The Subscription Model Doesn’t Work for Everything
Subscriptions took the internet by storm in the 10’s, but their days are numbered.
When apps on mobile devices were the new thing, developers were selling them for them for a couple of bucks, updating them a few times, and leaving them out to dry. Users felt ripped off that the product wouldn’t work with later versions of iOS, and developers complained that they couldn’t support the app for longer than they were paid for. Then came along a new payment model — subscriptions. Instead of resorting to the sinister world of micro-transactions, developers could charge a subscription fee, per month, or per year, ensuring that their products could be supported for as long as users still used it. There’s only one problem: the subscription model won’t work for much longer. Here’s why.
When subscriptions first debuted, users were paying for a living, growing collection of content to stream. The giants of mobile subscriptions were, and still are, Netflix and Spotify. In this article, I talk about how there will be an increasing number of content-as-a-service products in 2019, but this doesn’t ring true for applications. Unlike content-as-a-service products, applications don’t grow and evolve to the extent that people will pay monthly for them. A prime example of this is the Adobe Suite. While once Adobe had a stranglehold on the creative market, a growing number of customers are moving towards alternatives, such as Affinity and Pixelmator. Although Adobe still is the suite of choice, alternatives are now being more seriously considered, since Adobe’s change to a subscription pricing model. Subscription plans also don’t work for mobile applications. While they may provide a lot of value, all mobile applications are restricted to use on mobile devices, and consumers aren’t willing to pay for hefty subscription plans on their phones. In essence, subscription plans are perceived as far too expensive in a world where everything else is already being charged as a service. After expenses like internet access and CAAS products like Spotify and Netflix, there simply isn’t much left to spend on subscriptions for static applications.
The result of this is disastrous. Since consumers aren’t willing to spend even more on subscription plans, developers have had to resort to in-app purchases on games, and high prices on applications. As the expectations for applications increases, so does the production cost, and therefore the amount needed to recoup that cost. This is passed on to the consumer in one way or another, and recently, the prices of applications on the App Store have skyrocketed. The innocent days of the App Store are over. You can no longer have a mega hit with a Vuvuzela app which takes a week to code. Consumer expectations are sky high, requiring years of man hours to satisfy, but their willingness to spend hasn’t increased by enough. Today, announcing “I’m going to make an app” is a declaration of huge sacrifice. Applications are going the way of films, with increasingly large teams and budgets, and an increasingly discerning audience. At $2-$10 per month for many applications, the rising cost of applications means that for users, there is increased selectivity in what they will subscribe to.
So what’s the solution? It isn’t easy. No matter what sleuthing there is to be done, there simply isn’t a way to have consumers pay less, and the developers get more. Ads have been around since the dawn of time, but no customer will both pay for an app and tolerate ads on it. This leaves only one option — free apps with ads. However, this isn’t as easy as you might think. People want ads to be shown on popular apps, since they will reach the most people, but popular apps aren’t the ones in need of ad revenue. The lone developer with a fresh, unnoticed app is in most need of ad revenue, but won’t get any. Ads only work at scale, which is why the best ad driven sites such as Duolingo and SoloLearn had monstrous amounts of (unprofitable) initial investment before introducing ads.
However, the “Pay As You Go” model seems to be increasing in popularity, mostly for desktop applications. The main problem with “pay once, play forever” is that the apps rarely, if ever get updates, since the income stream is almost all at once. Users aren’t happy with this, since OS updates break compatability with older, never-updated apps, and so the apps become useless after a few years. The pay as you go model fixes these problems, since those who don’t need more than the features of Year 1 can continue to get stability updates, while those who pay for Year 2 and onwards fund the upkeep of the app while enabling new features to be added. This model works well in theory, since it means that as long as an app is being used and can be improved, it can survive into the future. However, this creates a conflict of interest between the users and the developers. Too many features at launch or at Year 1 will mean that there aren’t enough features to add in Year 2 and onwards, or later features will be less and less useful. In addition, people still aren’t willing to pay money per year for a phone app. It’s hard enough getting people to pay for apps at all, let alone every year. There really isn’t a silver bullet for the problem of continued funding for apps. Multinational companies will continue to create apps — don’t worry, they have the resources to keep them going indefinitely. It’s the indie developers who come off worst.
For now, we’ll just have to accept that as users expectations increase, so will the cost of production, and so it will take deeper pockets to get an app off the ground. The Pay As You Go model works well in the desktop sector, but doesn’t have a proven track record in mobile applications, and it’s unlikely to work in an environment where competition is fierce, with huge companies able to self-fund apps. The upside to all of this, if any, is that mobile apps will be of little to no monetary cost to most users, at the expense of intrusive ads, tracking, and exploitative micro-transactions. However, in an age where privacy and data mining are becoming more pressing issues, we should be paying with our wallets, not our data.