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I think that a lot of this is actually being driven by new accounting standards (ASC 606 - Revenue Recognition), basically the new rules state that for subscrip
by grantlmiller 8y ago
I think that a lot of this is actually being driven by new accounting standards (ASC 606 - Revenue Recognition), basically the new rules state that for subscription revenue to be recognized over time, the software must be materially disabled at the end of the period. This matters mainly b/c it has tax implications. If companies don't disable the software the entire value of the customer's contract must be recognized up front (as well as taxed upfront), this is true even if the payments are still made monthly. Paying taxes now on revenue that comes in later isn't good for cashflows and as such it creates a business problem that trickles down to consumers.
- lotsofpulp 8y agoWhile that may be a factor, I think it was inevitable to go to a subscription business rather than one time sale. Consistent cash flow, vendor lock in, no risk of piracy, ability to raise prices quickly (or slowly), not having to support everyone's Windows installations or whatever OS they may have full of malware. Who wouldn't want to have a rent seeking business, given the option?
- acdha 8y agoI don't think it's just new accounting rules since this was the preferred model in the past, too, for the obvious reasons. It broke when the PC revolution hit and direct sales to consumers became the dominant business for most vendors but the customers couldn't be assumed to have any network connectivity or even someone who'd install upgrades if you paid the non-trivial cost to ship them. Now most vendors can assume reasonable network connectivity that's not a constraint and the recurring monthly revenue is quite appealing.
- toddh 8y agoAny company that cares about ASC 606 isn't reporting taxes on a cash basis anyway. They report on an accrual basis which has little to do with when customers pay.