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>Zuora came up with the phrase “subscription economy” to name the trend in which buyers increasingly choose recurring service payments over outright purchases.

• jk563 8y ago
  Get where you're coming from, but I don't think they're entirely wrong. Whilst you can't buy Photoshop once now (your point), there are plenty of models where the choice is still there. Netflix and Spotify both have one-off purchase equivalents. You can still buy Jira as a one off purchase instead of SaaS.
  • cyberpunk0 8y ago
    Please describe how Spotify and Netflix offer these lifetime price one-time purchase options.. quite well hidden in their exclusively subscription pricing
  • jakelazaroff 8y ago
    In case it's unclear, the "one-off purchase equivalents" to Netflix and Spotify to which the parent refers are iTunes, Amazon, etc.
    • jk563 8y ago
      Sorry, yeah, this is what I meant.
    • gowld 8y ago
      Those aren't one-off for the same product (full catalog unlimited access); those are pay-per-use instead of pay-per-calendar-month
      • jakelazaroff 8y ago
        That's true. Maybe magazines and newspapers are a better analogy: you can pay for single issues, but plenty of people still choose to subscribe.
  • moorhosj 8y ago
    Spotify has its own no-purchase equivalent, the free version of Spotify.
    • tjoff 8y ago
      They are not equivalent.
      • moorhosj 8y ago
        And what is the one-off equivalent of Spotify? Is it closer to the paid version Spotify than the free version of Spotify?
• Illniyar 8y ago
  A trend rarely happens on only one side of the demand-supply axis. There is definitely a trend towards subscriptions, especially for SMBs, but enterprise and individuals as well. It's so much easier to pay a monthly or yearly fee then up front, especially for companies - both in terms of cashflow , accounting practices and stability. Some companies has gone that route that have customers on both sides of the aisle - adobe is one of them. Their choice alienated some part of their customers, but be sure that many others were glad for the change - probably big companies with shifting employee roster, or those who upgraded frequently.
  • tjoff 8y ago
    Sure they do. 3D TVs and bent TVs are two glaring examples of something people never wanted. The only way companies could uphold that view was by ensuring that no manufacturer had sensible alternatives - effectively forcing people that wanted a TV to buy it. And then pretending that the sales were proof that people wanted it. It is the exact same with the majority of subscription services. For a company I get that it is easier. But easier for an individual? I walk twice around the earth before even considering a subscription service. It cannot be simpler than pay once and you are done for life. The reason as to why so few companies offer both is because it then becomes apparent how bad the subscription value is.
    • ghaff 8y ago
      >It cannot be simpler than pay once and you are done for life. Although that's rarely the case. At some point, your OS upgrade--which you probably have to do for security reasons--breaks your five year old program. Or the program doesn't handle some new format or peripheral, etc. I don't really disagree with your basic point. I dislike money leaks. For online services of various types, I mostly have no choice but I at least want to minimize them with on-prem software--especially for things I only use every now and then.
    • saiya-jin 8y ago
      Bent TV probably no since they are mostly viewed with other people, but ultra wide bent monitors are super nice, especially for gaming. I go this way instead of VR which seems to take time to 'get there' (also HW requirements are easier to pay for).
• enraged_camel 8y ago
  Not true. I work in the enterprise software space. We definitely noticed a strong trend, starting around mid-2010, where prospective customers started shying away from one-time, upfront purchases and demanding a subscription model. The reason is simple: one is a capital expenditure, whereas the other can be categorized as an operational expense. With a subscription model, even if you end up paying more in the long run, you realize the return on investment almost immediately.
  • HeyLaughingBoy 8y ago
    I get the feeling this is something they always wanted, but the software business model had to catch up to that need. Thinking back to my first job as an EE in the early 90's, I clearly remember the new owner of the company who had been a CFO in his previous life, trying to figure out a way to move our hardware sales to a leasing-type model. His experience as a CFO led him to the conclusion that larger companies would prefer to bill items to OpEx rather than CapEx for just the reason you said.
    • enraged_camel 8y ago
      >>I get the feeling this is something they always wanted, but the software business model had to catch up to that need. It's more that the need manifested itself with the economic crash, as companies realized they would rather keep as much cash as possible in the bank in order to more successfully navigate the uncertain economic climate. Subscription model satisfies that risk aversion.
  • TeMPOraL 8y ago
    I keep hearing this "capex vs. opex" argument from time to time; are there tax benefits to this, or something else that justifies putting the same costs under different label?
