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A Critical Analysis of the Subscription Economy

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Re: A Critical Analysis of the Subscription Economy

#61

Post by tonyedgecombe »

ColanR wrote: post #18
pspeter3 wrote: post #14

Earlier quoted context omitted.

Can you provide your reasoning? I assume that the subscriptions continue to fund software developers working on the product.

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…

There is a reason to improve the product because if they don't they will lose subscribers.

What does change is there isn't the incentive to pile in dubious features to justify charging for an upgrade every other year.

Re: A Critical Analysis of the Subscription Economy

#62

Post by zAy0LfpBZLC8mAC »

Houshalter wrote: post #49
softawre wrote: post #36

Earlier quoted context omitted.

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?

Economically you can convert between a fixed price and a subscription price. A subscription has a fixed economic value governed by the interest rate. That is if you have a thing that generates $10 every year, you should be able to sell it for $200 (if the interest rate is 5%.) I think this is something people don't often think about. But it makes it very easy to compare different costs and benefits that involve time.…

> Hypothetically you could just invest $2400 and use the interest to pay the subscription. Saving $2,600.

Except you do not actually use software forever, and there is also no market for licenses for 10-year-old versions, so you have to actually calculate it as an annuity.

So, if you expect to use the software for ten years, the NPV of 120$ per year would be about 900$ at 5% interest.

Re: A Critical Analysis of the Subscription Economy

#63

Post by ladon86 »

mortenjorck wrote: post #50
ladon86 wrote: post #39

Earlier quoted context omitted.

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…

While I still consider Sketch's model leagues more customer-friendly than Adobe's, I'm not happy that they appear to have given up any attempt at meaningfully versioning the file format. I can completely understand something like an overhaul to the way symbols are handled breaking compatibility with older versions of the app, but when an update is adding things like a new color picker and tweaking vector snapping, it…

Right - because their business model depends on you updating, they are strongly incentivized to break the file format with every new version.

Re: A Critical Analysis of the Subscription Economy

#64

Post by siidooloo »

blacksmith_tb wrote: post #54
greggman wrote: post #30

Earlier quoted context omitted.

I personally hate the Adobe model and am still on Photoshop CS6 but my artist friends all love it. Maybe they don't realize they're paying at least double. All they concentrate on is it's cheap to stsrt.

But licenses for the old Creative Suite were an eyewatering $2500 USD for the full suite. Sure, you'll get there in four years with a full-on CC subscription, but for the large number of users who only want Photoshop, the ~ $10 USD / mo. plans are pretty appealing (and Adobe now makes money off of them, since it's easier than pirating it to pay for it).

The value really depends on what you need. Most people don't need the whole create suite. If all you need are the photo/design/print apps you really get screwed by the subscription.

Photoshop Illustrator and inDesign haven't had upgrade worthy releases since like CS5. Acrobat Pro seems to be getting worse.

Re: A Critical Analysis of the Subscription Economy

#65

Post by v12golfcart »

Seems like the point of the article is that subcr is bad for customers and therefore bad for biz... the psychos should have known better.

It's true that we pay more for stuff now vs. perpetual licenses (it's prob a book's worth of material, but "opt-out is better than opt-in" and Houshalter's point on chunking are most of it). But in exchange, companies have the ability to invest that greater profit to a greater degree in innovation, so in the long-term we, customers, should get more out of it than we lost in dollars.

First an observation: Adobe's decision to increase profit secularly (i.e. beyond any accounting nuances at the time of switch) by switching to subscription is actually TWO decisions. 1) the switch in revenue mechanism itself and 2) the decision to NOT invest the additional profit.

#2 is the crux of my point, but the "to a greater degree" thing is a 1+1=3 effect:

"more profit" is straightforward because subscriptions increase dollars in, often more than making up for any churn. That cash could be invested to accelerate innovation. It's 1-to-1 apart from timing issues (queuing "yearly up fronts" :D)

"to a greater degree" - this is the special part. It is easier to spend more when predictability is higher. Or put another way, volatility is the enemy of spending to the "hilt". So companies like Netflix can spend (for our sake) more to the hilt when you have a tighter distribution as to where the hilt could be (vs. perpetual products which have poor visibility). Just ask any marketing person or sales person about how easy it is to spend in channels when attribution isn't a problem. BTW I define hilt as "as much as necessary to stay ahead of threats of competition/churn"

But yes, the company does have to choose to do this. Some are more relentless for their customers :). I just heard about the www.relentless.com thing lolz...

Quick aside: I saw this sick chart that compared 12-month lifetime value between Dollar Shave Club (subscription) and Harry's (previously per unit). Even though Harry's has always been branded as a more premium product, DSC made more money by the 12th month (even after churn). It's easy to forget that monthly click -_-

Re: A Critical Analysis of the Subscription Economy

#66

Post by siidooloo »

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…

Look at the upgrades they are offering on that page. No one would pay for that as a stand alone upgrade. For the last 5 years they've been adding gimmicks.

A real update would be better live editing. When they launched lightroom I was hopefull some of that workflow would make it to Photoshop. Nope. When they bought speedgrade I thought "amazing, I hope they make a print version." Nope.

The same is true for Illustrator, inDesign and Acrobat Pro.

Re: A Critical Analysis of the Subscription Economy

#67

Post by nodamage »

The challenge with modern consumer software is that:

1. Users expect their apps to work on their computers, tablets, and phones, which generally means you need to provide some ongoing service to keep your data synced between all of the devices. (For some simple apps you can get away with using a third-party service, e.g. Dropbox or iCloud, but many apps with complex data will need their own custom-built solutions.) Depending on the kind of data you are storing, this can get expensive.

2. Users expect perpetual upgrades for every new version of iOS/macOS/Android/Windows that comes out. This obviously requires development work, especially since iOS/macOS/Android are annual releases at this point.

These ongoing costs imply that some kind of recurring revenue is necessary to keep the software running and up to date, which is why the move to subscription revenue has become more popular lately.

Besides, I question the premise that "perpetual" licenses have ever truly been perpetual except in name only: eventually that software you bought will stop working on newer operating systems and devices and you'll have to buy a new version anyway.

Re: A Critical Analysis of the Subscription Economy

#68

Post by s73ver »

zAy0LfpBZLC8mAC wrote: post #42
cwyers wrote: post #27

Earlier quoted context omitted.

> 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…

>> 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? Every single one of them. It's just a matter of logic that that incentive is removed. There might be other incentives that still keep them innovating or whatever (like, say, competition, if it's reasonably possible…

No, it isn't. It is not a matter of logic that the incentive is removed. One could logically say that if the company wanted people to continue subscribing, they would have to keep up with the bugfixes and patches.

Re: A Critical Analysis of the Subscription Economy

#69

Post by [deleted] »

zAy0LfpBZLC8mAC wrote: post #42
cwyers wrote: post #27

Earlier quoted context omitted.

> 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…

>> 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? Every single one of them. It's just a matter of logic that that incentive is removed. There might be other incentives that still keep them innovating or whatever (like, say, competition, if it's reasonably possible…

[deleted]

Re: A Critical Analysis of the Subscription Economy

#70

Post by nodamage »

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’m certain Adobe has made a good amount of money in the short term, but they've forfeited a monopoly. I’m more skeptical about their long-term business.

I don't think they ever would have had a monopoly, even if they had kept their perpetual licensing instead of moving to subscription. The cost of those licenses was pretty high, so there was always room for someone to come in at a lower price point and undercut them.

Besides, $10/month for Photoshop and Lightroom is much more accessible than $699 for a perpetual license, especially if you don't need to use it that often.

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