Can subscriptions replace freebies?
Asking those who pay nothing to pay something is a big ask
One of the perks of living in the internet era has been the freebie, with email being a good example. Often, this service or software is either free or comes with a nominal one-time payment, like say ₹69 ($1). That’s hard to resist, especially if you are a student or broke or live in one of the world’s poorer countries. The problem is the freebies aren’t really free. One way or the other, we are paying a price for it, and it’s usually our private data.
Most of the first wave of freebies tended to be poor quality software, full of malware and ugly ads. But companies like Google soon realized they were sitting on a gold mine in terms of ad revenue, and began to plow back money and refine their products till they became benchmarks of excellence in their respective fields. Apps like Gmail and Google Maps are today the gold standard in email and mapping.
Google showed how our data can be used in a responsible way. Unfortunately, Facebook demonstrated how to use data irresponsibly. By letting themselves be driven by greed, they may have destroyed the whole data-driven ‘free’ economy and killed the goose that was laying the golden eggs. At his recent speech at Stanford, Brian Acton, one of WhatsApp’s original founders, made this comment about WhatsApp’s plan to levy an annual fee of $1:
“It was not extraordinarily money-making, and if you have a billion users … you’re going to have $1 billion in revenue per year. That’s not what Google and Facebook want. They want multibillions of dollars.”
This is what led to scams like Cambridge Analytica and the Trump Presidency. Though many of us are now wary of freebies, we have become so habituated to the free economy that we aren’t likely to give them up completely.
Personally, I‘m almost out of Facebook and Instagram. I still do access these apps around once a month just to keep track of things. But I have dedicated a separate app/browser (like Firefox Focus on my mobile ) solely for use with these two apps. This, in effect, creates a sandbox for FB and IM, as all my regular browsing is done in apps like Safari.
Not that it helps too much as WhatsApp is India’s defacto messaging system, which means Facebook can access whatever data WhatsApp has. Besides, Facebook’s recent plans to combine WhatsApp, Instagram and Facebook messenger is going to be an issue. That’s a bridge I will cross when I reach it.
With more people becoming worried about their data, the free economy is beginning to show some cracks though it’s not likely to collapse as yet. Google, for instance, is still deeply interwoven into my life. My iPhone has an entire home screen devoted to Google apps as I have found ‘Apple just works better when it piggybacks on Google.’ In fact, I even use Siri to open Google Assistant for voice interactions, as the latter works better for me. So I’m still very much a part of the ‘free’ economy despite all the data misuse scams.
However, being an iPhone user means I also have one foot in the ‘paid’ economy. In contrast to Google and Facebook who generate income by selling our data, Apple makes its money by charging a premium for its hardware. This is why Apple can afford to maintain data privacy for its customers and even throw in its software and services for free.
However, Apple may have gone too far with their $1000+ iPhones. Sales have definitely slowed. I was due to upgrade my three-year-old iPhone 6S+ last year, but instead changed its battery, and plan to use it for another year or two. I did this because I found the high cost of upgrading to the ‘iPhone X’ series unjustified by the relatively minor improvements in these new iPhones. I suspect there are millions of iPhone users who feel the same.
Whatever the cause, Apple’s cash cow has begun yielding less cash, and the company finds itself needing to find another source of revenue. They seem to be changing their services strategy from a cut on the ‘one-time app payment’ to a cut on a ‘recurring app subscription.’ Apple’s switch to the ‘recurring app or subscription’ model will be closely followed by the ‘free economy’ players.
Of course, online video streaming services like Netflix, Amazon Prime Video, Hotstar and a host of new players already exist in India. But their challenge is a lot more simple. They are basically asking paying customers to switch to a new provider. In other words, cut the cord to their current TV provider, and switch to streaming. If the customer already has broadband at home, the cost of the streaming service is similar to their cable services, but offers a far wider collection of videos to choose from, as well as the convenience of choosing what they want to see, and when they want to see it. So video streaming services will find it relatively easier to convert customers. As against other subscription services which are trying to make customers who are currently paying nothing to pay something.
