A lot of software today seems to be more like movie or sports franchises: once you've found a winning formula, you just keep cranking it out with slight variations from one year to the next. After all, as long as there are enough suckers in the market to pay your bills if you do that, what's to stop you?
In terms of fixing bugs, those are defects in the original product and I think it's reasonable to expect a software company to make a decent effort to correct them, just like any other purchase. That includes providing an appropriate level of customer support if something goes wrong.
Updating existing software to support new protocols or maintain compatibility with new hardware or other software is a tricky area. My personal take on this one is that businesses selling software ought to indicate up-front how long they guarantee to provide this kind of support for so that everyone knows what the deal is, but then switching to some sort of ongoing support contract at a reasonable cost to extend the working lifetime of the software if the market wants it is fair, because this does mean extra work and provide extra benefit for the customer. (The crucial difference between this and the full subscription model is that paying for extra maintenance is optional here and you don't lose what you already have if you stop paying.)
As for servers when businesses are choosing to store customers' data on their own systems rather than their customers', or to include activation or copy-protection technologies, or other similar issues, I have much less sympathy for the developers. In many such cases, the limitations are entirely artificial and basically only there as a way to enforce the need for ongoing payments or spy on customers' data or otherwise impose constraints that aren't in the customer's interests. Cloud-everything may be very trendy, but much of this new cloud-based software could have been implemented just as effectively on a customer's own network and using VPNs for their mobile staff if the industry had chosen to move in that direction instead.
Well aware that the App Stores do not offer this option, but it is possible if you implement your own billing system on macOS or Windows.
Or do you have a long tail of „casual users“? Bloggers that write an article or two every month. Casual runners that want to track their weekend runs. Someone who wants to touch up vacation photos once a year.
Then a subscription is unsuitable. Casual users will pay once for a premium app, especially if they expect to use it for a long time. But its gonna be hard to convince them to pay a monthly fee.
Most apps will have a mix of regular and casual users.
Just make sure to think of the different audiences your app has. Your business model will decide which of them you can keep.
I don't think so. It may not be as easy to convince as "just $1!" but I bet the customers will come.
I also think they'll forget to cancel. That's where the real casual money is. Thousands of customers oblvious to the monthly fees.
It's like gym memberships but without the high pressure sales tactics. The customer signs up, uses it for a a week, then gets billed monthly for the next year.
That model is what you come to when you realise burglary doesn't scale.
I'm not promoting it. I'm calling it out as the natural progression of switching to a subscription model.
When a customer sees "$1/month" vs. "$12/once" what they're really seeing is "$1" vs "$12". The apps on a subscription model will win out.
> That model is what you come to when you realise burglary doesn't scale.
It's not subscription themselves that are bad. It's selling a product that relies on your customer not using the product to be profitable. Limited space in the gym leads to overcrowding which incentives them to not have you come. The less you come, the less crowded it looks, the easier it is for them to sell memberships (i.e. subscriptions).
It is unrealistic to expect developers to toil away, improving software each year, using new platform features, all for no incremental income from existing users.
I'm an app developer with a relatively successful app who spends about 1 minute every 6 months thinking about upgrading the app. No money, no honey.
Some of the iOS apps I run cost me $15-$50 a pop, like Prompt, Coda, Working Copy and a few Omni apps. But I bought them _across a few years_, and I would rather buy food and books for my kids than spend $5-$10 monthly on a single app, _except_ when it is the front-end for a service I need (like Dropbox, which I still use).
My approach to mobile apps is that I prefer to pay up-front and spend around $100 yearly (on average, discounting service-oriented apps) rather than pay $5 for _anything_ on a monthly basis - that allows me to buy one quality app per quarter, and avoid losing time and money on frilly apps and subscriptions I don't need.
I think the real problem here is people making up useless "services" and wanting to turn their apps into niche shopfronts that will only ever reach a minuscule portion of their target base.
(I will on occasion spend a few extra bucks on a quality game for the kids - or myself - too, but even then I've been avoiding anything with in-app purchases of any kind, and tend to go for promotions rather than new launches.)
edit - typos
subscription, which the article lists the problems with;
publishing a new ‘My App 2’ on the store, which is confusing for users and unless your app stores nothing or is entirely cloud based, presents a migration path that is messy at best or;
offer new features as in-app purchases, which, depending on the scale and nature of your app, can be incredibly complex or even impossible to do in a way that makes sense.
I can’t see it being done because it goes agains the ‘simple’ principle of the App Store, but would be nice to be able to separate the concepts of bug/security fixes and featur updates to allow multiple concurrent versions to exist under the same entry.
That is all perfectly fine, but it turns out most users, ( Not developers or Geeks ) will only buy a new product when their product stop working or became OUT DATED. Since most App will continue to work for as long as it is, users have no incentive to buy a newer version.
That is why developers wanted a Subscription model. It is hard to sell to its existing users pool, a rental model allow them to have a continuous revenue.
