5 ms·

That 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 ago
  the 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 ago
  For 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 ago
    No, 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 ago
      I 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 ago
        Yes, 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.
    • dfee 4y ago
      You don’t know what you’re talking about. There are a bag full of other tricks. Like - increasing subscription revenue, offsetting lost subscribers.
      • the_optimist 4y ago
        Wrong. If you increase revenue, that’s not the same as changing the form of the revenue (and delaying cashflow to boot). The comment suggests that the latter is more valuable. It is not.
  • SilasX 4y ago
    That still doesn't make sense. In this case, the "continuing revenue" is deliberately artificial and strictly worse than the upfront payment. To the extent that your valuation "likes" the latter in such a case, that valuation method is predictably, avoidably flawed, and will be outcompeted by non-goldfish-attention-span valuation methods.
    • Closi 4y ago
      The assumption is that the subscription will continue past the initial term for some % of users.
    • parkingrift 4y ago
      Recurring revenue is worth 7-15x. One-time revenue is worth 1-3x. I could rant for hours on how absurd this is, but it’s better to just abuse it. You know mba and finance people are idiotically valuing revenue in this way. So game it.
      • the_optimist 4y ago
        They’re not.