Why everything is turning into a subscription
Who even likes monthly payments?
Looking at my bank account at the end of the month, it’s easy to spot my ever-growing collection of recurring payments. Streaming services like Spotify and Netflix are listed next to classics like my phone bill and rent, but recently there has been a surge of payments for a new category — Random Apps I Like To Use.
People don’t like paying for software. For some reason, no one has a problem shelling out $2 for a bag of chips, but most think $0.99 for an app is way too much. It’s a weird discrepancy, because software developers need to pay their rent just as much as chips producers.
The psychological reason behind this behavior is called anchoring, and it’s all about the expectation of how much something costs. Back in the early 90s, desktop software could easily be priced around $200, but people happily paid up because all software was expensive. Now, thanks to the free market of mobile app stores, competition between developers kickstarted a race to the bottom — why would you pay for a $2 app if there’s a free alternative?
This low-cost mobile ecosystem has changed consumer demands in a lot of ways. When Apple’s touch devices just came out, software updates for the iPod Touch cost $9.95 per release. After a while, the company eventually started offering them for free. This also influenced desktop software — when Mac OS X Leopard was released in 2009, the upgrade to Apple’s desktop operating system still cost $129 — however, the release of OS X Mavericks four years later was a free upgrade. Keeping in line with this trend, Microsoft also started offering free upgrades to the most recent version of Windows.
In 2017, users expect continuous updates, great customer support and high-quality software for a the lowest possible price. Corporations like Apple are able to give this to their users, offsetting the costs by dipping into their massive cash pile or slightly raising retail prices. However, for most companies this means having to totally rethink their business model.
The Rise of the Subscription Model
Recently, more and more software developers have been making the switch from one-time payments to a subscription model. Popularized by streaming services like Spotify and Netflix, monthly payments are seen as a way to support continuous development of an app or service.
Take for example 1Password, a stellar password manager that’s a must-have for anyone with a computer. When it launched in 2006, a license to use the desktop app was sold for a one-time fee of $49.99. A few years later it released a mobile app, sold separately for $17.99.
Recently, the app made the switch to a subscription model, offering an all-in-one solution for $2.99 per month. According to AgileBits, the company behind 1Password, it was too much of a hassle for people to buy separate app licenses for their Mac, iOS and Windows devices, and users often revolted when asked to pay for a major new release. By charging a monthly fee, subscribers get access to the app on all their devices, unlimited updates and the added option to sync their data via 1Password’s servers.
Of course, the new subscriptions making things easier for users. But most importantly, recurring payments give AgileBits a steady source of income that can drive the development of future releases.
Alright, so are subscriptions good or bad?
That’s a pretty complex question. Let’s take a closer look a the pros and cons for each party:
There’s something to say for both sides, but I think it ends up being more in favor of the developer. There are a few reasons for this:
One of the worst things about subscriptions is how users can be lured into paying for them. To try the product, you can get access to a free trial in exchange for your credit card details. There’s the promise they won’t charge your card during the trial, but the moment your trial period is over the full monthly price is charged.
At that point, if you liked the product, it doesn’t take any effort to keep using it — but your card will continue to be charged indefinitely. The only way to make it stop is by diving deep into your account setting to cancel the subscription. Or maybe you’ve already forgotten about it completely, like these poor Tidal subscribers.
Then there’s another thing I touched on at the top of this page — we’re drowning in subscriptions. Personally, I’m trying to keep track of over 20 different monthly payments for all kinds of services. Hundreds of euros slip out of my account every month without me noticing it one bit, making it important to look for unused or bogus subscriptions every so often.
Bobby is a great app to help you with this. It provides you with a neat list of all your recurring costs, calculates, your monthly total and sends a notification when a bill is due, giving you more grip on your finances.
Chances are subscriptions won’t just take over the software industry. Plans like the iPhone Upgrade Program show the first signs of an emerging market for hardware subscriptions — for a monthly fee, you can trade in your iPhone for the newest model the day it comes out, always giving you access to Apple’s latest and greatest. If you’re a fan of them or not, subscriptions are definitely here to stay.