    • enraged_camel 8y ago
      Yes. Cash at hand is very valuable. It cushions you against certain types of business risk and also gives you the ability to pounce on opportunities that may come up (e.g. acquiring another company). In some companies there are also budgetary reasons. For example, a department may blow their capex budget on something early in the year. If you have a payment model that supports regular payments, the customer can still buy your product, as opposed to having to make room in next year's budget (which is not only not guaranteed, but also delays the purchase). But the biggest reason is ROI. Let's say there is a software that will save your department $1000 per month. You can either buy this software for a $24,000 one-time payment, or for $500 per month. If you do the former, it would take you two years to start realizing the ROI. If you do the latter, you start realizing it immediately. And of course, if you don't like the software, you can always cancel your subscription, which means you're also protected against the risk of, say, buying something that never gets adopted by the users (or project failures, etc.).
• jfoster 8y ago
  When he says "buyers" here, I think he's talking about Zuora's customers.
• michaelt 8y ago
  Presumably Zuora hopes you'll think of "Netflix vs Google Play Movies" and "Spotify vs Amazon MP3 Store" rather than "Adobe CS vs Adobe CC"
• ataturk 8y ago
  Ha! I came here to say the exact same thing! Talk about being inside an echo chamber--you're not creating value, you're strip mining wealth. Auto makers are starting to get in on it, too.
• bhauer 8y ago
  Thank you for this. It made me laugh and makes HN feel like HN. As I read the blog entry, I was struck by how much apprehension I had about the particular subject (Zuora and subscriptions) and not the theme (making a compelling sales presentation). I was tempted but decided to refrain from adding a comment about the subject and how much I find the "Subscription Economy" disappointing. After all, railing about an incidental matter from a submission rather than its point would be HN comments in a nutshell. So many of us here do it, myself included. But I was happy—and not really surprised—to see the point had already been made and all I had to do was upvote. But here I am writing a reply to say that it provided me a good chuckle this morning as we get back to work after a holiday break. Back to the ol' grind in the Subscription Economy, eh?
  • lmg643 8y ago
    I am also heartened that the #1 and #2 comments on here retain the voice of sanity. I think this piece and the pitch it references are borderline abuse of the history and context of subscription businesses. I see the current trend in subscriptions as largely a revolution in pure technology service businesses, where subscriptions are a rational way to pay for them (dropbox, github), along with software producers and their customers maturing to the point that they can mutually acknowledge the need for up-to-date and evolving core capabilities, such as Windows and Office, which can reasonably be seen to require recurring support which has value. (But you can still get a lot done with non subscription versions of Word 2003 etc). Newspapers, telephones and cable TV have long been subscription based. Subscriptions alone obviously were not able to save newspapers from crushing deflation in their ancillary revenue models of classified ads, which they lost to craigslist and others. Cable TV to date has been much more successful in evolving and preventing disruption in those ancillary lines (pay per view etc) and has maintained a subscription model. As an aside - everyone thinks Netflix is so wise with their current subscription strategy, I am a paying streaming customer myself, but the number of times of late that Netflix does not have the movie I actually want to watch, but Amazon's pay-per-view model does, makes me realize there are limits to the subscription approach as well. Netflix's model of creating content to justify their subscription is going to stop working eventually, content is a "long tail" type problem and their strategy of self-funding content is going to be increasingly unworkable within a few years.
• DINKDINK 8y ago
  >It's not a trend where buyers choose recurring payments, but where companies only offer services through recurring payments. If a firm could be profitable and offer out-right purchases relative to recurring payments, why aren't they doing that? Let the market be rife with only recurring-payment firms. A purchase firm enters with higher prices, if they fail to succeed, it's "buyers [are] increasingly choose recurring service payments over outright purchases."
  • gowld 8y ago
    Vendor lock-in and network effects.
• at-fates-hands 8y ago
  When I was running my Web Agency, we gave the client two options, one was an hourly rate, the other a monthly subscription. A majority of our larger clients took the subscription since it came with a few more benefits in service and response time. The smaller clients wanted to have us doing ala carte work which was also fine. The best part about our sub clients was it built a closer relationship with us. Communication was easier and more streamlined and it was easier to show a real value to the work we were doing on a month to month basis. Our hourly clients didn't care about analytics, they just wanted a part-time content manager or someone to upgrade their design every now and then. It was easy for us to continue to have the incoming revenue and plan a budget based on those numbers. Our smaller hourly clients were just frosting on the cake. We never would have gotten so many smaller companies on board if we only offered sub services to them. The hourly rate was perfect for them to keep the work manageable and on-demand and still within a reasonable budget. My other friends who did the same thing would simply charge a bulk rate for the design and development and then once the site was released, they had to find another client willing to dole out %5-$10K for their services. We built long term relationships with our clients and were able to tailor future services to their needs - which totally blew my friends mind. They were so opposed to a sub based service, all they wanted was the money up front which was a total red flag to me.
• scirocco 8y ago
  In the enterprise world, many companies prefer recurring payments (opex). Reasons include...It's risky to invest large sums early on in a project without knowing the outcome. Also easier to get approvals for a smaller recurring payment than a single, large sum