10 ms·

A Critical Analysis of the Subscription Economy

113 points by BuleBule 9y ago

BuleBule 9y ago
This is a follow up to my previous article "To Catch A Liar: 1Password Edition" : https://medium.com/@guisebule/to-catch-a-liar-1password-edition-4bfa30fbd7e4 https://medium.com/@guisebule/to-catch-a-liar-1password-edit...
- yborg 9y ago
  Completely agree with your analysis, and at the same time cannot fault 1Password for doing this since they are in a position to do it. They are potentially a hundreds of million dollar acquisition if they juice those sub numbers. But they have to do this NOW, because what they are doing is not that difficult, and come the day, as it always does, that Google spies an attractive mechanism to drive more people into their ecosystem and decides they don't want to acquire you, your business will (probably) evaporate overnight. This, for the vendor, is the other edge of the subscription model. If another flavor of the day arises that costs less, your customer base can swiftly move to this new contestant, especially in the enterprise space, because unlike a fixed license, a subscription isn't a capitalized cost. For Adobe, with their massive ecosystem, this is less practical for their customers, but a password manager? There are already a host of commercial alternatives that to an end user are all more or less the same.
  - BuleBule 9y ago
    I had not considered this angle, thank you for commenting.
bocz 9y ago
It is hard to classify Microsoft in the "#SubscriptionPsycho" category in regards to Office. They still offer perpetual licenses alongside the subscription model. However I do believe there is a huge marketing failure in making the distinction between the two product offerings.
bocz 9y ago
It is hard to classify Microsoft in the "#SubscriptionPsycho" category in regards to Office. They still offer perpetual licenses alongside the subscription model. However I do believe there is a huge marketing failure in making the distinction between the two product offerings.
pspeter3 9y ago
As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. I like the subscription model, especially if it has a free tier, because passionate customers can support the developer team and subsidize less passionate users
- zAy0LfpBZLC8mAC 9y ago
  > As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. But you do realize that the subscription model is exactly the thing that removes the incentive to do that, right?
  - pspeter3 9y ago
    Can you provide your reasoning? I assume that the subscriptions continue to fund software developers working on the product.
    - ColanR 9y ago
      I think parent's point is about how the company is drawing in cashflow. If the customer owns perpetually a copy of the software, the only reason they'll buy a new copy is if the new one is substantially better than the old: hence, the only way the company makes cash next year is if they've been improving their product. With the subscription model, the company is still going to make that income regardless if they have a new product. As long as no other competitor has developed a competing product, there's no reason to innovate. (and there's lots of ways to deal with competitors besides innovating)
      - toyg 9y ago
        On the other hand, this removes a big incentive for "featuritis". A developer can sit back and only add features that really matter to the product or fix minor but annoying bugs, rather than pushing unnecessary flashy changes dictated by a sales cycle. I'm not particularly happy about moving to what is effectively a rent society, but I think this is one of the few silver linings of the subscription model.
zAy0LfpBZLC8mAC 9y ago
Or in other words: You should not allow a company to build a monopoly on a skill of yours, because, as it happens with monopolies, they will end up abusing it.
aerique 9y ago
While I don't like the move to a subscription model for a lot of software, I really couldn't finish this piece. I don't think it was very well written, mostly because it kept repeating the same points over and over written a little differently. It could have been much shorter. I don't like the subscription model because in the end, for multiple subscriptions, it all adds up and ends up being more expensive. And that after spending a lot of money on a subscription you still don't own the software. (Not to mention "season passes" for games.)
- BuleBule 9y ago
  This is actually the best feedback I have had on that article, thank you so much for commenting, you know proper critical feedback is the best kind of feedback. Truth be told, I hammer the same point how thrice, simply because my papa told me people were stupid.
michaelt 9y ago
I know a lot of people here on HN think subscription models are pretty swell - personally I think they're not so great. Sure, they provide revenue that can support security fixes - but at the cost of decimating the incentive to improve features to generate upgrade revenue. After all, if spending more on development doesn't raise revenues much, but cutting down to a skeleton team of maintenance developers means that subscription revenue is almost pure profit, there'll always be investors pushing for that. Seems to me that invites our industry to stagnate and stop producing value, if you don't need to make a better product in order to bring in revenue.
- adrianN 9y ago
  In my opinion software doesn't have to add features all the time. It would be okay for me if it kept doing what it's doing, except bugs get fixed and performance improves.
  - tonyedgecombe 9y ago
    Yes, this was particularly evident at Adobe where they were scratching around adding features to justify the upgrade costs.
- brandon272 9y ago
