Subscription Pricing Isn’t as Evil as You Think It Is

| Dave Hamilton's Blog

With Smile’s announcement yesterday came a new wave of anti-subscription sentiment when it comes to paying for software. Frankly, I think that sentiment is pretty short-sighted. I would also posit that most people who are complaining about a change to the subscription model are folks who avoid paying for upgrades until absolutely necessary, too. That’s not necessarily a bad thing, it’s just important to qualify where the negative sentiment comes from.

I think another, perhaps larger group are folks who aren’t happy about the net increase in price of Smile’s TextExpander with the new subscription model. Depending upon how you do the math, it’s reasonable to presume that the new version of TextExpander will cost you double what you paid before without offering you any new features that you care about…yet. And that’s a fair gripe.

But let’s not vilify the entire concept of subscription pricing for software in the process of complaining about these other things that bother us. Subscription pricing can be very, very good for consumers. For one, recurring revenue might just be the thing that keeps your favorite app alive. Yes, it might keep your favorite software developer alive—or at least eating—too, but let’s focus on what’s best for you, the user.

The biggest benefit I see is that subscription pricing allows you, the user, to get new features the very moment they are ready for you. If you’re paying only for occasional upgrades then developers must hold back features and bundle them together in order to create a compelling reason for you to pay again. With subscription pricing, developers have to compel you to continue paying regularly, and that means rolling out new features regularly. If they ignore one app for too long people can simply stop paying for it. Suddenly that developer is far more incentivized to keep you happy with both new features and stellar support.

How again is this bad for consumers? What is it about this that you don’t like?

Oh yes, the recurring payments. I get that, but again, instead it's better to look at the overall out-of-pocket cost for, say, a year (or two) of using the software. In the case of TextExpander, that probably just doubled for you. So yes, you have a decision to make about whether or not the price increase is worth it.

Remember, though, Smile won’t be getting all of that money from you at once if you choose monthly payments. That means you’re in the driver’s seat on this one. If they want to double the price, make them double the value for you. They’ve just moved to a model that gives you the power to say, “No thanks,” at any time. They could have simply offered TextExpander 6 for double the price. Would we be having a different conversation in that case?

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Comments

John C. Welch

The other important thing that subscriptions do is they de-incentivize the “no new features in unpaid upgrades” thing. Looking at one of the biggest examples in the Mac market, Adobe, the number of updates that are released *as available* compared to the “better” model of pay once is astounding. Under the old method, you’d never get new features with free updates. Those were bug fixes only. Want a new feature? You paid the full up-front cost for the new version. And you waited 18-months to a year to get it.

More features more often.

You see that in Acrobat, written by a team that has traditionally barely thought about the Mac market. That’s changed with Acrobat DC. They’ve added features that folks have been asking about for years, if not decades, they’ve improved the UI, and they’re releasing quarterly updates with significant new features.

Under the old way, you’d wait, again, a year to 18 months. And because you can only add in so many new features in a new version, well, if your needs weren’t reflected by the majority of that product’s market…well, maybe next time.

But when you have a steady income stream month over month or year over year as opposed to the boom/bust of traditional release cycles, you can add new features as they are ready or close to it, because you have a much better incentive to do so. You have customer money coming in on a steady basis, so you aren’t needing a major release funding spike to pay for the work you’re still doing year-round anyway.

You see the same thing with Office, which had even longer release cycles.

And mind you, i was very much anti-subscription based solely on the math until I saw how MS and Adobe were able to accelerate the rate of improvements, not just bug fixes, in their apps. That was something I hadn’t thought of.

Ultimately, subscriptions allow a developer to not have to regularly raise the price of their apps. They can keep it, on a monthly or even yearly basis, more affordable. It is far, far easier to pay $9.99 a month for my copies (Multiple!) of Office than the thousand-plus it would cost me under the old rules.

MarcusNewton

I am not against the idea of having subscriptions available, and I can understand that there are groups that prefer to have subscriptions.  What upsets me about the subscription model, specifically Adobe’s, is that it is subscription or nothing.

If Adobe offered the choice of having a subscription or paying for a perpetual license, then I would not say a word.  Those who need or want the latest features can subscribe, and then those who prefer to say on a particular release can do that to.

At least Microsoft offers the choice of buying a perpetual license or a subscription to Office 365.  So in that regard I am totally fine with Microsoft’s choice of subscriptions.

