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Editorial: get used to software subscriptions
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Apr 15, 2016, 03:04 PM
 
If you aren't already a TextExpander user, then what appeared to happen last week was that makers, Smile Software, switched to charging a subscription for the software, and everyone complained that it cost too much money. They did do that switch, and everyone did complain about the cost, but this was not really about one price point versus another. Perhaps if a different company had done it with lower prices, the debate would not have started when it did, but it was coming regardless. The debate is really about the whole issue of subscriptions, of software as a service (SAAS), and that is something we are going to see more and more of: we have to.

The issue is about the medium and the long term, about whether software developers can even survive. It may not be an issue that can ever be entirely resolved, but we've reached a crunch point and what happened with Smile is indicative of the stress points on all sides. The developers needing to survive and our wanting great software -- plus our unwillingness to pay for it. That's not a palatable fact, but it's a fact: as a society, we have driven software prices into the ground.



If this is about the future, though, it is still important to note what Smile did at the center of this particular ignition. To their excellent credit, the firm has responded well: it has done all that it could over the couple of days of the storm. So right now, the subscription price has been lowered, and also the previously-abandoned standalone TextExpander 5 has been brought back as an option. That is all they could do now, that's all they could do in time, and it's commendable. Except it shouldn't have been necessary, because despite all the enormous financial pressures on software developers, Smile got caught between just two specific problems. One of them was perhaps unforeseeable, but the other was entirely within their control, and they missed it.

The one they missed is their own product. As hard as it must be for them to hear when they quite clearly spent a lot of effort developing the new TextExpander 6, it just isn't really any different to TextExpander 5. Cosmetically there are nice touches, and if you're in a team or on Windows, then there were distinct benefits to the new version. Yet there wasn't a compelling or even an intriguing reason for a version 5 user to upgrade to 6. In the old course of things, everyone would've upgraded anyway, because either they'd get a discount for being an existing user, or because every user loves this software and wants to support it.

As a society, we famously value coffee above apps or books, but as individual Apple-using professionals, we are a bit better than the average. We do see the benefits, and we are prone to getting partial to our software and hardware. We pay more for Apple gear than PC users do, we pay for iOS apps more than Android users do for their software. It's still only 99 cents, but it's something; and if you are a TextExpander user, you could well call yourself a fan of it, and so you would be likely to upgrade. You are probably used to upgrading each time a major version comes along.

This time, though, existing users were faced with the choice of not just buying an upgrade, but essentially committing to buy it forever. They were faced not only without any clear advantage to doing this, but also with the very clear disadvantage that they would lose a feature. The previous editions of TextExpander synced using Dropbox or iCloud, and the new one only uses its own textexpander.com. There's an issue over whether that is as secure and private, but also it's a big move that locks you into the subscription.

Internally, you can be sure that Smile saw all this work as a massive, massive change, and that pulling it off was a big achievement; but from the outside, there is nothing on view but the price and the problem. So atop all they already did, Smile could've done one more thing, and added a feature that was compelling. That's easy to say, far harder to do, and we don't know what it would be, but it was essential -- and that's what they missed. It is not a bad thing that they went to a subscription model, not bad at all -- except for this one predictable problem, and the one they could only have guessed about.



That second problem is subscription fatigue. Nobody yearns to pay a subscription, but we all do. Maybe you call it a mortgage, but you have that, and you maybe also have Netflix, Apple Music, and perhaps Adobe Creative Cloud. For any one of those, you had to make a decision to purchase, or you had to be okay with not getting around to making a decision to cancel. There was still an initial moment when you thought about whether it was worth your signing up, even if you later continue through habit, the way that it seems AOL's entire income is from dial-up subscribers who haven't switched off their accounts yet.

Netflix and Apple Music went the free trial route, where you could actually see what you were getting. Adobe went the route of offering you all of its apps: previously, you might only have been able to afford Photoshop, but now for a very low fee you get that plus Illustrator, Premiere, InDesign and a dozen more world-class applications. If you really needed them in your work, you'd have got them already, but if you only needed occasional use of them, or you simply wanted to really see what you could with these other apps, that Creative Cloud deal was compelling.

A key part of all this is the phrase "very low fee," though. This does fit in with software's race to the bottom, the way that we have driven applications and their developers into the ground because of how successfully we've demanded cheap or free apps. Software used to cost hundreds or thousands of dollars, and it was worth it. You know that, and you agree with it, but we're not going to be able to turn back the race to the bottom -- so if we are to get decent software, and if developers are to even survive, pricing is gone. That means this: there is only subscription. Nothing else is left.

Except, developers can't think of subscriptions in the way they used to think of prices. It is not a cost-plus model, where you work out what you had to invest to develop this, add on a bit for profit, and then divide by your anticipated number of users. A subscription price is not about the product, it is about the user. It is about what they are willing to pay, and about what you have that will make them want to.