With upgrade model, it is basically offering a discount for its existing users, instead of telling them to buy a New version.
And it turns out, the more subscription Apps there is, the more i like the upgrade pricing model better.
Say they charged $5.99 for Foobar v.1 and then they also want to charge $5.99 for Foobar v.2 but allow their current customers to upgrade for $2.00. They keep both versions at $5.99 and sell an "app bundle" of both products for $7.99. That will allow current customers to pay $2.00.
Of course the developer needs to put in big bold writing in the description of v.1 not to buy that product.
Maybe to someone in Silicon Valley spending a hundred to two hundred bucks a month on a bunch of apps is reasonable, but to a student that has less than 50 bucks left after rent and groceries (and might need to buy new clothes sometimes, too), this is ridiculous.
It’s a similar issue with the completely ridiculously priced smartphones. Android often loves breaking their APIs, so you need to test the new releases on a physical phone before they’re public. Google now dropped the Nexus phones, so that means you need a Google Pixel. The cheapest Google Pixel is 900$ in Germany. How the hell am I supposed to pay for that? Or is App Development now supposed to only be a thing for big businesses?
Why not use the emulator?
I’ve tried with the emulator, but it never is the same as the real device, and you just can’t test pinch-zo-zoom for example on an emulator.
Android Emulator also has been supporting "multi touch" via the mouse and keyboard for a while now, IIRC it's alt+click.
Android devices that run stock android and get monthly updates can be bought for under 150 and even 100 EUR e.g. WilleyFox.
Yes, sure, and I’ve still got my Nexus 5X – but Google only provides the preview releases for the Pixel devices from now on, all other devices only get those after release.
Guardian for 2.50 a month. How much did newspapers cost?
10 a month for VPN service. You have to rent a server right?
80 bucks for Dropbox a year. How much does that external terabyte hard drive cost, let alone the syncing feature.
Not to mention that a lot of stuff is in easily exportable formats....
There's always going to be one off apps, but most of this stuff is too nice to be supported by one off purchases (far before it's considered "done"). Paying 100 dollars a month for premium software when we spend all our time in our computer is ... Fine I think.
Though the counterargument is that I wouldn't spend 100 bucks a month on chairs.
We are very quickly heading down the path to a full-blown renteer class, who don't own anything and live at the mercy of their myriad service providers, who by-the-way seem more concerned with their perverted version of 'innovation' then customer satisfaction or avoiding product sunsets.
I think what you're trying to say is that they're charging more than you think they should. That's not what rent-seeking means.
These apps are providing value and doing so under a subscription model. If you don't think they provide sufficient value, there are almost always loads of competitors. Additionally, it makes no sense to sell a lot of software under a one-time fee. There are significant ongoing costs for support, maintenance, servers, etc. It makes as much sense as selling one-time fee access to the grocery store.
And it is very much rent-seeking. How could you not describe big 5's lobbying activities as conducted at least partially for regulatory capture? Look who is in charge of the FTC and FCC, particularly that one kid that tried to act cool to tech geeks, what's-his-name.
And that is not even what I meant by rent seeking. We are seeing a new kind, at least in tech: subjugation of consumers means of production, achieved by carefully dispensing bits through services instead of allowing customers to retain control of them (via un-drm'd media or downloads). The purpose of this change is to create more revenue for the owner.... which is rent-seeking. Similar things have been going on for years with consumer stables... DollarShaveClub's One Wipe Charlies (expensive) to replace toilet paper (cheap), or juicero (expensive) to replace a blender and fruit (cheap). Chemical cleaners (expensive) instead of centuries-old natural techniques (cheap) even when chemicals are inappropriate to the cleaning job. And so on...
Compare this to the world of professional software, where it's almost the other way around. Businesses are used to spending lots of money on software, because it makes them more money in return, but they won't do so lightly. To get businesses to pay on a subscription basis, even the biggest names in the industry have had to set their subscription levels at a tiny fraction of the previous cost for a one-off purchase, because businesses will do the sums and won't take the deal if it's going to work out too expensive.
I think part of why people dislike subscription models is due to the reduction of their personal consumer surplus. Under a one time purchase model, power users who get value out of a product for many years get a nice windfall. Users who only need or use the product for a shorter period of time have a smaller consumer surplus since they're paying the same price.
A subscription model almost functions as a form of price discrimination. You end up charging more to those that get value out your product for a longer period of time. I'd imagine this has the effect of increasing producer surplus at the expense of consumer surplus.
In theory every consumer has a one time price such that they would be indifferent between a perpetual model and the subscription model. The issue is there isn't a way for the supplier to segment the market in a way that is as efficient as the subscription model for every user. If you offer the two models together you create an adverse selection problem where only consumers who estimate a greater consumer surplus from the one time price will choose that option, lowering overall revenue for the supplier.
In the few cases where it isn't, thanks to having some technical knowledge, I'm able to string some utilities or services together to accomplish what I need.