  I actually think that pressures from customers increases somewhat when they are dealing with an ongoing fee which they see hitting their accounts on a monthly basis. Every time I see it there is a question of, "how is this software working for me? Do I still need it?" ... Not so much the case with perpetual licensing until it is time to (potentially) upgrade.
samsolomon 9y ago
The case of Adobe is interesting. I think the move to a subscription model has been a hostile move for customers. The second you stop paying for the software, you lose the ability to open your old files. This has allowed smaller software applications such as Sketch, The Affinity Suite and Capture One to grab marketshare. I think Sketch’s current business model is perfect. Customers pay for a year of updates. If a customer decides not to upgrade, they stay at the same version as when their license expires. I’m certain Adobe has made a good amount of money in the short term, but they've forfeited a monopoly. I’m more skeptical about their long-term business. EDIT: Updated for clarity.
- maxxxxx 9y ago
  "The second you stop paying for the software, you lose access to any of your old files." It seems you lose editing access, you still can view them. Still not great, but I wanted to clarify.
  - gaius 9y ago
    That is the case with Office 365 too.
  - samsolomon 9y ago
    I've updated my comment. You don't lose access, but you cannot open old files. I suppose you could use a PSD or AI to Sketch converter. I'm unsure about other file types.
    - maxxxxx 9y ago
      I think you can open and view them with Photoshop, just not edit. At least that's my understanding.
      - ptero 9y ago
        I suspect you can still edit them with an older version of the Photoshop. PSDs have been around forever. I am not arguing that subscription models forced by Adobe on users is a good thing. It is, IMO, horrible and is the reason I am still using CS3 for my photography hobby.
Houshalter 9y ago
It's worth considering what a subscription would be worth as a fixed cost. Like say the company was going to invest the fixed cost into the market, and take the interest as if it was continuous income from subscriptions. Or if a user wanted to just invest a fixed amount of money so the interest will always be there for to pay for the subscription. At 5% interest, a subscription of $1 a month is worth a fixed cost of $240. Photoshop and Netflix's $10 a month is worth a fixed cost of $2400. Xbox Live's $60 a year subscription makes it worth about $1200, making it cost 3 times more than the console itself. World of Warcraft's $15 a month subscription comes out to a whopping $3600, making it 60 times more expensive than a normal new game (if you wanted to subscribe to it forever.)
- softawre 9y ago
  Can you explain why considering the dollar amounts that would earn interest equal to subscription costs has any relevancy into how much these services cost? Or put another way -- what?
  - zAy0LfpBZLC8mAC 9y ago
    I think they meant to use the concept of the time value of money, like this: https://en.wikipedia.org/wiki/Time_value_of_money#Example_2:_Present_value_of_an_annuity.E2.80.94solving_for_the_payment_amount https://en.wikipedia.org/wiki/Time_value_of_money#Example_2:... But their calculation was ... let's say wrong :-)
  - nobodyorother 9y ago
    It seems like GP is calculating 20 years worth of subscription cost. Seems reasonable, but I'd also stop using most subscriptions before 20 years: 5 years seems more likely. I'd probably cancel a subscription if I stopped using the product after a few years or if the related hardware died.
    - FabHK 9y ago
      > It seems like GP is calculating 20 years worth of subscription cost. Well, yes and no. GP is calculating the discounted value of receiving $N annually forever (assuming a fixed constant interest rate r): N/(1+r) + N/(1+r)^2 + N/(1+r)^3 + ... = N/r Thus, receiving N$ forever, given rates are 5%, is worth 20N. (You can derive it from (for |q| < 1), 1 + q + q^2 + q^3 + ... = 1/(1-q) ) Note, by the way, that currently rates are very low (say 1%), and thus receiving a perpetual stream of $N per year is very valuable, namely 100N. That makes the switch to subscriptions even more valuable to these psycho firms.
deleted 9y ago
[deleted]
ChuckMcM 9y ago
Interesting take on it. For historical accuracy this was something that Sun talked about in the 90's, you sold someone some software, and that was the last bit of revenue you ever got from them. Except you still had the programmers who wrote the software to pay. This then is the fundamental problem, when you finish the software do you fire the engineers that worked on it? If not, what do they do? The fact is that software can actually be "done" and it happens every where. And it takes a special kind of engineer who will work on simply removing blemishes (bugs) and not write any new features. And that fundamentally points at a really really deep problem, engineering software rather than just writing it. If your software has very well specified and defined interfaces, and no 'escapes' then you can say it is engineered to be partitionable. And an engineer can be tasked with fixing one part, they can fix that part, and do the qualification tests for that part and then when they integrate it they can be assured the system as a whole continues to work as it always did, but now with a slightly different part. Not surprisingly this was a part of, if not the major part of, the notions in object oriented programming. Once the part (object) worked, you didn't have to think about it any more. An auto-mechanic doesn't have to know the physics of a an ignition system to replace a spark plug, a spark plug