The other thing that bothers me about subscription only software is that it allows a developer to abandon older versions.  Maybe I do not have the latest and greatest computer, and an older version has the features I want and works well with my current computer.  With Adobe CC I am pushed to the latest version regardless of whether or not that is what is best for me.  Maybe some new feature brings my older computer to a crawl, with a subscription I cannot go back to an older version.

I abandoned Adobe’s products for Affinity Photo, Affinity Designer, Pixelmator, BBEdit, and Procreate.  It is better software and easier to use, and I have a perpetual license for each, which all together cost me less then a years worth of Adobe CC.

David 1

I don’t have a problem with subscription pricing. I buy directly from vendors when I can because they can offer upgrade pricing where Apple doesn’t. I even subscribe to a few services. My issue with the move Smile made with Text Expander yesterday is that I don’t feel like they are offering me anything new (I’m fine syncing with Dropbox) and $45/year is more than I think Text Expander is worth. $15/year? Yes. $20/year? Maybe. More than that, definitely not.

John C. Welch

Except that you can pay the old way for CC, it’s just not available to every customer. At the big business/enterprise level, it’s available, because the dollar amounts there make sense for Adobe.

Also, you’re only “pushed” to new versions in the sense that you’ll get annoyed by the update reminders. It won’t terminate the function of the application. But, expecting any ISV to particularly care that older computers can’t run a brand new feature fast, or at all, is unrealistic. “Gosh, this new feature that 80% of our customers want will make a computer made in 2010 run slow, we’d better not implement it”.

why would anyone do that? And it’s not just adobe. You see that in many other products.

If other products do what you need for less, that’s great, and you made the right choice for you, but that doesn’t disprove subscription as a viable business model, and based on the comments I see on various App stores when a dev dares to charge *five whole dollars* for an upgrade, these days, it may be the best way to go.

brett_x


The biggest benefit I see is that subscription pricing allows you, the user, to get new features the very moment they are ready for you. If you’re paying only for occasional upgrades then developers must hold back features and bundle them together in order to create a compelling reason for you to pay again.

That’s fine if the new features are what you want. But the old model offers stability. Things don’t suddenly change on you on a day that you had to use the software for something important. 
I think the biggest problem that most people have with subscriptions is that it takes the control away from the user. You will use the software in the way they give it to you. If you don’t like the way a new method works, there’s nothing you can do.  (I’m assuming we’re talking about software as a service here, not just software that runs locally, but requires a subscription to launch. )

With subscription pricing, developers have to compel you to continue paying regularly, and that means rolling out new features regularly. If they ignore one app for too long people can simply stop paying for it. Suddenly that developer is far more incentivized to keep you happy with both new features and stellar support.

I see it the the opposite way. The old model - no good features? I won’t upgrade, and you won’t get my hard earned money. Good new eatures? Take my money, please.

I think subscriptions are easier to swallow on the bigger items like the Adobe suite, where now you don’t have to shell out a huge dollar amount up front. It’s much harder to stomach for minimally useful utility software (sorry if that’s a bad characterization, I’m not that familiar with TE) products that didn’t cost that much to begin with. 

Another big aspect - recurring payments have to be budgeted. Incidental purchases do not. A month ago, if you had $35 in your pocket, you just might have bought it. Recurring payments is not buying something. It’s buying INTO something. I think that’s a problem with something as ‘simple’ as Text Expander.  I suspect this will kill the product (or they’ll have to abandon the subscription method). 

John C. Welch

Then don’t buy it. But don’t complain when they leave you behind in a couple years or stop caring about updates for your old version. You’re never going to pay them another dime, you’re effectively an ex-customer.

John C. Welch

“That’s fine if the new features are what you want. But the old model offers stability. Things don’t suddenly change on you on a day that you had to use the software for something important.  “

Except for bugs. But I guess once a piece of software is some amount of years old, the bugs give up and go home? Bug fixes require devs. Devs require money. nothing is free.

“I think the biggest problem that most people have with subscriptions is that it takes the control away from the user. You will use the software in the way they give it to you. If you don’t like the way a new method works, there’s nothing you can do.  (I’m assuming we’re talking about software as a service here, not just software that runs locally, but requires a subscription to launch. )”

No, we are not talking about SaaS. At least I am not. SaaS is a completely different issue.

“I see it the the opposite way. The old model - no good features? I won’t upgrade, and you won’t get my hard earned money. Good new eatures? Take my money, please.”

