It's not a trend where buyers choose recurring payments, but where companies only offer services through recurring payments.
As I read the blog entry, I was struck by how much apprehension I had about the particular subject (Zuora and subscriptions) and not the theme (making a compelling sales presentation). I was tempted but decided to refrain from adding a comment about the subject and how much I find the "Subscription Economy" disappointing. After all, railing about an incidental matter from a submission rather than its point would be HN comments in a nutshell. So many of us here do it, myself included.
But I was happy—and not really surprised—to see the point had already been made and all I had to do was upvote. But here I am writing a reply to say that it provided me a good chuckle this morning as we get back to work after a holiday break. Back to the ol' grind in the Subscription Economy, eh?
I think this piece and the pitch it references are borderline abuse of the history and context of subscription businesses.
I see the current trend in subscriptions as largely a revolution in pure technology service businesses, where subscriptions are a rational way to pay for them (dropbox, github), along with software producers and their customers maturing to the point that they can mutually acknowledge the need for up-to-date and evolving core capabilities, such as Windows and Office, which can reasonably be seen to require recurring support which has value. (But you can still get a lot done with non subscription versions of Word 2003 etc).
Newspapers, telephones and cable TV have long been subscription based. Subscriptions alone obviously were not able to save newspapers from crushing deflation in their ancillary revenue models of classified ads, which they lost to craigslist and others. Cable TV to date has been much more successful in evolving and preventing disruption in those ancillary lines (pay per view etc) and has maintained a subscription model.
As an aside - everyone thinks Netflix is so wise with their current subscription strategy, I am a paying streaming customer myself, but the number of times of late that Netflix does not have the movie I actually want to watch, but Amazon's pay-per-view model does, makes me realize there are limits to the subscription approach as well. Netflix's model of creating content to justify their subscription is going to stop working eventually, content is a "long tail" type problem and their strategy of self-funding content is going to be increasingly unworkable within a few years.
How so?
It's so much easier to pay a monthly or yearly fee then up front, especially for companies - both in terms of cashflow , accounting practices and stability.
Some companies has gone that route that have customers on both sides of the aisle - adobe is one of them. Their choice alienated some part of their customers, but be sure that many others were glad for the change - probably big companies with shifting employee roster, or those who upgraded frequently.
It is the exact same with the majority of subscription services.
For a company I get that it is easier. But easier for an individual?
I walk twice around the earth before even considering a subscription service. It cannot be simpler than pay once and you are done for life. The reason as to why so few companies offer both is because it then becomes apparent how bad the subscription value is.
Although that's rarely the case. At some point, your OS upgrade--which you probably have to do for security reasons--breaks your five year old program. Or the program doesn't handle some new format or peripheral, etc.
I don't really disagree with your basic point. I dislike money leaks. For online services of various types, I mostly have no choice but I at least want to minimize them with on-prem software--especially for things I only use every now and then.
I had them both before the Rift had its non-xbox controllers. The Rift let in light through the nose, had no room scale (needed to be in a chair), and just generally seemed like a worse experience.
Did things change or are there other reasons you like it? Are the controllers just that much better?
The tracked hand controllers the Rift now has are arguably a little better than the more basic “baton” style controllers on the Vive, although I believe HTC do have a “Knuckle” controller on the way that adds more advanced hand tracking.
The Rift is also significantly lighter and less sweaty on the head, its built in headphones are good enough you can avoid the additional weight of decent headphones, something the Vive pretty much requires.
I do strongly think both systems are _way_ too early for anyone other than insane early adopter types. Given this, I think the Rift makes most sense for no other reason than it’s the cheapest. Both of them will make many people sick even after relatively short play sessions. Neither of them are “good” in my opinion, merely the best it seems the market has managed so far.
It's WAY better than most people imagine, even if it isn't "there" enough to be mainstream, yet.
“A lot of people insist on price, but if the VR available today were as good as The Matrix, price wouldn’t be the issue. It’s going to be a combination of better software and better hardware. Right now free isn’t cheap enough for most people.”
I still regard the Rift/Vive as the poorest technology investments I’ve ever made, but if others want to spend thousands of dollars on low res, low frame rate (no, 90-120 FPS is not good enough to adequately trick the human mind) motion sickness generators, have at it.
The install base is, and will remain, far too small to support serious investment in AAA software/games for many years yet I suspect. People love to argue the minute practical differences between the Rift and the Vive, but I’d argue who cares about either when there is so little software worth anyone’s time available.
> https://www.wired.com/story/wired25-peter-thiel-palmer-lucke...
