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I learned the reason for this push as I learned about business accounting and particularly how businesses are valued. Recurring revenue is valued at higher mul
by api 3y ago
I learned the reason for this push as I learned about business accounting and particularly how businesses are valued.
Recurring revenue is valued at higher multiples than non-recurring revenue, and the math for how to value it is much simpler. Higher valuation multiples mean more ability to raise money or access debt liquidity in the market at a lower cost in either equity or interest.
This creates a powerful systematic incentive for companies to look for any and all opportunities to tack a subscription onto everything.
It’s so powerful that it can make sense for a company to trade higher non-recurring revenues for lower recurring revenues.
The only thing that will push back is if consumers revolt and stop buying things that require subscriptions, especially if the subscription doesn’t make any sense or as with this case has unacceptable terms.
Bottom line is that you get what you incentivize. If you see a pathological trend, look for the incentives.
- AnimalMuppet 3y ago> The only thing that will push back is if consumers revolt and stop buying things that require subscriptions, especially if the subscription doesn’t make any sense or as with this case has unacceptable terms. As we should. I don't care how much sense it makes for the business. It doesn't make sense for me, and I'm the one making the purchasing decision. Those who play this kind of game to trade higher non-recurring revenue for lower recurring revenue won't have my revenue, whether recurring or non-recurring. The big problem is when it's hidden. If it's clearly spelled out that this is the way they're going to play, fine. But if you buy a printer and then later find out that they're doing this, that's basically a deceptive business practice, because the terms aren't what you were led to believe they are. That's something where consumer protection laws should apply.