The old model: “I want bug fixes fixed NOW, but I will never fork out another dime for them. Oh, you’re now in the red? Sucks to be you”

you want your software cheap, up to date, and paid for when you feel like it. That’s a money loser given again, people literally lose their minds over a DOLLAR as an up-front price. And that’s not edge cases. That’s the general majority anymore.

“I think subscriptions are easier to swallow on the bigger items like the Adobe suite, where now you don’t have to shell out a huge dollar amount up front. It’s much harder to stomach for minimally useful utility software (sorry if that’s a bad characterization, I’m not that familiar with TE) products that didn’t cost that much to begin with. “

It probably helps if you’re familiar with the thing that started the discussion. Anyway, “minimally useful” utility software takes real time to develop. A product like text expander, especially given what it does, and the environment it has to work in, is not easy to develop, it’s not easy to upgrade. It takes real work by people who know what they are doing, and oddly enough, they like things. Like shelter. And food.

you want quality software, you’re going to pay for it one way or another. And no, you don’t get to dictate all the terms.

“Another big aspect - recurring payments have to be budgeted. Incidental purchases do not. A month ago, if you had $35 in your pocket, you just might have bought it. Recurring payments is not buying something. It’s buying INTO something. I think that’s a problem with something as ‘simple’ as Text Expander.  I suspect this will kill the product (or they’ll have to abandon the subscription method). “

I almost hope they do. Just abandon it and burn the source code. It’s pretty obvious to me anymore that expecting people to pay you for your work is ignorant. People want everything and they want it to cost nothing. I’m absolutely down with them getting what they’re willing to pay for.

or learn to code and do it yourself.

brett_x

Then don’t buy it. But don’t complain when they leave you behind in a couple years or stop caring about updates for your old version. You’re never going to pay them another dime, you’re effectively an ex-customer.

Wow, take things personally much? I don’t really care about TE. I was just trying to provide my own analysis of the subject.

geoduck

Subscription Pricing Isn’t as Evil as You Think It Is

Yes it is.

I don’t rent software. Period. You say that it’s a good way to make sure you have the latest with the most up to date features. How about all the, many, times a newer version breaks something or renders old files unreadable. No. I want to chose when I  update, and that will be after I have checked online for bug reports.

Oh and overall out of pocket costs? I can get Final Cut Pro for ~$400 and use it for several years, or I can pay Adobe $19.95 a month, pay ~$400 over 21 months and then keep paying for the same package forever. And if I miss a payment, “well damn son, your files all dun gone blewie”. Nope, nope, nope.

No Creative Cloud. No Office 365*. No rental software. Not on my machine. Not now. Not ever.

*My company tested Office365 a couple of years ago. It was so inferior to a local copy of Office that we now have a solid company policy to not EVER use it again.

John C. Welch

“Wow, take things personally much? I don’t really care about TE. I was just trying to provide my own analysis of the subject.”

It’s not personal brett, it’s how things have to work. You want to pay once and have that software kept up to date in terms of bug fixes and new OS support. That costs real money. The only way to make that money under your preferred model is a) charge 2-3x more so each purchase funds years of work and support. (Software support is not free either, but I assume you expect some form of it. I also assume you’re not going to pay for a support contract for a $35 product.)

All the things you want an ISV to do cost money. Developers cost money. QA costs money.  There’s no way around that unless you want all your software to be written by either deep-pocketed $BIGCORP or hobbyists. That middle ground where so many good products come from? That’s being eviscerated because people want $BIGCORP resources for a hobbyist price.

Ted Landau

Re: ” If they ignore one app for too long people can simply stop paying for it.”

It depends. If you stop paying for it, you lose all access to the app. So, if you are disappointed with the lack of updates but still find the app useful, you are forced to choose among the lesser of “evils.”  I know…you can argue that if you still find the app useful then it’s worth paying for. But that’s a separate issue from whether you’d wind up with an even better app without a subscription model.

Personally, I don’t like being locked into a monthly or yearly subscription no matter what. A couple of examples:

I don’t used Photoshop Elements much, but I do use it. And currently I am content to be sticking with version 11, which I purchased several years ago. If Adobe enforced a subscription model, I’d have either paid a lot more money for my occasional use, keep subscribing and unsubscribing as needed (a big hassle) or go with some other software.

I have an old password keeper called Steel. It went out of business years ago. But their final version still works — and I still like it and use it. If it had been a subscription only model, it likely would have stopped working when the company died.