[1]-https://www.cnet.com/news/shambling-corpse-of-3d-tv-finally-...
The markets aren't spectacularly and miraculously efficient, but they're efficient enough that products without demand will not last, with the exception of industry-wide collusion to remove the consumer-preferred option from the market. Game theory says the existence of a wanted-but-not-provided product probably won't last, however. And regardless of continuous cooperation of the participating suppliers, there can always be a new entrant.
Anecdotal on the TV point, but I recently purchased a new TV... no bend, no 3D (didn't even see that as an option), no hassle. :)
They didn't try to start a trend. They tried to make something up to warrant a new purchase.
Today, every tv is a Smart TV, and yet again, I haven’t found anyone who thought they weren’t awful
In cars theres the same issue with GPS systems: even luxury cars have awful interfaces. Presumably tesla’s is decent (never tried), but otherwise the only interface I’ve encountered yet that met the minimum requirement of a sensible response time (let alone everything else) is a luxury jeep. Mercedes, priuses, bmws, etc are all horrendous.
In phones, the aux ports and phablets
On the web, heavy js
In games, complex 3D graphics (this is very slowly changing, as indie devs begin to realize games existed between 1980 and 2000)
This type of event, where the producers collectively decide what the consumers want, and only produce it, and miss the mark by a mile, definetely exist (these are just things I’m irrated by recently), though I assume incompetence and babdwaggoning over any kind of real thinking going into this. (They didn’t try to force a trend, they just all thought it was the trend, due to whatever terrible research they all do; hell, I’d bet there was one or two marketing firms that were the root cause of most of these messes)
I like 3D well enough at least for the occasional novelty and film that uses it well, e.g. Gravity. There is just about zero content available however. My impression when I bought my TV was that there were certainly non-3D options available. But I got a pre-Christmas deal and I paid about the same as for an equivalent TV that didn't have 3D.
It's the same with Smart TVs. It doesn't really add to the cost of the TV. I just never use the features.
I guess the latest trend is whatever resolution that's an additional increment beyond the limits of human vision. Or maybe OLED.
I do understand that the TV manufacturers are really desperate to drive TV upgrade cycles. The good news is that the new features are mostly harmless if you need a new TV anyway.
Some of the things I noted have perfectly valid ideas, but just ..pathetic.. implementations (smart tvs, gps), and others are preferences that get forced onto you (aux port, web heavy-js, game graphics)
But the key is the suppliers collectively decided that this is exactly what the consumers want, and the only option left otherwise is to turn back to 1990 or look to the chinese knockoffs. The ability to signal to the market that this isn’t whats wanted is lost... except by entirely avoiding all recent technological advances.
And the truly strange thing is that there are few, if any, offering the same object but with improved interfaces (with cars it makes sense, the rest of the vehicle is more important; but tvs? video games? What the hell? These should be much easier to find variations on.
THat's just a shitty TV. My now almost 5 year old Smart TV handles 24hz just fine... the panel is actually running at 120 so 24 is an even multiple.
Personally, I really like my smart TV and use many apps for stream non-mainstream sports, and the like.
If 3D TVs were able to garner any premium over regular TVs, the electronics companies would have continued selling them. It was, and probably still is, a net loss.
Smart TVs are a convenience that is actually in demand, mostly because it does not add a markup to price - why buy a non smart TV when you can buy a smart one at the same price.
The majority of iPhone users probably use bluetooth headphones.
Phablets are so much in demand, that apple had practically no choice but to build one.
Heavy js and web is a completely different story because you aren't the customer for website with heavy js, and the advertisers, who are the customers of these websites, have a great demand for more javascript.
AAA titles are dominating the market. Indie sales are a minuscule fraction of the game industry market. Why? because there is insane demand for AAA titles, and for that matter for massive multiplayer games - LoL, Fortnite, PUBG etc...
Just because you don't like it, or for that matter the entire of HN don't like it, doesn't mean there is no demand for it.
Sure; the issue is that due to supplier convergence, the only option in a modern tv. If they weren’t so obviously harmful to sales, we’d still have them around, because it’d be impossible to differentiate between negative vs positive impact, simply because nothing else was available to even buy (in that trust/price/quality/brand range)
>The majority of iPhone users probably use bluetooth headphones.
Before or after it was their only choice? Like cars, the presence or lack of an aux port is irrelevant compared to the rest of the purchase. It doesn’t imply one way or the other whether anyone actually prefers it, when the change is bundled with so much more.