manufacturer doesn't have to know the geometry of every cylinder to make a spark plug. Software as books. You don't go to the library and periodically buy updates to the books you own. Textbooks pull that off but even they know its really a scam. Pythagorean's principle hasn't actually changed and the last text book was just fine. Open source kind of wins and kind of loses here. The poster child is gcc. Looking at the code base changes over time for a given architecture they start with a flurry of functionality changes, then smooth out to just bug fixes and the occasional optimizer tweak, and then when the noise floor of change frequency gets to a certain level you start seeing really sort of adhoc changes or perhaps changes that only help a very very small part of the user base. Its hard to capture both a gcc for ARM9 and gcc for ARM9 embedded in an FPGA fabric that can have optimized bespoke instructions. And yet they will try. The author calls them psychopaths but they are the current generation of entrepreneurs which are building businesses based on rents rather than sales. Its all the rage, is not Uber a rent seeking business that simply takes a tax or rent for you using their app? The 'sale' was the car ride, the 'tax' is everything else. This works because collecting rent of $1 a month from a million people is "easy" they hardly miss it, and you're $12M/year richer for it. Selling them $12M worth of value is so much harder. Why push yourself? Everybody is doing it, the streaming company, the phone company, and even the maker of your coffee machine. If you haven't got an ARR you aren't a 21st century company these days.
v12golfcart 9y ago
Seems like the point of the article is that subcr is bad for customers and therefore bad for biz... the psychos should have known better. It's true that we pay more for stuff now vs. perpetual licenses (it's prob a book's worth of material, but "opt-out is better than opt-in" and Houshalter's point on chunking are most of it). But in exchange, companies have the ability to invest that greater profit to a greater degree in innovation, so in the long-term we, customers, should get more out of it than we lost in dollars. First an observation: Adobe's decision to increase profit secularly (i.e. beyond any accounting nuances at the time of switch) by switching to subscription is actually TWO decisions. 1) the switch in revenue mechanism itself and 2) the decision to NOT invest the additional profit. #2 is the crux of my point, but the "to a greater degree" thing is a 1+1=3 effect: "more profit" is straightforward because subscriptions increase dollars in, often more than making up for any churn. That cash could be invested to accelerate innovation. It's 1-to-1 apart from timing issues (queuing "yearly up fronts" :D) "to a greater degree" - this is the special part. It is easier to spend more when predictability is higher. Or put another way, volatility is the enemy of spending to the "hilt". So companies like Netflix can spend (for our sake) more to the hilt when you have a tighter distribution as to where the hilt could be (vs. perpetual products which have poor visibility). Just ask any marketing person or sales person about how easy it is to spend in channels when attribution isn't a problem. BTW I define hilt as "as much as necessary to stay ahead of threats of competition/churn" But yes, the company does have to choose to do this. Some are more relentless for their customers :). I just heard about the www.relentless.com thing lolz... Quick aside: I saw this sick chart that compared 12-month lifetime value between Dollar Shave Club (subscription) and Harry's (previously per unit). Even though Harry's has always been branded as a more premium product, DSC made more money by the 12th month (even after churn). It's easy to forget that monthly click -_-
nodamage 9y ago
The challenge with modern consumer software is that: 1. Users expect their apps to work on their computers, tablets, and phones, which generally means you need to provide some ongoing service to keep your data synced between all of the devices. (For some simple apps you can get away with using a third-party service, e.g. Dropbox or iCloud, but many apps with complex data will need their own custom-built solutions.) Depending on the kind of data you are storing, this can get expensive. 2. Users expect perpetual upgrades for every new version of iOS/macOS/Android/Windows that comes out. This obviously requires development work, especially since iOS/macOS/Android are annual releases at this point. These ongoing costs imply that some kind of recurring revenue is necessary to keep the software running and up to date, which is why the move to subscription revenue has become more popular lately. Besides, I question the premise that "perpetual" licenses have ever truly been perpetual except in name only: eventually that software you bought will stop working on newer operating systems and devices and you'll have to buy a new version anyway.
- noobermin 9y ago
  1. No they don't. Some may want it, but no one "expects" it and will gleefully accept your invalidation of their previous purchases so you can provide a feature they didn't ask for. 2. https://www.youtube.com/watch?v=sxXs0Yy5-0Y https://www.youtube.com/watch?v=sxXs0Yy5-0Y For 2, yes, users may get mad when some vulnerability ends up leading to a leak of PII or worse, but to claim they "expect" it, again, no.
  - nodamage 9y ago
