Recently, a lot of iOS and macOS apps have switched from a pay once and use until next major version pricing model to a subscription model. The latest example I’m aware of is Ulysses. I don’t use Ulysses, but one of the apps I use that has also made the switch is 1Password. There’s been a lot of discussion about this all over the internet.
Here’s a quick summary of both sides of the debate. Some people think subscriptions for iOS and macOS apps are good - they provide a way to increase revenue, and have it be more predictable. Other people are of the opinion that subscriptions do not make sense for “apps” - people are ok with paying a subscription fee for something like Dropbox, but not for an app like Ulysses. I thought that the discussion on the latest CoreInt episode put forth both sides of this debate much better than I can. I highly recommend giving it a listen.
However, I feel like there are some factors I haven’t seen discussed yet (perhaps they have been, and I just haven’t seen it).
Total cost of ownership
Most apps switching from a paid upgrades model to a recurring subscription model are also raising their total cost of ownership at the same time. Even if the amount of money you pay up front is lower, your total cost of ownership is way higher.
I’ve been a 1Password user for over 5 years now. During that time, I’ve spent around $75 on 1Password for Mac, and iOS. I use Dropbox to sync my passwords, but I don’t pay for Dropbox specifically for 1Password.
If you think about the total cost of ownership over 5 years, with 1Password’s subscription model, which is $2.99 per month (billed annually), that’s $180. That is more than 2 times my previous total cost of ownership!
So far, I haven’t really seen anyone make the switch from paid upgrades to subscriptions without also dramatically increasing the total cost of ownership. I’d be very interested to see if the backlash against subscriptions is as high if the total cost is no different, or lower.
The only things I can think of that reduce or maintain total cost of ownership are all content subscriptions. Things like Netflix, Apple Music, etc. If I watch 2 or 3 movies a month that are available on Netflix, I’ve reduced my price compared to renting them on iTunes (this is partly why I pay for Netflix). Having said that, content and software are really different beasts, so I’m not sure this really applies.
Subscriptions are good because developers won’t hold back features
The argument here is that in the paid upgrades pricing model, developers have to hold back features that are ready for the next major release in order to make paying for an upgrade worth while.
I think this has theory has already proven itself to be invalid. Great example: Adobe Lightroom. In the last 2 years, Lightroom has added virtually no meaningful new features. I’ve paid adobe $240 over that period for absolutely nothing.
This leads me to my next point…
Comparisons to Adobe, Office 365, etc.
A lot of people are pointing to subscriptions like Adobe’s Creative Cloud, and Microsoft’s Office 365 as successful switches to subscription based models. However, I believe this is a misleading comparison to make.
There are no alternatives to Adobe Creative Cloud, and Microsoft Office for the vast majority of people using it. Think about it - what would a Lightroom user switch to? What would a Photoshop user switch to? What would a Microsoft Office user switch to? You could say Apple Photos, Pixelmator, Acorn, or iWork, but really, in a professional context, none of those are real options. Even if you’re willing to switch, the people you work with won’t.
So even if Adobe and Microsoft do atrocious things like having a garbage installer, not allowing you to unsubscribe without making 12 phone calls, or charging you outrageous amounts of money for absolutely nothing in return, you’re still going to have to pay them - you simply have no choice.
Ulysses, 1Password, etc. however, are not in that category. For most users, there are loads of alternatives.
So when do subscriptions work?
I think Manton was on to something on CoreInt when he said people are willing to pay for apps with a server component because there are real costs to running servers. However, I’m not convinced that most people really understand the details of how software is built, and that servers cost money, etc. I like to think of it more as a difference between products and services.
Let’s take software out of the picture for a moment. Would you pay once a week to have someone clean your house? You would. Would you pay once a week to have a vacuum cleaner in your house? Highly unlikely!
In summary, I believe that subscriptions are great for services. They are a much harder sell for products.