>AAA titles are dominating the market
AAA titles are always dominating the market. My point is that there is no way to differentiate between a AAA game being successful because of, despite or irresThe majority of iPhone users probably use bluetooth headphones.pective of its graphical complexity, because consumers simply cannot buy a AAA title that did not spend half its budget on 3D graphics.
This is only changing because a few indie games/smaller titles have seen extreme success despite “weak” graphics (minecraft, fortnite, LoL). Even kickstarter games appealing to older genres (eg The recent CRPGs trend) probably put an outsized emphasis on graphics, despite targetting players of 90s work.
My opinion is that games can get very far with very limited graphics, but looking at the general market its impossible to actually make the case because there’s very few examples where its even been tried. The best you can really do is turn to modern indie, or point out that some older games are still heavily played (WoW, starcraft, quake, etc)
If the whole market suddenly shifts in a particular direction, there’s no chance for competition to rule out an idea as being a bad one.
I can't imagine going back not having music subscription service. I don't have to make a decision which album to buy anymore and I don't have to worry about my kids pirating music.
The problem is when something really has no reason to not be a one time purchase, like companies on instagram charging me $15 a month to send me three new pairs of socks twice a quarter, or maybe they mail me a wooden box once a month with some woodsy smelling beard oil, a leather flask, and a small axe.
Software is moving this way too; but I'm still in the camp that would shell out $25 for a program as is that would still work on my machine decades later even if the company folds or puts out another version, than pay $2 a month for something that might not work at all or fundamentally change its functionality in a year.
Software is a moving target where everything else is changing around it - OS, hardware, web infrastructure, etc. and having devs continuing development on a tool I'm using is useful. The subscription model in this case accurately reflects the reality and is better than randomly having to pay $45 on occasion to upgrade to a version that still works.
I'd also argue that Spotify is better than legal Napster with its streaming and music playlist curation. Spotify may be the best software application I use on a regular basis.
For me the 5" screen of the regular Pixel (2) is perfect.
The screen could be a bit larger if there was less bezel though: An iPhone SE size phone in the iPhone X style could have a 5" screen without getting any larger. That would be perfect.
Good luck only selling 3D TVs when the next company will just sell normal TVs for less and actually make money.
That's really where subscriptions break down. You need to use something every now and then but you don't care if it's five years old as long as it still works.
Of course, one-time purchase alternatives like Photoshop Elements are one option these days as are free programs like The GIMP.
My assumption at the time was they had no choice to go to a subscription model at that time, because the other option would be to instantly demolish the finances of every broke graphic designer out there, which would possibly cause an exodus to a cheap or OSS option and risk their ability to stay the dominant player.
On that side of the coin, I can't blame Adobe for going to the subscription model. On the other side, it's a real kick in the ass for casual users.
I worked in Graphic Design for 15 years, and always kept a personal copy of Adobe Photoshop and Illustrator. I didn't upgrade every version, because right around CS2, the upgrades weren't worth it, imo. I still have a pre-subscription license that I hope keeps working, because as a person who only opens it up once a month, it's simply not worth the price for me.
Which has maintained its position as the de facto standard which may otherwise have leaked away if the students/early career users couldn't have used cracks.
At the same time, as you suggest, those large numbers of non-corporate users almost certainly helped Adobe emerge as the de facto standard that it became.
There are real merits to subscription models, not only in accounting but in risk avoidance (you haven't paid up front) and support (the vendor has a cash incentive to keep you happy). There are obviously drawbacks too, like lock-in and the risk of a vendor collapsing, but in some cases it looks like a good decision.
As far as consumer-facing? I'm not so sure.
Lots of companies, especially the ones with protected IP or network effects, can kick their customers around quite a bit without shifting demand.
I don't want Microsoft Office to be subscription based. I've never met anyone who does, unless what they actually wanted was the online storage subscription. (I know some people who initially said they did because they didn't want the menus to keep changing on them between editions, but then the subscription version developed the same problem.) But it's a real fight to avoid their implicit network when people keep sending me .xls files or formatting-dependent .docx or all the other things Open Office won't actually manage, so I (or rather my employers) end up paying the subscription.
Spotify, Hulu, etc are more popular, but it's still fairly telling that no one offers direct purchase of TV shows in anything short of ultra-expensive box sets. Even buying music and movies outright has become increasingly tough to do. There are probably people who will save money even with a lifetime Spotify subscription, but I suspect people who don't vary their listening a lot lose out compared to direct purchase, and people with tastes not easily provided by one streaming service have definitely lost out. It basically looks like IP holders shied away from direct sales as soon as they couldn't inflate costs by overpricing a physical medium, and left consumers without a choice.