Take India’s music scene for instance. Firstly, Indians usually don’t pay for music as they can get it for free via the radio, YouTube, or the free versions of the music streaming apps. Secondly, it’s still early days in the industry with players like Google still getting their act together with their current offer being a confusing mix of Google Music, YouTube Music, and YouTube Music Premium, which they are likely to simplify.
Unlike Apple Music, most of the music streaming services in India offer free versions, usually supported by ads. These versions may have restrictions like users not being allowed to download songs to listen offline. The pro or premium versions of these services remove these restrictions for a price. However, the subscription model is going to be hard to push in countries like India which are price sensitive. See below the pricing for the premium versions of India’s music streaming services.
As you can see the prices are incredibly cheap compared to the US, and may be part of a bundled service like Amazon Prime. In contrast, Apple is offering Apple Music as a standalone subscription with a free one month trial, after which it will cost ₹99/month. That’s just $1.43/month as compared to the $10/month that Apple Music customers pay in the US. But even at this price, customers will be hard to come by in India for Apple Music as they are competing with ‘free.’ After all, this is a country where ₹100/month gets you a cellphone plan with unlimited calls, messages and data (throttled after a limit) and music, video and other stuff thrown in for free.
To get around this, bundling subscriptions seems to be the latest strategy, and it’s not surprising to see Amazon leading the charge as they have a penchant for killing off competition with their money muscle. Consider my current subscription to Amazon Prime Music. It comes free with my Amazon Prime service, which itself comes free as part of a bundled deal with my Vodafone cellphone plan. Here’s a list of what I get from Amazon Prime.
Free delivery for Amazon Prime Shopping
Discounts on Amazon shopping
Amazon Prime Music
Amazon Prime Video
Free membership to a limited version of the Kindle ebook library
On/off offers like a 3 month free trial of Audible audiobooks library
Free 1-year Amazon Prime subscription bundled with Vodafone cellular plan.
Even if I was paying the annual ₹1000 fee of Amazon Prime, this is literally a killer deal. Basically, Amazon is deploying its usual tactic of using its money muscle to kill off its competition in the music market. After which, if they jack up the price for Amazon Music, there’s nothing I will be able to do about it. This dilemma is why I may sign up with one of Amazon’s competing music streaming services. My current subscription to Amazon Prime will expire in December, and hopefully I will by then have a clear picture of which service will suit me best.
I don’t have any other online subscriptions, apart from Medium, which I’m discontinuing. That’s another story. Maybe I will divert that payment to Apple News, if they can sort out their current issues and give me a single source access to good reading content.
Having said that, subscription services do exist in India. The catch is almost none of it is for online services. Here are what some of my offline monthly subscriptions look like.
Cable TV: ₹220/month ($3.17)
Newspaper: ₹120/month ($1.73)
Landline: ₹353/month ($5)
Cellphones: ₹100/month ($1.44) each.
So yes, the subscription model is already applicable in India. It’s just that Indians aren’t used to subscribing and making regular payments for online services. What they are used to is free services, free apps, or at worst a nominal one-time payment of ₹69 ($1). That’s going to be a hard habit to break. I mean this is a country where for a long time even government departments used to run pirated Windows editions on their official PCs. Asking such users to start making regular payments for a service is a huge ask.
In such a scenario, streaming music is indeed a good way for companies to test out the waters for a subscription model in India. ₹100/month may not sound like much. But the price-conscious, average Indian will quickly figure out that adds up ₹1000+/year, and that’s not peanuts for him.
My gut feel is ordinary Indians will opt for the free, ad-supported music-streaming models. That’s because data privacy is not something most Indians really understand or worry about. The exception who may pay, would be those who don’t mind subscribing if it’s bundled along with some other service.
One thing is for sure. The good times of the free economy could be coming to an end, with some form of a subscription economy likely to replace it. Whether they will succeed or not remains to be seen.
What I do know is I will miss the free lunches, even if they weren’t really free.
