Productivity Apps and Subscription Pricing ⇥ mjtsai.com

Michael Tsai:

It’s certainly true that people are wary of subscriptions. But I wonder how much of the recent backlash is due to the subscription model itself and how much is due to the fact that, in practice, transitions to subscriptions have effectively been large price increases.

I think it’s absolutely this combination of factors. While Tsai points out that subscriptions have increased the price of software for their typical lifespan, let’s not forget that some people are comfortable using an older version of software for longer. I still run Photoshop CS5.1, which was released in 2011, because newer versions of the software don’t offer additional features that are relevant to me. If Creative Cloud was the only option at the time that I bought Photoshop, I would have committed at least $720 USD. True, I would be running the latest version at any given time, but that isn’t something I value.

Perhaps that price barrier is the goal here. Instead of being able to get away with paying once for software every ten years, customers now need to decide just how valuable the software is to them. But I think one thing a lot of developers might forget is that their subscription is not the only one a user has to make a decision on: as more apps adopt this model, users have to make more decisions about which software they can really afford.

Tsai:

The benefits to the developer are obvious, and provided that development continues at the same pace it seems fair to the customer as well. (Let’s put aside for now the concern that subscriptions change incentives, so that you’d be paying the same price but not getting the type of development that you want.) It may even be beneficial because the costs are more predictable, and you can avoid large up-front payments for big apps.

The concern about changing incentives, as stated by Peter Lewis:

This model ensure that I am working as much for existing customers as for new users, and that I am incented to add new features that add value for existing customers and new customers as fast and effectively as I can.

I don’t necessarily disagree with this, but what happens when software becomes effectively feature complete for some customers? The subscription model also arguably increases the likelihood for bloat to creep in, as new features provide justification for a monthly bill to every user.

I feel the subscription model works especially well when there’s an ongoing service attached to an often-used app. I’m happy to pay $13 every month for my iCloud subscription because I’m paying for synchronization services and cloud data storage; even if the price were increased, the recurring cost would make sense to me because of how tightly integrated it is with the apps and devices I use. It’s harder for me to justify paying a monthly fee for Dropbox because I use it far less.

Applying this same model to apps — the so-called “software-as-a-service” model — means users have to make harder choices about where they spend their money. Few people will commit to a monthly payment for an app they use only occasionally, which means that users will likely seek free alternatives. On the other hand, Adobe — for example — is in a fortunate place with Photoshop, as it is the de facto standard across multiple creative professions; there are few true alternatives, and none which are as universally used. Subscription pricing, therefore, most benefits developers of apps at either extreme: must-use apps, and free alternatives. The apps that are in between — those used infrequently, non-standard apps, and similar — seem like they aren’t a good fit for a subscription-based model.

Update: You can see many of the same concerns in both paid apps and subscription-based apps, but I see the subscription model as exaggerating those concerns. There’s incentive to add bloat in order to justify paid updates, for instance, but an app on a subscription model is expected to be updated more frequently and, as a result, may incentivize greater bloat. Upgrading apps annually is expensive, but paying for smaller upgrades all the time may be even more expensive. And so on.