    1. Yes, they do. Especially consumer software like 1Password or Evernote is expected to be accessible on your phone, tablet, and computer. 2. I'm not talking about OS updates. I'm saying consumers expect their apps to be updated to keep them compatible with new versions of their OS. That means someone that bought your app for iOS 6 five years ago absolutely expects it to be updated to work on their new iPhone 7 running iOS 10. Besides, Windows is probably the outlier here. People might hate Windows 10's automatic update system (which was clearly implemented poorly) but a lot of people update to the latest iOS, macOS, and Android versions right after they're released.
dredmorbius 9y ago
This is a topic that could use a good article. This was not that article. It's one thing to rail about the varios psychotics or psychopathics of this that or another. That's not the same as understanding the dynamics through which a situation emerges. What's particularly disturbing is when it appears that the outcome is inevitable. I.F. Stone, writing in 1967 on the Arab-Israeli crisis: The essence of tragedy is a struggle of right against right. Its catharsis is the cleansing pity of seeing how good men do evil despite themselves out of unavoidable circumstance and irresistible compulsion. When evil men do evil, their deeds belong to the realm of pathology. But when good men do evil, we confront the essence of human tragedy. http://www.nybooks.com/articles/1967/08/03/holy-war/ http://www.nybooks.com/articles/1967/08/03/holy-war/ Let's look at the problem here. In a commercial software world, there's a mismatch between cash flows and development. Worse, there's also a conflict between market mechanims based on marginal-cost pricing, and the long-run average costs of development. There's also the tremendous variance in customers' ability to pay -- price discrimination -- particularly for enterprise software. If you sell shrinkwrap, or some other form of buy-once software, then sustaining the development efforts for the next version is ... difficult. The two largest consumer softare companies of the 20th century, Microsoft and Apple, both sponsored that development through hardware sales. Apple did so directly, by selling its own hardware. Microsoft did it indirectly by way of per-CPU licensing of IBM-compatible PCs. Both companies avoided the significant costs of direct software sales. The concept of recurring-subscription revenue is usually associated with periodicals, though that is a relatively modern development. The term doesn't emerge until the 19th century (previous usage was generally in a religious context), and it generally referred to stock subscriptions. Another variant was the subscription library. (See links below.) In a magazine subscription, you pay for the right to receive fresh material, but continue to possess any previously received issues. The model for software subscriptions was in large part IBM's practice of leasing rather than selling computer hardware. Phone systems often followed similar practices. Hardware and software occupy different worlds in that hardware is fairly intrinsically limited: you have a computer, or perhaps a rack, or aisle, or datacentre. But these are unitised, and you're not individually leasing, say, hard drives, CPUs, memory cards, or capacitors, within the computers. My Debian systems typically have a few thousand individual software packages installed. For a proprietary OS, that number falls, but is still considerable. Dealing with individual software packages on a subscription basis from here to eternity is itself a major complexity problem I'd, frankly, rather not have to deal with. It may work in instances, but not at scale. At the same time, there are the financing and cash-flow problems of software developers. How do you bridge those divides? https://books.google.com/ngrams/graph?content=*_NOUN%20subscription&year_start=1800&year_end=2000&corpus=15&smoothing=3&direct_url=t2%3B%2C%2A_NOUN%20subscription%3B%2Cc0%3B%2Cs0%3B%3Bstock_NOUN%20subscription%3B%2Cc0%3B%3Btrial_NOUN%20subscription%3B%2Cc0%3B%3Blife_NOUN%20subscription%3B%2Cc0%3B%3Bmagazine_NOUN%20subscription%3B%2Cc0%3B%3BAnnual_NOUN%20subscription%3B%2Cc0%3B%3Byear_NOUN%20subscription%3B%2Cc0%3B%3Bgift_NOUN%20subscription%3B%2Cc0%3B%3Bguinea_NOUN%20subscription%3B%2Cc0%3B%3Bmembership_NOUN%20subscription%3B%2Cc0%3B%3Bpenny_NOUN%20subscription%3B%2Cc0#t2%3B%2C*_NOUN%20subscription%3B%2Cc0%3B%2Cs0%3B%3Bstock_NOUN%20subscription%3B%2Cc1%3B%3Btrial_NOUN%20subscription%3B%2Cc0%3B%3Blife_NOUN%20subscription%3B%2Cc0%3B%3Bmagazine_NOUN%20subscription%3B%2Cc1%3B%3BAnnual_NOUN%20subscription%3B%2Cc0%3B%3Byear_NOUN%20subscription%3B%2Cc0%3B%3Bgift_NOUN%20subscription%3B%2Cc0%3B%3Bguinea_NOUN%20subscription%3B%2Cc0%3B%3Bmembership_NOUN%20subscription%3B%2Cc0%3B%3Bpenny_NOUN%20subscription%3B%2Cc0 https://books.google.com/ngrams/graph?content=*_NOUN%20subsc... https://books.google.com/ngrams/graph?content=subscription+*_NOUN+&case_insensitive=on&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t2%3B%2Csubscription%20%2A_NOUN%3B%2Cc0%3B%2Cs0%3B%3Bsubscription%20list_NOUN%3B%2Cc0%3B%3Bsubscription%20price_NOUN%3B%2Cc0%3B%3Bsubscription%20paper_NOUN%3B%2Cc0%3B%3Bsubscription%20lists_NOUN%3B%2Cc0%3B%3Bsubscription%20rate_NOUN%3B%2Cc0%3B%3Bsubscription%20library_NOUN%3B%2Cc0%3B%3Bsubscription%20books_NOUN%3B%2Cc0%3B%3Bsubscription%20book_NOUN%3B%2Cc0%3B%3Bsubscription%20rates_NOUN%3B%2Cc0%3B%3Bsubscription%20concerts_NOUN%3B%2Cc0#t2%3B%2Csubscription%20*_NOUN%3B%2Cc0%3B%2Cs0%3B%3Bsubscription%20list_NOUN%3B%2Cc1%3B%3Bsubscription%20price_NOUN%3B%2Cc0%3B%3Bsubscription%20paper_NOUN%3B%2Cc0%3B%3Bsubscription%20lists_NOUN%3B%2Cc0%3B%3Bsubscription%20rate_NOUN%3B%2Cc0%3B%3Bsubscription%20library_NOUN%3B%2Cc1%3B%3Bsubscription%20books_NOUN%3B%2Cc0%3B%3Bsubscription%20book_NOUN%3B%2Cc0%3B%3Bsubscription%20rates_NOUN%3B%2Cc0%3B%3Bsubscription%20concerts_NOUN%3B%2Cc0 https://books.google.com/ngrams/graph?content=subscription+*...

