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Maybe I'm dense, but; Why not just include it in the sticker price of the car? At a minimum for PR / Optics. You could argue: > Its like power steering. You
by jwally 4y ago
Maybe I'm dense, but;
Why not just include it in the sticker price of the car? At a minimum for PR / Optics.
You could argue:
> Its like power steering. You don't have the option NOT to have it, and it costs us money; so its part of why the car costs what it does.
That way instead of people feeling like they're being cheated out of an extra $1,500 on a $50,000 vehicle; they just purchase a $51,500 vehicle?
- xhkkffbf 4y agoThey could do that and I'm sure they considered it. In the end, the consumer pays the same price. But I'm sure there are some internal accounting games going on. The $1500 is booked over the next three years, not all at once. So I'm guessing the accountants may have a plan.
- jedberg 4y agoBecause Wall Street treats subscription revenue differently than one time income. So if they can put that $1500 on the books split up over three years as recurring subscription, that helps their stock price.
- mwint 4y agoThat feels so backwards… Does it have a root in reality? In my personal finance, I’d always rather have $1500 now than an IOU for $1500 over three years.
- modzu 4y agothe idea is that you forget to unsubscribe and then pay much longer than 3 years
- tomnipotent 4y ago> Does it have a root in reality? Predictability. Recurring subscription revenue is drastically easier to forecast and plan cash flow around, and the financial models can be so much simpler to work with than non-transactional sales.
- jedberg 4y agoFor you yes, you'd rather have cash now. But for a public business, investors want to see continuing and growing revenue. So they need a mix of both. Subscription revenue is more stable as long as your subscriber base is steady or growing.
- the_optimist 4y agoNo, this is just wrong. Whoever came up with this theory has no idea what they’re talking about. If there’s a non-zero probability of the subscription not being canceled (more revenue) then yes, more revenue is good. Otherwise later revenue is bad, public or private. There is no exception to this.
- listenallyall 4y agoI think you're are looking at this with a very narrow lens. a) GM can remotely disable the car if the subscription isn't paid. So likelihood of abandonment is minimal. b) more importantly, this takes $1500 off the sticker price, making GM cars more appealing when compared to Ford, BMW, etc. People who don't buy a GM car don't buy OnStar subscriptions at all... so just increasing the volume of subscriptions is the most important metric c) 3 years/$1500 is just the minimum. People who have paid for 3 years are likely to keep paying in year 4, 5 and beyond. Totally different reaction than just starting a new monthly payment in month 37. And GM can add new features as upcharges to increase those payments in future years. d) GM can use the recurring subscription creatively to roll owners into a new GM car. Think family plans where the 2nd sub costs less, or a % of future subscription payments are credited against the cost of a new vehicle.
- the_optimist 4y agoYes, obviously if you increase revenue and/or create new, valuable service opportunities, that’s more valuable. Merely changing the form of existing revenue: not valuable. Getting the same cash later: not valuable. So now we’re back at this point, which is perhaps obvious, that if you sell something with value, it could be valued by “Wall Street.” There is nothing counterintuitive or non-obvious worth pointing out here.
- the_optimist 4y agoThis is incorrect in theory and in practice. You have this reversed.
- thayne 4y agoSo once the three years is up they they start automatically billing you unless you cancel?
- listenallyall 4y agoSimilar reasons to why things are priced at $x.99 or why car prices are often quoted in per-month payments or why mail-in rebates make you mail something in rather than just give you a discount. Or why the dealer doesn't even mention the mandatory "prep" charge until after you've shaken hands on the deal. Perfectly rational people may factor everything in properly... but the world is woefully short of perfectly rational people.
- smnrchrds 4y agoBecause the optics of a car company disabling a feature that was included with the car after three years unless you start paying for it and continue paying for it indefinitely are even worse.
- snackenaway 4y agoI'm going to guess it's because when you buy a car, you don't buy it from GM. You buy it from the dealer. That $1,500 option can become whatever inflated price the dealer puts it. While if it's a subscription from GM, it's $1,500 and that $1,500 directly goes to GM.
- jwally 4y agoFor what its worth, this is a massive pet-peeve of mine. I forget exactly who does it, TicketMaster, or Axios, or something - will say something like: > Ok, two tickets for the concert; that's $120 I'm like great. No idea how you came up with that number, but I'm good with it. Then they'll come back after I'm locked in and say: > There's also a convenience fee of $30. Your total is $150. I'm livid at this point - which is totally irrational; because had they just told me the cost was $150 up front - like an idiot, I'd have just said "well, that's the price. Here's money." Instead, I'm left with a sour taste in my mouth and hate all ticket vendors who I feel pulled a fast one on me. I'm sure you could make the argument that a greater percentage balk at the $150 number than would walk at $120 + $30, so you make more money. That's fair, but to me it feels like I was tricked for no good reason. :shrug-emoji