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A Critical Analysis of the Subscription Economy

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Re: A Critical Analysis of the Subscription Economy

#31

Post by Houshalter »

It's worth considering what a subscription would be worth as a fixed cost. Like say the company was going to invest the fixed cost into the market, and take the interest as if it was continuous income from subscriptions. Or if a user wanted to just invest a fixed amount of money so the interest will always be there for to pay for the subscription.

At 5% interest, a subscription of $1 a month is worth a fixed cost of $240. Photoshop and Netflix's $10 a month is worth a fixed cost of $2400. Xbox Live's $60 a year subscription makes it worth about $1200, making it cost 3 times more than the console itself. World of Warcraft's $15 a month subscription comes out to a whopping $3600, making it 60 times more expensive than a normal new game (if you wanted to subscribe to it forever.)

Re: A Critical Analysis of the Subscription Economy

#32

Post by TimJYoung »

toyg wrote: post #24
ColanR wrote: post #18

Earlier quoted context omitted.

I think parent's point is about how the company is drawing in cashflow. If the customer owns perpetually a copy of the software, the only reason they'll buy a new copy is if the new one is substantially better than the old: hence, the only way the company makes cash next year is if they've been improving their product. With the subscription model, the company is still going to make that income regardless if they have…

On the other hand, this removes a big incentive for "featuritis". A developer can sit back and only add features that really matter to the product or fix minor but annoying bugs, rather than pushing unnecessary flashy changes dictated by a sales cycle. I'm not particularly happy about moving to what is effectively a rent society, but I think this is one of the few silver linings of the subscription model.

Spot-on.

It's almost impossible to keep mature products going without a subscription model. Mature products eventually only need:

a) support and b) compatibility/stability/performance updates.

But, these types of updates can be very expensive to develop and are very difficult to market as a new release (works with XXXX now isn't a very compelling proposition for upgrades).

It's kind of the same problem that open source software faces after it matures. Nobody wants to just sit and do support/incremental changes on old software, at least not for free.

Re: A Critical Analysis of the Subscription Economy

#33

Post by Spooky23 »

cwyers wrote: post #27
zAy0LfpBZLC8mAC wrote: post #6

Earlier quoted context omitted.

> As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. But you do realize that the subscription model is exactly the thing that removes the incentive to do that, right?

> But you do realize that the subscription model is exactly the thing that removes the incentive to do that, right? Can you name a single case where this has happened with subscription software, though? The big named examples in the article (as far as I could stand to read it, at least) are Adobe Creative Cloud and Microsoft Office 365. Here's the What's New page for Photoshop CC 2017, along with links to the changes…

Microsoft took away your previous version rights and broke Access for many older databases. They launched an O365 server side Access Service that was shut down.

There are other examples as well. Do you own Visio or Project and use Citrix? You can't use it unless you convert to a subscription.

Most of the office apps changes have been around supporting other office components. Stuff like federated login and not crashing. :)

Re: A Critical Analysis of the Subscription Economy

#34

Post by diggum »

toyg wrote: post #24
ColanR wrote: post #18

Earlier quoted context omitted.

I think parent's point is about how the company is drawing in cashflow. If the customer owns perpetually a copy of the software, the only reason they'll buy a new copy is if the new one is substantially better than the old: hence, the only way the company makes cash next year is if they've been improving their product. With the subscription model, the company is still going to make that income regardless if they have…

On the other hand, this removes a big incentive for "featuritis". A developer can sit back and only add features that really matter to the product or fix minor but annoying bugs, rather than pushing unnecessary flashy changes dictated by a sales cycle. I'm not particularly happy about moving to what is effectively a rent society, but I think this is one of the few silver linings of the subscription model.

I am employed by one of the companies discussed, and while I was on the fence about subscriptions originally, I've come to change my opinion. While not ideal for a subset of users who might use only one or two applications, it is less expensive for the majority of users. It's also lowered the barrier of entry significantly, which has invited a lot of new users, reduced piracy, and encouraged use and exploration of applications they might have avoided in the past.