113 points by BuleBule 9y ago

This is a follow up to my previous article "To Catch A Liar: 1Password Edition" : https://medium.com/@guisebule/to-catch-a-liar-1password-edition-4bfa30fbd7e4 https://medium.com/@guisebule/to-catch-a-liar-1password-edit...

yborg 9y ago
Completely agree with your analysis, and at the same time cannot fault 1Password for doing this since they are in a position to do it. They are potentially a hundreds of million dollar acquisition if they juice those sub numbers. But they have to do this NOW, because what they are doing is not that difficult, and come the day, as it always does, that Google spies an attractive mechanism to drive more people into their ecosystem and decides they don't want to acquire you, your business will (probably) evaporate overnight. This, for the vendor, is the other edge of the subscription model. If another flavor of the day arises that costs less, your customer base can swiftly move to this new contestant, especially in the enterprise space, because unlike a fixed license, a subscription isn't a capitalized cost. For Adobe, with their massive ecosystem, this is less practical for their customers, but a password manager? There are already a host of commercial alternatives that to an end user are all more or less the same.
- BuleBule 9y ago
  I had not considered this angle, thank you for commenting.

bocz 9y ago

It is hard to classify Microsoft in the "#SubscriptionPsycho" category in regards to Office. They still offer perpetual licenses alongside the subscription model. However I do believe there is a huge marketing failure in making the distinction between the two product offerings.

bocz 9y ago

pspeter3 9y ago

As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. I like the subscription model, especially if it has a free tier, because passionate customers can support the developer team and subsidize less passionate users

zAy0LfpBZLC8mAC 9y ago
> As a counter point, I hope that by paying a subscription, I get a continuous stream of small patches with bug fixes, security updates, and design improvements. But you do realize that the subscription model is exactly the thing that removes the incentive to do that, right?
- pspeter3 9y ago
  Can you provide your reasoning? I assume that the subscriptions continue to fund software developers working on the product.
  - ColanR 9y ago
    I think parent's point is about how the company is drawing in cashflow. If the customer owns perpetually a copy of the software, the only reason they'll buy a new copy is if the new one is substantially better than the old: hence, the only way the company makes cash next year is if they've been improving their product. With the subscription model, the company is still going to make that income regardless if they have a new product. As long as no other competitor has developed a competing product, there's no reason to innovate. (and there's lots of ways to deal with competitors besides innovating)
    - toyg 9y ago
      On the other hand, this removes a big incentive for "featuritis". A developer can sit back and only add features that really matter to the product or fix minor but annoying bugs, rather than pushing unnecessary flashy changes dictated by a sales cycle. I'm not particularly happy about moving to what is effectively a rent society, but I think this is one of the few silver linings of the subscription model.

zAy0LfpBZLC8mAC 9y ago

Or in other words: You should not allow a company to build a monopoly on a skill of yours, because, as it happens with monopolies, they will end up abusing it.

aerique 9y ago

While I don't like the move to a subscription model for a lot of software, I really couldn't finish this piece. I don't think it was very well written, mostly because it kept repeating the same points over and over written a little differently. It could have been much shorter. I don't like the subscription model because in the end, for multiple subscriptions, it all adds up and ends up being more expensive. And that after spending a lot of money on a subscription you still don't own the software. (Not to mention "season passes" for games.)

BuleBule 9y ago
This is actually the best feedback I have had on that article, thank you so much for commenting, you know proper critical feedback is the best kind of feedback. Truth be told, I hammer the same point how thrice, simply because my papa told me people were stupid.

michaelt 9y ago

I know a lot of people here on HN think subscription models are pretty swell - personally I think they're not so great. Sure, they provide revenue that can support security fixes - but at the cost of decimating the incentive to improve features to generate upgrade revenue. After all, if spending more on development doesn't raise revenues much, but cutting down to a skeleton team of maintenance developers means that subscription revenue is almost pure profit, there'll always be investors pushing for that. Seems to me that invites our industry to stagnate and stop producing value, if you don't need to make a better product in order to bring in revenue.

adrianN 9y ago
In my opinion software doesn't have to add features all the time. It would be okay for me if it kept doing what it's doing, except bugs get fixed and performance improves.
- tonyedgecombe 9y ago
  Yes, this was particularly evident at Adobe where they were scratching around adding features to justify the upgrade costs.
brandon272 9y ago
I actually think that pressures from customers increases somewhat when they are dealing with an ongoing fee which they see hitting their accounts on a monthly basis. Every time I see it there is a question of, "how is this software working for me? Do I still need it?" ... Not so much the case with perpetual licensing until it is time to (potentially) upgrade.

samsolomon 9y ago

The case of Adobe is interesting. I think the move to a subscription model has been a hostile move for customers. The second you stop paying for the software, you lose the ability to open your old files. This has allowed smaller software applications such as Sketch, The Affinity Suite and Capture One to grab marketshare. I think Sketch’s current business model is perfect. Customers pay for a year of updates. If a customer decides not to upgrade, they stay at the same version as when their license expires. I’m certain Adobe has made a good amount of money in the short term, but they've forfeited a monopoly. I’m more skeptical about their long-term business. EDIT: Updated for clarity.