Essentially, I believe a subscription model can work great for businesses. They pay an annual fee and never again have to worry about keeping up with updates or what version they are running etc. The possible added cost is likely worth the convenience — especially for critical software. But, at least from my perspective, it makes a lot less sense for consumers…especially for software that you only expect to use occasionally.

Jim Tanous

With Adobe CC I am pushed to the latest version regardless of whether or not that is what is best for me. Maybe some new feature brings my older computer to a crawl, with a subscription I cannot go back to an older version.

While you make a good point about the subscription model in general, when it comes to Adobe specifically, you can indeed download several older versions of the apps at any time. Currently, users can go back as far as CS6, which was the version in place when the switch to Creative Cloud occurred, and you can also choose each major version since then.

Jamie

I’m with geoduck. Though it may provide cost savings etc. in the short term,  there is nothing ok about investing in software that ceases to work after a prescribed period. This is troubling about IoT devices as well. I’m sorry, but you just can’t paint this in a positive light for me.

jhunkins

Personally I would prefer to pay more for software upfront and then for updates when there are interesting features that I can use. In fact I have paid for several updates to this software even without new compelling (for myself) features simply because I was using the software and wanted to support them.
But the key here is that was my choice - not theirs. They had to earn my continued support which they have (and others have not). But now asking for me to commit to money payments that are to be honest too high for a utility, no matter how well it is designed. And without any new compelling features for my use case is a double negative.
For businesses with major apps and need for support across multiple users, a subscription model often makes sense. And personally for a publication on an individual level also makes sense as there will be new material every month.
I will plan to continue with my current version as I have paid money for this good software over the years both on my Mac and my iPad. But there is no way that I can justify a subscription for it.
Hopefully they will rethink this approach and continue to offer versions with upgrades and perhaps for additional services instead of only by prescription.
This also makes me nervous about what will happen with some of their other valuable apps that I appreciate and use and have also paid for updates and pro editions.
I am seriously hoping that there won’t be a point in the near future where Smile will no longer be a source of products that I can use. And for now, my advise to buy their products also has to Include a caution with it.

Scott B in DC

While I am against the subscription model for software that is used as a utility I would like to bring a different perspective into consideration: what is old is new again.

When I started in computing, I was a mainframe jockey. Although I was a student, I began to work for the university and learned about the management issues. I learned that every mainframe manufacturer charged a base fee for the hardware, a licensing fee for maintaining the hardware, and a licensing fee for the software. An organization did not own the mainframe. It purchased the rights to have the mainframe, paid for the service, and leased the software. The lease was based on usage. There were “meters” in the system to measure your usage and you paid a fee for the resources you use. You still pay for the electricity, cooling, supplies like paper and tape.

Think of it like the electricity to your home. You provide the infrastructure from the entry point to the plugs in your home. But you are paying a fee to connect to the network and for the metered electricity you use.

When IBM released the PC in 1981, the first revelation was that when you bought the software it was yours. You paid once and used it forever or at least until the next update. Even though Microsoft would go on to sell Office for $500, it was a one-time purchase and no management of lease agreements.

It was the deterministic nature of the costs that helped drive computing smaller. Mini computer makers allowed services to scale while saving long-term costs by eliminating the licensing costs. Some companies were able to add subscription pricing for software like databases to enterprises, but the consumer were exempt from that model.

(I’m making leaps in time for space consideration)

The Internet began to turn the trend. They created a service where they would own the connection, process your email, transfer your network requests, and maintained the way you communicate with the world. They were providing a service that people wanted and were willing to pay. You did not have to create your own connection, you paid the company to do it for you. However, you were still buying the modem and the telephone lines including the wiring to access the telephone system.

(Time warp…)

Now we have clown… err… cloud computing that is rewarmed timesharing that was the birth of services like Compuserve. Like timesharing, these companies are renting pieces of their infrastructure. Like the old timesharing days, you are sharing the hardware, software, and connectivity without real assurances of efficacy. But they added a new wrinkle back into the lexicon: metered access. You pay for the memory you used. You pay for the disks you use. You pay for the resources because under the agreements, you do not own it like we did not own the mainframe in the 1970s.

If this could be done for infrastructure why not do this for software. Adobe took that first step with Creative Cloud. By tying their services to the timesharing… oops… cloud system, they can put a meter on the software and charge you for using their software. Even if you are not using the software, Adobe is providing the upgrade services while you were away giving justification for them to continue to charge for their service, aside from the disk space that is reserve for you whether you use it or not.

