TMO Daily Observations 2016-04-07: The Subscription Software Debate Followup

| Daily Observations Podcast

Today Adam Christianson from the Maccast and TMO's Bryan Chaffin join Jeff Gamet to take a look at subscription software models from the perspective of the average user. They also share their thoughts on budgeting for app purchases and subscriptions, if developers are sharing their pricing messages effectively, and more.

TMO Daily Observations 2016-04-07: The Subscription Software Debate Followup

Apr. 7, 2016 — Download: MP3 Version (AAC Version Coming Soon)

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CNET Daily News, April 7, 2016: FBI spills iPhone hacking secret to senators

“The FBI may be keeping Apple in the dark about how it broke into an iPhone used by a terrorist. But now it’s letting some members of Congress in on the secret.

“The law enforcement agency has started briefing some US Senators about how it accessed data stored on an iPhone 5C used by Syed Farook, one of the people involved in December’s San Bernardino, California, terrorist attack that killed 14 people…

Sen. Dianne Feinstein (D-Calif.) was briefed by the FBI about how it got into the iPhone 5C, a representative from her office confirmed to CNET, though he declined to give any details about the briefing. Feinstein is the vice chairman of the Senate Select Committee on Intelligence and one of the backers of a bill that would make sure the government can access encrypted data. Feinstein has called encryption “the Achilles’ heel of the Internet.”

The National Journal, which originally reported the news of the briefings by the FBI, also said Sen. Richard Burr (R-N.C.), the chairman of the Senate Intelligence Committee and co-sponsor of an encryption bill with Feinstein, was offered a briefing but hasn’t taken it yet. His office didn’t immediately respond to a request for comment.

The National Journal said both Feinstein and Burr believe Apple shouldn’t be given information on how the FBI broke into the phone, which is an obvious stance given the bill they’re planning to introduce as soon as this week.

“I don’t be­lieve the gov­ern­ment has any ob­lig­a­tion to Apple,” Fein­stein said in a state­ment emailed to the National Journal. “No com­pany or in­di­vidu­al is above the law, and I’m dis­mayed that any­one would re­fuse to help the gov­ern­ment in a ma­jor ter­ror­ism in­vest­ig­a­tion.”

Law enforcement agencies like the FBI often give classified briefings to federal intelligence committees. But they don’t have the same obligation to tell companies how they circumvent their security controls if sharing the information could hurt investigations. That has been particularly vexing to Apple of late… Apple, which had been fighting a search warrant to help the FBI unlock Farook’s iPhone, has said it wants the information so it can make sure its devices are secure…

Reuters, citing sources, reported Wednesday that the White House won’t offer public support for the encryption legislation soon to be proposed by Burr and Feinstein. President Barack Obama previously had seemed to support the bill, saying last month that Americans have always made privacy trade-offs with the government when it comes to public safety.”



I fully understand why a software company would want to switch to a subscription model.  From a financial standpoint, subscriptions bring in regular revenue that can be reported each month.  Whereas software that is only released once a year have revenue streams of a peak when the software is released, and then a dropoff until the next release.  To make investors happy, which is a never-ending no-win game, companies need to show consistent and raising revenue streams.

From a consumer standpoint, these announcements of companies switching to subscription only models goes over like a lead ballon.  Kind of like how Carrier (air conditioner units) announced they were closing their American factory to move it to Mexico because that was what was best for the company.  The “best for the company” announcements nearly always come off as greedy.

I agree with Adam Christianson, that I have to be very careful with my income about what subscriptions I choose.  I already feel that I have too many subscriptions, and I do not have any more money to start new subscriptions without canceling existing ones.  Subscriptions are great for enterprises and businesses, but often burdensome to consumers or independents.

For Mac developers wanting to expand their business there are not a lot of choices.  Which brings me to the Mac App Store.  My biggest complaint about the Mac App Store is that their is no upgrade mechanism.  I would love it if Apple announced at WWDC in June that the App stores allowed apps to offer upgrades and upgrade pricing to new versions.  I think this would go a long way in revitalizing the Mac App Store.  Also, the 30/70 split of revenue with Apple is high for small developers.  I think a 20/80 split would also be a great improvement.


The problem for Smile’s shift to the subscription model is that they vastly increased the price for their customers without providing anything useful in value, while removing features. 

On the other hand the successful subscription companies give you a lot of value for the subscription. And generally the subscription costs you substantially less than the price of buying the product itself or a very competitive price.

Microsoft gives you Office 365 plus 1 TB of cloud storage for a subscription total of $99 a year.
Adobe gives you Creative Cloud with Photoshop for $120 a year.
These subscriptions are huge bargains.

So Smile priced itself out of their customer’s pockets.  For them, hopefully enough businesses can subsidize the loss of customers. 

But then again, few businesses need text expansion - particularly if it reduces their security by storing potentially secret information on Smile’s servers.

If the subscription cost $1 to 2 a month - a very reasonable cost compared to upgrade costs - then I’d jump on it.  The current price is simply too high for what you get. So I’m switching to its competitors.


I think that the subscription model debate can be distilled down to trust developers to offer you value for their efforts for a monthly fee. I appreciate good software developers and want them rewarded for their efforts. Developers need consumers and consumers need software. Under the upgrade model developers created software that was offered to the public for a fixed price. The initial software program was sold as a ‘license’ to use that software essentially in perpetuity. This program was updated to address bugs that appeared subsequent to the initial software release. At the same time the developer would then begin working on the next upgrade to that software. This upgrade/new version typically was sold at a specific price and had an upgrade price for current users. Under this model if the developer did not provide real value the customer could choose not to upgrade. Stated another way this was a performance based model.

The subscription model locks the consumer into a model where the developer is trusted to offer valuable updates to the software. The advocates of the subscription model sell it by stating that you will get new features earlier and it is beneficial for the developers. I am sure that these are true. Some arguments are like a good magician, they get you to look where they want you to look.

With the upgrade model you can easily evaluate the value of the new features relative to the upgrade price. So if the developer has not offered you value for the upgrade price you can decline until the next upgrade comes out. This let’s the developer know the value place on their efforts. With the subscription model you are forced to pay for features that may or may not have value to you. So I am not an advocate of the subscription model. I want to make my purchase based on features offered not promises that I will get updates sooner.

If a developer is head over heels in love with the subscription then my suggestion would be to offer both models, like homes and automobiles. This would seem to be a win-win model. You can buy (paid upgrade model) or lease (subscription model). Give the consumer a choice. If a developer only offers a subscription model that is a developer I seek to avoid. My choice would be for a developer that offers the upgrade model or both models. These last two models indicate to me that that developer is looking for a fair way to balance developer and consumer interests.

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