maxxxxx 9y ago
"The second you stop paying for the software, you lose access to any of your old files." It seems you lose editing access, you still can view them. Still not great, but I wanted to clarify.
- gaius 9y ago
  That is the case with Office 365 too.
- samsolomon 9y ago
  I've updated my comment. You don't lose access, but you cannot open old files. I suppose you could use a PSD or AI to Sketch converter. I'm unsure about other file types.
  - maxxxxx 9y ago
    I think you can open and view them with Photoshop, just not edit. At least that's my understanding.
    - ptero 9y ago
      I suspect you can still edit them with an older version of the Photoshop. PSDs have been around forever. I am not arguing that subscription models forced by Adobe on users is a good thing. It is, IMO, horrible and is the reason I am still using CS3 for my photography hobby.

Houshalter 9y ago

It's worth considering what a subscription would be worth as a fixed cost. Like say the company was going to invest the fixed cost into the market, and take the interest as if it was continuous income from subscriptions. Or if a user wanted to just invest a fixed amount of money so the interest will always be there for to pay for the subscription. At 5% interest, a subscription of $1 a month is worth a fixed cost of $240. Photoshop and Netflix's $10 a month is worth a fixed cost of $2400. Xbox Live's $60 a year subscription makes it worth about $1200, making it cost 3 times more than the console itself. World of Warcraft's $15 a month subscription comes out to a whopping $3600, making it 60 times more expensive than a normal new game (if you wanted to subscribe to it forever.)

softawre 9y ago
Can you explain why considering the dollar amounts that would earn interest equal to subscription costs has any relevancy into how much these services cost? Or put another way -- what?
- zAy0LfpBZLC8mAC 9y ago
  I think they meant to use the concept of the time value of money, like this: https://en.wikipedia.org/wiki/Time_value_of_money#Example_2:_Present_value_of_an_annuity.E2.80.94solving_for_the_payment_amount https://en.wikipedia.org/wiki/Time_value_of_money#Example_2:... But their calculation was ... let's say wrong :-)
- nobodyorother 9y ago
  It seems like GP is calculating 20 years worth of subscription cost. Seems reasonable, but I'd also stop using most subscriptions before 20 years: 5 years seems more likely. I'd probably cancel a subscription if I stopped using the product after a few years or if the related hardware died.
  - FabHK 9y ago
    > It seems like GP is calculating 20 years worth of subscription cost. Well, yes and no. GP is calculating the discounted value of receiving $N annually forever (assuming a fixed constant interest rate r): N/(1+r) + N/(1+r)^2 + N/(1+r)^3 + ... = N/r Thus, receiving N$ forever, given rates are 5%, is worth 20N. (You can derive it from (for |q| < 1), 1 + q + q^2 + q^3 + ... = 1/(1-q) ) Note, by the way, that currently rates are very low (say 1%), and thus receiving a perpetual stream of $N per year is very valuable, namely 100N. That makes the switch to subscriptions even more valuable to these psycho firms.

deleted 9y ago

[deleted]

ChuckMcM 9y ago

Interesting take on it. For historical accuracy this was something that Sun talked about in the 90's, you sold someone some software, and that was the last bit of revenue you ever got from them. Except you still had the programmers who wrote the software to pay. This then is the fundamental problem, when you finish the software do you fire the engineers that worked on it? If not, what do they do? The fact is that software can actually be "done" and it happens every where. And it takes a special kind of engineer who will work on simply removing blemishes (bugs) and not write any new features. And that fundamentally points at a really really deep problem, engineering software rather than just writing it. If your software has very well specified and defined interfaces, and no 'escapes' then you can say it is engineered to be partitionable. And an engineer can be tasked with fixing one part, they can fix that part, and do the qualification tests for that part and then when they integrate it they can be assured the system as a whole continues to work as it always did, but now with a slightly different part. Not surprisingly this was a part of, if not the major part of, the notions in object oriented programming. Once the part (object) worked, you didn't have to think about it any more. An auto-mechanic doesn't have to know the physics of a an ignition system to replace a spark plug, a spark plug manufacturer doesn't have to know the geometry of every cylinder to make a spark plug. Software as books. You don't go to the library and periodically buy updates to the books you own. Textbooks pull that off but even they know its really a scam. Pythagorean's principle hasn't actually changed and the last text book was just fine. Open source kind of wins and kind of loses here. The poster child is gcc. Looking at the code base changes over time for a given architecture they start with a flurry of functionality changes, then smooth out to just bug fixes and the occasional optimizer tweak, and then when the noise floor of change frequency gets to a certain level you start seeing really sort of adhoc changes or perhaps changes that only help a very very small part of the user base. Its hard to capture both a gcc for ARM9 and gcc for ARM9 embedded in an FPGA fabric that can have optimized bespoke instructions. And yet they will try. The author calls them psychopaths but they are the current generation of entrepreneurs which are building businesses based on rents rather than sales. Its all the rage, is not Uber a rent seeking business that simply takes a tax or rent for you using their app? The 'sale' was the car ride, the 'tax' is everything else. This works because collecting rent of $1 a month from a million people is "easy" they hardly miss it, and you're $12M/year richer for it. Selling them $12M worth of value is so much harder. Why push yourself? Everybody is doing it, the streaming company, the phone company, and even the maker of your coffee machine. If you haven't got an ARR you aren't a 21st century company these days.