Adobe set the precedence: move it to the timesharing system and we can continue to charge the user whether they need the service or not.

Smile Software has lowered the bar to the 1970s where the utilities are being offered with a subscription model. Where the mainframes I used licensed Syncsort (an advanced sorting program now into big data), ACF2 (security), and Cullinet (database management) I am now being asked by Smile to go back to the future to subscribe to TextExpander.

I spent my entire career doing what I was able to make computing more accessible. I moved away from the mainframe world to help unshackle computing from the monolithic culture of the mainframe in order to make the tool more useful to society. This is no longer the case.

The web has replaced the mainframe.
The cloud has replaced timesharing.
The web browser has replaced the 3270 block mode storage tube terminals.
Adobe and Smile has returned us to software subscription.

This is not progress. We have regressed back to 1976.

Bregalad

The subscription model can work for business where a small recurring payment is much easier to deal with than trying to get approval for a version upgrade and then running around for days or even weeks getting every copy updated. That is until someone decides to switch to a different product. Sure it’s easy to cancel a subscription, but what about the data? Did the old product use a propriety format? Is it practical or even possible to export it and then import it into a competitor’s product? If the data isn’t easily accessed then maybe you’re trapped in that subscription for the rest of time, even if just to access old documents.

There’s a related problem. I’ve seen software released that is not 100% compatible with documents created by older versions of the same software. So now you’re on a subscription, the new software has been installed on everyone’s computer and suddenly nobody can access a file that was created a few years ago.

Of course that can happen even without subscription. My old company ran into huge problems when iWork switched format and suddenly documents weren’t properly syncing with Dropbox. The company soon realized that lost productivity was costing a fortune and went back to using Office.

The bottom line is that a subscription model for a tool can be a good thing, but only if the data the tool creates isn’t locked to that tool.

Ted mentioned using software from a long-gone developer. Maybe if they’d had subscriptions the product would still be supported by an active developer.

I’d like to make one more point. Sometimes a product doesn’t need any new features. That’s more often true with small tools than enterprise applications, but Word did everything I needed it to do back in 1992. There have been a handful of useful additions in the last 24 years, but most of the changes have been neutral or even negative.

Frank V

I agree with jhunkins. I’m not a power user and this computer is not used to earn my daily bread. So to me TextExpander is a handy utility, something nice to have, but not essential. Not software I value enough to take a subscription. That doesn’t mean that I don’t want to spent money on software, I bought version 4 and 5.

I don’t need a special cloud to sync my snippets, I use local network sharing to sync my snippets. I was wondering isn’t it possible to sell a Pro version with cloud syncing with the subscription model and a normal version for consumers like me without it.

I don’t see much information about their cloud service, so I can’t determine how safe it is. What kind of encryption do they use for the connection? Is the data of their customers encrypted? Remember you can use bash commands in snippets, so I’m careful.

Bart B

I don’t have a problem with subscriptions in general, but I do have a problem with THIS subscription service.

From a personal user point of view, this new subscription service is a solution in search of a problem. They have to charge us more to pay the bills on the cloud service we don’t want or need!

I like having control over my data. This new model takes that away from me. According to an article on TidBits today, they don’t even bother encrypting my stuff in their cloud. Hello, it’s 2016!!!

When I do the maths, based on how much I have paid for TE for the last 5 years, and when I compare that to what the next 5 years would cost, even if I include the 1 year discount, I get a TRIPPLING of my costs. TRIPPLE!

So - pay three times as much to get the same feature I already have, and to lose control of my data.

There is no way to spin that as a good deal.

geoduck

In construction they call it As Drawn vs As Built.

The idea of renting software is not bad. The trouble is that the way they are doing it is. Subscription Software is sold as getting your money’s worth and nice timely updates, and providing a stable revenue source for the developer, like subscribing to a newspaper. In reality is it is a way for companies to rake in huge increases in profits while doing LESS. Once you are locked into Creative Cloud you have to keep subscribing even if they stop updating and fixing their software. Drop the subscription and bad things happen. It’s really more like becoming a drug addict. Any good that it provided wears off quickly. Soon you keep doing it just to prevent withdrawal symptoms. All the while the companies bottom line’s are swelling.

No, the way Software as Service is being done IS EVIL.

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