The last category are I suppose subscriptions offering consumable products on a schedule, like Dollar Shave Club. These have more obvious value - there's no lifetime purchase possible, so it's not much different than a "reorder monthly" option. But even here they mostly seem to be succeeding by offering novelty or taking on markets that have been overpriced for ages.
I'm not sure I can think of a consumer-facing subscription product equivalent to e.g. CircleCI - something that could be sold as a lifetime purchase, which is instead sold as a subscription - for which buyers voluntarily chose a subscription model.
Most consumer-oriented services (Spotify, Apple Music, Netflix, etc.) could be sold with a lifetime option but I suspect the balance sheet liability would be unattractive to most companies and the big upfront payment toward an ultimately unknowable future service would be unattractive for most consumers. (Will the company still exist? Will I still want the service? Will the company come out with a new and better service and put the one I paid for on legacy support?)
>Even buying music and movies outright has become increasingly tough to do.
Really? I admittedly don't do it a huge amount but my impression was that CDs and DVDs were still pretty readily available for purchase on both physical media and digitally.
As for music, TV shows, movies, it’s definitely possible to buy them rather than using a subscription service. Music is the easiest, Amazon and iTunes still offer MP3 purchases for reasonable prices that you can play anywhere and not have to worry about DRM. Movies and TV shows are more complicated because they all have pretty crappy DRM and the pricing is kind of ridiculous, but it is possible to buy them outright.
As much as I hate how everything is moving to subscriptions, there are occasions when I prefer it. For example my Plex pass, I don’t really trust that the company will be around and providing enough value in the long term for me to invest in a lifetime subscription even though it is offered. And so I pay annually and sometimes I don’t renew. I think I paid for 3 out of the last 5 years, depending on how much use I’m getting out of it.
The reason is simple: one is a capital expenditure, whereas the other can be categorized as an operational expense. With a subscription model, even if you end up paying more in the long run, you realize the return on investment almost immediately.
Thinking back to my first job as an EE in the early 90's, I clearly remember the new owner of the company who had been a CFO in his previous life, trying to figure out a way to move our hardware sales to a leasing-type model. His experience as a CFO led him to the conclusion that larger companies would prefer to bill items to OpEx rather than CapEx for just the reason you said.
It's more that the need manifested itself with the economic crash, as companies realized they would rather keep as much cash as possible in the bank in order to more successfully navigate the uncertain economic climate. Subscription model satisfies that risk aversion.
In some companies there are also budgetary reasons. For example, a department may blow their capex budget on something early in the year. If you have a payment model that supports regular payments, the customer can still buy your product, as opposed to having to make room in next year's budget (which is not only not guaranteed, but also delays the purchase).
But the biggest reason is ROI. Let's say there is a software that will save your department $1000 per month. You can either buy this software for a $24,000 one-time payment, or for $500 per month. If you do the former, it would take you two years to start realizing the ROI. If you do the latter, you start realizing it immediately. And of course, if you don't like the software, you can always cancel your subscription, which means you're also protected against the risk of, say, buying something that never gets adopted by the users (or project failures, etc.).
As it happens, I would have been fine just dropping the cash. No major emergencies occurred. But I didn't know that at the time.
Opex is much more reactive, both in accounting and in scaling costs of goods with actual sales.
A majority of our larger clients took the subscription since it came with a few more benefits in service and response time. The smaller clients wanted to have us doing ala carte work which was also fine.
The best part about our sub clients was it built a closer relationship with us. Communication was easier and more streamlined and it was easier to show a real value to the work we were doing on a month to month basis. Our hourly clients didn't care about analytics, they just wanted a part-time content manager or someone to upgrade their design every now and then.
It was easy for us to continue to have the incoming revenue and plan a budget based on those numbers. Our smaller hourly clients were just frosting on the cake. We never would have gotten so many smaller companies on board if we only offered sub services to them. The hourly rate was perfect for them to keep the work manageable and on-demand and still within a reasonable budget.
My other friends who did the same thing would simply charge a bulk rate for the design and development and then once the site was released, they had to find another client willing to dole out %5-$10K for their services. We built long term relationships with our clients and were able to tailor future services to their needs - which totally blew my friends mind. They were so opposed to a sub based service, all they wanted was the money up front which was a total red flag to me.
If a firm could be profitable and offer out-right purchases relative to recurring payments, why aren't they doing that? Let the market be rife with only recurring-payment firms. A purchase firm enters with higher prices, if they fail to succeed, it's "buyers [are] increasingly choose recurring service payments over outright purchases."