v12golfcart 9y ago

Seems like the point of the article is that subcr is bad for customers and therefore bad for biz... the psychos should have known better. It's true that we pay more for stuff now vs. perpetual licenses (it's prob a book's worth of material, but "opt-out is better than opt-in" and Houshalter's point on chunking are most of it). But in exchange, companies have the ability to invest that greater profit to a greater degree in innovation, so in the long-term we, customers, should get more out of it than we lost in dollars. First an observation: Adobe's decision to increase profit secularly (i.e. beyond any accounting nuances at the time of switch) by switching to subscription is actually TWO decisions. 1) the switch in revenue mechanism itself and 2) the decision to NOT invest the additional profit. #2 is the crux of my point, but the "to a greater degree" thing is a 1+1=3 effect: "more profit" is straightforward because subscriptions increase dollars in, often more than making up for any churn. That cash could be invested to accelerate innovation. It's 1-to-1 apart from timing issues (queuing "yearly up fronts" :D) "to a greater degree" - this is the special part. It is easier to spend more when predictability is higher. Or put another way, volatility is the enemy of spending to the "hilt". So companies like Netflix can spend (for our sake) more to the hilt when you have a tighter distribution as to where the hilt could be (vs. perpetual products which have poor visibility). Just ask any marketing person or sales person about how easy it is to spend in channels when attribution isn't a problem. BTW I define hilt as "as much as necessary to stay ahead of threats of competition/churn" But yes, the company does have to choose to do this. Some are more relentless for their customers :). I just heard about the www.relentless.com thing lolz... Quick aside: I saw this sick chart that compared 12-month lifetime value between Dollar Shave Club (subscription) and Harry's (previously per unit). Even though Harry's has always been branded as a more premium product, DSC made more money by the 12th month (even after churn). It's easy to forget that monthly click -_-

nodamage 9y ago

The challenge with modern consumer software is that: 1. Users expect their apps to work on their computers, tablets, and phones, which generally means you need to provide some ongoing service to keep your data synced between all of the devices. (For some simple apps you can get away with using a third-party service, e.g. Dropbox or iCloud, but many apps with complex data will need their own custom-built solutions.) Depending on the kind of data you are storing, this can get expensive. 2. Users expect perpetual upgrades for every new version of iOS/macOS/Android/Windows that comes out. This obviously requires development work, especially since iOS/macOS/Android are annual releases at this point. These ongoing costs imply that some kind of recurring revenue is necessary to keep the software running and up to date, which is why the move to subscription revenue has become more popular lately. Besides, I question the premise that "perpetual" licenses have ever truly been perpetual except in name only: eventually that software you bought will stop working on newer operating systems and devices and you'll have to buy a new version anyway.

noobermin 9y ago
1. No they don't. Some may want it, but no one "expects" it and will gleefully accept your invalidation of their previous purchases so you can provide a feature they didn't ask for. 2. https://www.youtube.com/watch?v=sxXs0Yy5-0Y https://www.youtube.com/watch?v=sxXs0Yy5-0Y For 2, yes, users may get mad when some vulnerability ends up leading to a leak of PII or worse, but to claim they "expect" it, again, no.
- nodamage 9y ago
  1. Yes, they do. Especially consumer software like 1Password or Evernote is expected to be accessible on your phone, tablet, and computer. 2. I'm not talking about OS updates. I'm saying consumers expect their apps to be updated to keep them compatible with new versions of their OS. That means someone that bought your app for iOS 6 five years ago absolutely expects it to be updated to work on their new iPhone 7 running iOS 10. Besides, Windows is probably the outlier here. People might hate Windows 10's automatic update system (which was clearly implemented poorly) but a lot of people update to the latest iOS, macOS, and Android versions right after they're released.