From the development side of the business, the more frequent release cycle has allowed the product teams to be much more responsive. Under the old model, with major updates every 18-24 months, I might receive a feature request which is implemented in a few weeks, but which the user doesn't have access to for a year or more. This was hugely frustrating as we want to make features and products our customers want to use, and to have it ready and waiting for so long was not a great experience for anyone. Now, we can have that feature in users hands in weeks or months.

I don't understand this idea that there will be reduced incentive to release updates under a subscription or membership model. If anything, frequency and responsiveness feels more important than before, and I don't know of anyone here who feels differently.

edit: I was more on the fence about subscriptions than unsupportive. It was a drastic change that required either gradual transition or a rip-off-the-bandaid approach.

Re: A Critical Analysis of the Subscription Economy

#35

Post by pspeter3 »

rcthompson wrote: post #29
pspeter3 wrote: post #5

As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. I like the subscription model, especially if it has a free tier, because passionate customers can support the developer team and subsidize less passionate users

We're not talking about subscribing to a service or subscribing to updates. We're talking about the "keep paying us or you lose access to the software" kind of subscription.

Yeah, that's an important distinction. I don't like that model.

Re: A Critical Analysis of the Subscription Economy

#36

Post by softawre »

Houshalter wrote: post #31

It's worth considering what a subscription would be worth as a fixed cost. Like say the company was going to invest the fixed cost into the market, and take the interest as if it was continuous income from subscriptions. Or if a user wanted to just invest a fixed amount of money so the interest will always be there for to pay for the subscription. At 5% interest, a subscription of $1 a month is worth a fixed cost of…

Can you explain why considering the dollar amounts that would earn interest equal to subscription costs has any relevancy into how much these services cost?

Or put another way -- what?

Re: A Critical Analysis of the Subscription Economy

#38

Post by brandon272 »

michaelt wrote: post #10

I know a lot of people here on HN think subscription models are pretty swell - personally I think they're not so great. Sure, they provide revenue that can support security fixes - but at the cost of decimating the incentive to improve features to generate upgrade revenue. After all, if spending more on development doesn't raise revenues much, but cutting down to a skeleton team of maintenance developers means that s…

I actually think that pressures from customers increases somewhat when they are dealing with an ongoing fee which they see hitting their accounts on a monthly basis. Every time I see it there is a question of, "how is this software working for me? Do I still need it?" ... Not so much the case with perpetual licensing until it is time to (potentially) upgrade.

Re: A Critical Analysis of the Subscription Economy

#39

Post by ladon86 »

samsolomon wrote: post #16

The case of Adobe is interesting. I think the move to a subscription model has been a hostile move for customers. The second you stop paying for the software, you lose the ability to open your old files. This has allowed smaller software applications such as Sketch, The Affinity Suite and Capture One to grab marketshare. I think Sketch’s current business model is perfect. Customers pay for a year of updates. If a cus…

I kind of disagree about Sketch having a customer-friendly model, because files produced by a newer version can't be opened by an older version - regardless of whether any new features have been used in that file.

So you pay for a year of updates, but if anyone you collaborate with updates their software, you have to as well, because you can't open the files they produce or even edit and save.

Most of the time you're paying for updates so that you can open collaborator files, not because you want new features. It's effectively a subscription paid annually.

Re: A Critical Analysis of the Subscription Economy

#40

Post by bruxis »

Houshalter wrote: post #31

It's worth considering what a subscription would be worth as a fixed cost. Like say the company was going to invest the fixed cost into the market, and take the interest as if it was continuous income from subscriptions. Or if a user wanted to just invest a fixed amount of money so the interest will always be there for to pay for the subscription. At 5% interest, a subscription of $1 a month is worth a fixed cost of…

From a company's perspective here, they need to target the most common denominator. This means looking at various cohorts of users and determining a pricing model for the average duration those cohorts continue to pay for the service.

However, coming up with some number X prices for various cohorts is not particularly useful, since simply introducing choice confuses some users and causes drop-off, let alone optimizing those choices and explaining them.

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