Uber Launches Subscription Model?

Since 2012 I’ve taken almost 1000 rides via rideshare apps, spending well over $8000 on Uber, Lyft and other competitors. My first rideshare ever was with Sidecar in 2012 (ironically from one of their co-founders). Until they sold out to GM they were one of my favorite options (no surge pricing).

Before my days at Amazon, as a scrappy entrepreneur (broke as hell) I regularly moonlighted as a part time driver for Lyft, Uber and Sidecar in their formidable years, where I completed over 500 rides combined on the services. This hails in comparison to what a full time driver does today. I once met a Seattle driver that claimed to have completed over 7500 rides and said, “I’m hoping that when I give my 10,000th ride Uber will give me some stock.” I had to break his improbable dream of being an Uber stockholder given his worker classification as a contractor and not an employee of Uber. Maybe the guy has a chance though, T-Mobile recently offered stock to its customers.

So why am I sharing this? Well I think Uber and Lyft need to (and will) move toward a subscription model. Here is why — I’m currently charged on a per mile + per minute basis + tips or surge charges. Uber and Lyft regularly update their per minute and per mile rates, often increasing prices rates unknowingly to consumers. This sucks, so why not instead charge me for miles, much like cell phone companies do with data or dealers do with car leases. I simply get allocated a certain amount of miles a month and if I go over I simply refill my miles in app next time I order ride. Uber already knows my average ride time and miles so they could simply recommend a plan to me from the information they already have. As an added benefit if I am a subscription member I don’t get surge priced as long as my plan is in good standing with miles to cover the next ride.

If Uber continues to rely on freelance drivers and customers who use Uber as a convenience and not as a utility then they won’t have a sustainable business in the long term. I for example, recently got rid of my vehicle and I would gladly pay Uber $100 a month and think of it as a cell phone plan for my daily commute. The subscription model also goes well with the inevitable move toward autonomous rideshare. By subscribing to the autonomous rideshare of my choosing (Tesla, Uber, Lyft, GM) I gain access to a fleet of vehicles whenever I need them. Rather than show me how much a ride will cost just show me how many miles it will be and how many I have left in my account. i.e. you have 200 miles left for this month. Rollover your unused miles and you are all set. The plan I subscribe to would determine the types of vehicles I have access too. Want the bare minimum (Cricket Wireless) then maybe that includes a limited network of compact Kia vehicles. Want a larger variety of vehicles with reliable coverage in more areas (Verizon) then perhaps Ford or BMW can provide the fleet.

What I am trying to get at is the future of rideshare looks like a playbook written from the telecom days of when cellphones shifted from being a luxury to more of a utility. First there was pay per minute, often with long distance or peak rates (surge pricing). Then carriers started offering shared/family plans (uber pool). Then there was rollover minutes, followed by unlimited minutes (yet to come for rideshare). Then smart phones entered the game and cell phone usage shifted dramatically from minutes to data. This presented an opportunity for carriers to charge for usage once again like they used to with minutes. However, T-Mobile then decided to eat the cost and offer an unlimited everything plan gaining massive market share as a result. Rideshare companies will most certainly shake out just like telecom of yesteryear, some will die, some will merge and some will need to create a new identity. Will Uber and Lyft be a T-Mobile, Sprint or Verizon? Better yet, will they even exist at all in 10 years from now? One thing is for sure, a network is too costly to maintain and Uber can’t afford to build and maintenance it’s own fleet of vehicles, autonomous or otherwise.

This brings me to my second point, I believe that much like how mobile carriers rely on mobile device makers, rideshare companies will similarly need to rely on automotive makers. Uber cannot be both. Uber has realized this and since partnered with Volvo and Lyft inked a partnership with General Motors well before that. Uber and Lyft are the carriers (T-Mobile/Verizon) and the automakers will become the devices their services operate on iPhone, Galaxy, etc…

Cell phone carriers often subsidize device makers to get more customers, I think you will see the same from Uber and Lyft who have been subsidizing rides pretty much from the beginning of their existence. A rideshare company is arguably only as good as its network of vehicles/coverage. Carriers used to get exclusivity to certain device makers. Remember when iPhone was only available on ATT? GM and Cadillac will likely lock up exclusivity with Lyft if they haven’t planned to already.

The holy grail? Are there any automotive makers that could be both the carrier and the device maker? The answer is yes, but it is a short list. I am willing to bet that Uber will barely be a blip in rideshare 10 years from now. Rather a major automaker such as GM will own the majority of market share. Tesla is also uniquely positioned to take on Uber as well, but let me throw in one last idea to noodle on. What if Amazon Prime included rideshare just as it does music and free shipping? And when autonomous cars take all those Uber drivers jobs where will they all work? I hear they are hiring over at Amazon Fresh, Amazon Prime Now, etc..I swear I know nothing, it’s pure wishful thinking.

Update: Uber secretly testing flat rate pricing