dredmorbius 9y ago

This is a topic that could use a good article. This was not that article. It's one thing to rail about the varios psychotics or psychopathics of this that or another. That's not the same as understanding the dynamics through which a situation emerges. What's particularly disturbing is when it appears that the outcome is inevitable. I.F. Stone, writing in 1967 on the Arab-Israeli crisis: The essence of tragedy is a struggle of right against right. Its catharsis is the cleansing pity of seeing how good men do evil despite themselves out of unavoidable circumstance and irresistible compulsion. When evil men do evil, their deeds belong to the realm of pathology. But when good men do evil, we confront the essence of human tragedy. http://www.nybooks.com/articles/1967/08/03/holy-war/ http://www.nybooks.com/articles/1967/08/03/holy-war/ Let's look at the problem here. In a commercial software world, there's a mismatch between cash flows and development. Worse, there's also a conflict between market mechanims based on marginal-cost pricing, and the long-run average costs of development. There's also the tremendous variance in customers' ability to pay -- price discrimination -- particularly for enterprise software. If you sell shrinkwrap, or some other form of buy-once software, then sustaining the development efforts for the next version is ... difficult. The two largest consumer softare companies of the 20th century, Microsoft and Apple, both sponsored that development through hardware sales. Apple did so directly, by selling its own hardware. Microsoft did it indirectly by way of per-CPU licensing of IBM-compatible PCs. Both companies avoided the significant costs of direct software sales. The concept of recurring-subscription revenue is usually associated with periodicals, though that is a relatively modern development. The term doesn't emerge until the 19th century (previous usage was generally in a religious context), and it generally referred to stock subscriptions. Another variant was the subscription library. (See links below.) In a magazine subscription, you pay for the right to receive fresh material, but continue to possess any previously received issues. The model for software subscriptions was in large part IBM's practice of leasing rather than selling computer hardware. Phone systems often followed similar practices. Hardware and software occupy different worlds in that hardware is fairly intrinsically limited: you have a computer, or perhaps a rack, or aisle, or datacentre. But these are unitised, and you're not individually leasing, say, hard drives, CPUs, memory cards, or capacitors, within the computers. My Debian systems typically have a few thousand individual software packages installed. For a proprietary OS, that number falls, but is still considerable. Dealing with individual software packages on a subscription basis from here to eternity is itself a major complexity problem I'd, frankly, rather not have to deal with. It may work in instances, but not at scale. At the same time, there are the financing and cash-flow problems of software developers. How do you bridge those divides? https://books.google.com/ngrams/graph?content=*_NOUN%20subscription&year_start=1800&year_end=2000&corpus=15&smoothing=3&direct_url=t2%3B%2C%2A_NOUN%20subscription%3B%2Cc0%3B%2Cs0%3B%3Bstock_NOUN%20subscription%3B%2Cc0%3B%3Btrial_NOUN%20subscription%3B%2Cc0%3B%3Blife_NOUN%20subscription%3B%2Cc0%3B%3Bmagazine_NOUN%20subscription%3B%2Cc0%3B%3BAnnual_NOUN%20subscription%3B%2Cc0%3B%3Byear_NOUN%20subscription%3B%2Cc0%3B%3Bgift_NOUN%20subscription%3B%2Cc0%3B%3Bguinea_NOUN%20subscription%3B%2Cc0%3B%3Bmembership_NOUN%20subscription%3B%2Cc0%3B%3Bpenny_NOUN%20subscription%3B%2Cc0#t2%3B%2C*_NOUN%20subscription%3B%2Cc0%3B%2Cs0%3B%3Bstock_NOUN%20subscription%3B%2Cc1%3B%3Btrial_NOUN%20subscription%3B%2Cc0%3B%3Blife_NOUN%20subscription%3B%2Cc0%3B%3Bmagazine_NOUN%20subscription%3B%2Cc1%3B%3BAnnual_NOUN%20subscription%3B%2Cc0%3B%3Byear_NOUN%20subscription%3B%2Cc0%3B%3Bgift_NOUN%20subscription%3B%2Cc0%3B%3Bguinea_NOUN%20subscription%3B%2Cc0%3B%3Bmembership_NOUN%20subscription%3B%2Cc0%3B%3Bpenny_NOUN%20subscription%3B%2Cc0 https://books.google.com/ngrams/graph?content=*_NOUN%20subsc... https://books.google.com/ngrams/graph?content=subscription+*_NOUN+&case_insensitive=on&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t2%3B%2Csubscription%20%2A_NOUN%3B%2Cc0%3B%2Cs0%3B%3Bsubscription%20list_NOUN%3B%2Cc0%3B%3Bsubscription%20price_NOUN%3B%2Cc0%3B%3Bsubscription%20paper_NOUN%3B%2Cc0%3B%3Bsubscription%20lists_NOUN%3B%2Cc0%3B%3Bsubscription%20rate_NOUN%3B%2Cc0%3B%3Bsubscription%20library_NOUN%3B%2Cc0%3B%3Bsubscription%20books_NOUN%3B%2Cc0%3B%3Bsubscription%20book_NOUN%3B%2Cc0%3B%3Bsubscription%20rates_NOUN%3B%2Cc0%3B%3Bsubscription%20concerts_NOUN%3B%2Cc0#t2%3B%2Csubscription%20*_NOUN%3B%2Cc0%3B%2Cs0%3B%3Bsubscription%20list_NOUN%3B%2Cc1%3B%3Bsubscription%20price_NOUN%3B%2Cc0%3B%3Bsubscription%20paper_NOUN%3B%2Cc0%3B%3Bsubscription%20lists_NOUN%3B%2Cc0%3B%3Bsubscription%20rate_NOUN%3B%2Cc0%3B%3Bsubscription%20library_NOUN%3B%2Cc1%3B%3Bsubscription%20books_NOUN%3B%2Cc0%3B%3Bsubscription%20book_NOUN%3B%2Cc0%3B%3Bsubscription%20rates_NOUN%3B%2Cc0%3B%3Bsubscription%20concerts_NOUN%3B%2Cc0 https://books.google.com/ngrams/graph?content=subscription+*...