In an economic downturn where people look more careful at their spending, isn't it counterintuitive that more and more companies introduce subscriptions or hike prices up?
The only exception is when there really is distinctive ongoing value being delivered (eg. VPN provider). But my bar for what constitutes 'ongoing value' is high.
I don't agree that it aligns incentives between me and the developer. I've found many of the subscription services I've signed up for tend to substantially degenerate in quality after a few years, as they start chasing a perceived larger market share by bloating with features I don't want and would be happy to pay more NOT to have (looking at you, Dropbox).
By contrast, I'm still using lots of software I initially purchased decades ago (tools like Hard Disk Sentinel and Beyond Compare are great examples).
I consider bugs to be manufacturing defects, for which fixes should be free (generally, minor version upgrades). Many parts of the world even have 'fit for stated purpose' laws to that end. If a car manufacturer sells you a lemon, they have some responsibility to fix the faulty parts (eg. recalls).
When the developer adds new features I'm interested in, I'm happy to pay for them (traditionally, major version upgrades). I prefer having the opportunity to make my own decision about whether the new features are worth it, and keep using the old one if not.
I own a ton of useful software, and I'd be broke if I had to pay for all of it on an ongoing basis.
In a world where all software is subscription, we'd all be using the same handful of suites from the top vendors. Better for a rich and diverse ecosystem.
The other nice thing is the continuous revenue stream ensures that developer can continue working on enhancements, lowering the risk of it becoming abandoned.
I also get to be on the latest greatest version at all times.
People’s expectations are anchored and it is hard to sell against that, they expect to pay X for the software price with a Y yearly maintenance. So we stick to industry standard where possible. The standard varies by country so we have country specific setups.
I’m annoyed by subscriptions as well but mostly because I dabble in a lot of things and it’s expensive to have a ongoing subscriptions for something I may only use a few days a year. I generally try to get perpetual licenses and stick to old versions.
The software I make is very niche and domain specific, users spend 70% of their work time on it and are vastly more productive with it. The end users also hate change so they’re very happy to keep paying so that someone will care about their problems and they don’t want upgrades for the sake of it.
Why would I spend $200 on some software one time when it will become obsolete within a couple years? Or maybe I only use it a few times.
I’d rather pay 10-20 a month for one month. And never use it again. Or keep using it.
In this economy I went ahead and cancelled a few subscriptions and kept some. I feel zero obligations and it’s great.
TLDR if it brings you value use it. If not don’t.
On the other end the service is providing you recurring value otherwise you would just drop it.
People worry about growth but more people are being born every second who will eventually grow up to need software. And you don’t even have to wait that long because there’s still a lot of adults without computers who will eventually need software in the future when they become connected. The people crying about subscriptions being the only viable model are the people looking to get rich quick and are probably backed by some VC company that’s hounding them to increase users and profits. If your software is good, you’re in no rush to buy a yacht, and you have confidence that you’re still going to be around in 10 years time then you don’t need to mess about with subscriptions because you know you’re going to have revenue either through people recommending your product to others or reinvesting at each major version update.
I try to avoid subscriptions wherever possible, and will always purchase yearly if it’s an option. But I get that monthly allows people who can’t afford the up front cost to join in too. I really don’t think it’s the way to go though.
My only software subscriptions currently:
- Feedbin (yearly)
- Duolingo (yearly)
- Amazon (yearly)
- Zwift (monthly)
- Netflix (monthly)
I understand the developer side of the equation, but I have more important recurring payments to make (bandwidth, cloud services for self-hosting, energy, gas, school fees, etc.), so paying, say, €10 each, monthly, for half a dozen non-essential apps that I don’t use on a daily basis and don’t contribute directly to my goals just doesn’t add up—-I’d rather use a free alternative or do without, and many businesses will do the same, especially when faced with per-seat fees.
There is, however, another factor at play—-many VCs evaluate businesses on the basis of ARR, and that often leads startups to make sure they have recurring revenue from the start and bake that into their operating model.
In theory, anyway, it's a good thing that they get cut if they are not bringing enough value. Sure, downturns are a time when this happens in earnest, but you'll always get people complaining about the service and claiming "We could save X dollars here" if it's not adding value.
In practice -- sure, there's probably a lot of services that are low-value and got "floated" by the general upswing in the last couple of years. But to me, this is probably true of non-subscription applications and physical goods as well. People are going to be thinking twice about buying those as well during downturns, so the impact isn't limited or specific to subscription-based models.
This value is objective? Therein lies the issue with this argument. For some people, a spam blocking app is a waste of $2/mo. For another person, it saves them a ton of headache. I'm currently subscribed to 12 apps on my iPhone and I have 20 others that I let expire over the past year - I pay for them because I enjoy them and would like to support the developers and to continue using them. I have a ton of paid apps from years past that are now just junk, because the $5 the developer charged 10 years ago couldn't support development for 10 years of service. Subscriptions are the answer to that problem.
Subscriptions will naturally go away if they don't work, but that also means those services/products go away as well.
Also where is this data on flattening subscriber growth that you have access to?
1. I personally don't like XYZ
2. My echo chamber doesn't like XYZ
3. Consumers at large don't like XYZ
4. XYZ will be the death of a company or the industry or the economy
are all very different realities. In this particular case, I'm pretty confident in saying that it is actually 1 & 2. The tech sector will be just fine.
However, consumer-facing subscription models are not the majority of the tech sector. Most tech companies have other ways of making money, and the tech sector as a whole will be fine.
Like GitHub for example, I love it, it provides value, but it costs a ton if you have a lot of devs, and you can spin your own git server
Personally, I think we are about to see a huge resurgence in self hosting and returning to "old ways" that worked before subscriptions.
One great example of the anti-pattern: Look at how GitHub has shit the bed since MS bought them. Tons of QoL developer features were pushed behind the enterprise paywall, actions was constantly down and having issues, and they did not innovate anything.
Beware robber barons who innovate nothing and expect you to pay more.
As a consumer, of course I have "subscription fatigue" and some apps when I get a $20 monthly charge I question whether I really need it.
As an entrepreneur, it's all just customer lifetime value , there's a lot of factors to whether subscription or lifetime makes more sense. Recurring revenue is easier to build a business upon but given people have subscription fatigue, there's a lot of merit to looking for ways to sell one-off, despite the aforementioned challenges.
With all this said, my biggest theory is that we _think_ people have subscription fatigue, but it's an illusion. What's really happening is that web software was VC subsidized for a long time, both directly (with sites like Facebook having no ads their first decade of existence), and indirectly (with many startups forgoing monetization favoring growth following companies like Facebook's lead). So people got anchored to web software being free/cheap for a long time.
When most people say "I hate subscriptions, I don't want to pay $20/month, just sell me the one-off software!" So as a business owner you say, ok, then give me $200 for lifetime, and they say "$200 for an app, that's crazy! I want to pay $20 lifetime". This debate looks like it's about subscription when really it's a debate about price. And consumers have been psychologically anchored to apps being very cheap for a long time - nobody would bat an eye at a $14.99 book on Amazon but that's considered a hefty price tag for an app that might have taken a fair bit of design and development (in-demand skills).
Last but certainly not least, most software is internet enabled these days. Not all of it, but a lot of it. It's risky as a business owner to offer a lifetime purchase for something that will have ongoing server costs. This is doubly true if there's an AI component that might involve expensive GPUs.
As far as it being "counter-intuitive" to hike prices, the cheap money is gone, and businesses are realizing it's better to make a small number of paying customers happy then a large number of non-paying customers happy.
If you're looking at this purely from a consumer perspective, you're sick of managing subscriptions, you're sick of getting billed for something you didn't use much, etc of course I relate. But if you put yourself in the shoes of software businesses, if people are going to complain and moan about paying $10 a month for an app because they think the most they should pay you is $20 their whole lives, you just can't build a sustainable business around those types of customers, when you have expensive design, development, marketing, and server costs.