If you're an Adobe Creative Cloud subscriber, then the odds are that your business depends on that software, and so to you it has a greater value than something you use just for fun. If you use Office 365, it's because you like paying to watch Word crash every day. Yet even so, you are not paying what the software is worth to you, you are paying as much as the makers can get out of you. Finding that point, finding the maximum that someone who will not make any assessment of worth or value but will instead compare you badly to a coffee, is hard.



All you can do is aim for a low price and for high volumes, plus make your SAAS be in some obvious way better than before. Doubtlessly, Smile needs people to subscribe in order to survive: if there is a software company out there now that doesn't need this, they will soon. Yet subscribing has to be a choice. You're used to finding ways to make people want your software, now you have to do the slightly different thing of trying to make them want to subscribe.

We're not at a good point at the moment, but TextExpander is excellent software, even it needs to go subscription in order to thrive. Think of apps that are not as good, that do not have fans: they are facing the same struggles, and they are going to go under. Some of the ones that fail, maybe many of them, will be good; yet failing because they're too niche, too small.

Yet there will be the ones that survive, and they will do it by being popular: they will do it by being great. Maybe, just maybe, software is going to get a new life through subscriptions. Maybe. If it's to happen, though, we're going to have to vote with our bank accounts, we're going to have to accept software as a service, rather than a one-off purchase. Developers are going to have to change how they think about pricing -- and so are we.

-- William Gallagher (@WGallagher)
     
alansky
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Apr 15, 2016, 04:38 PM
 
MacNN is pretty much glossing over what may become a very serious problem for many, many software users. For example, the article characterizes Adobe CC's $50 a month subscription price as "a very low fee". HAH! $600 a year is NOT "a very low fee" for the innumerable hobbyists and freelancers of modest means who rely on Adobe products just as much as their well-heeled corporate counterparts. Adobe does have a truly low-priced subscription option, but subscribers do not get the Adobe CC suite of apps for this price—just Photoshop and Lightroom. Can you imagine what the monthly tab might be to rent dozens of apps if you're an expert computer user who doesn't work for a big company?

If there is a crisis looming in the software business, software developers have brought it on themselves by milking the software gravy train for far too long. Now they're paying the price as consumers become accustomed to the much lower app prices introduced by the iTunes Store, and continued by the Mac App Store. If software developers think their profits are being ravaged by software piracy, they ain't seen nothin' compared to how much piracy there will be if consumers can't buy standalone applications at reasonable prices and use them until compelling new features make them want to upgrade.
     
Makosuke
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Apr 15, 2016, 04:53 PM
 
In a world where many apps have become, essentially, feature complete--there aren't any major new features to add, because it already does almost everything you could possibly want it to--SAAS becomes something of a necessity. Microsoft hasn't added a feature to Word or Excel that's truly useful for most users since, what, 1998? 2001? Certainly 2008 at the latest--we're still using that eight-year-old version at my entire university, and nobody is complaining. Same for Photoshop--it's feature-complete for most uses, and so the reason to upgrade are minimal unless you're a pro.

I'm sort of in favor of this, as long as the app is at least actively maintained (spend that dev money you were previously investing in new features on bug fixes, security, and polish). It lets a company with a mature product that's saturated the market stay in business without being forced to create new products.

But part of the bargain--what makes it work for an end user--is when there is a compelling price argument for why they're not just getting charged monthly for something that never gets updated. DreamWeaver is a prime example--Adobe barely touched the thing for years, and that's an app that had lots of room for improvement.

The other part is that there are "professional" (read: corporate) buyers who have a fixed budget, specific needs, and don't mind paying relatively high but predictable ongoing prices for something that they see as business-necessary. And then there are "consumer" buyers, who are more price sensitive and have a much narrower set of needs.

A consumer rarely if every needs Mail Merge or multi-user Track Changes in Word, for example, while professionals might rely on them, and is probably still happy using Word 2004 (heck, there are still fans of Word 5.1).

While corporate pricing might be able to get away with something else, what seems like a logical way to set consumer subscription pricing is to look at what the app cost, on average, if you upgraded every version during its pre-maturity period, divide it out to a monthly number, and then reduce it a little since you should theoretically be getting an "every version upgrade" from every user, and those who did, in turn, are getting a bit of a bargain in theory and less bang for their buck in the form of new features.

Adobe explicitly advertised CC as being cheaper, on average, than every-version upgrades, plus you get more apps. So there's a value proposition if you weren't the kind of person who upgraded every 3 versions.

Office 365 is less compelling for home users--it's about twice as expensive as before, and most users probably don't care about the cloud features--while the business version is maybe a little cheaper or on parity, with some add-on theoretical value. This may explain why no home user I know personally has switched to Office 365, but I'm seeing business users go for the subscription.

It seems to me like where TextExpander went wrong was trying to apply corporate pricing to home users. Given what it does, what the competition costs, and what it cost before, there probably wouldn't have been anywhere near the backlash if it had cost a dollar or two per month for home users.

One could also, of course, make the argument that if you're not adding any significant new features to a mature, SAAS product, it should be substantially cheaper to compensate--you're just paying for OS-version maintenance. And none of this solves the "lock in" problem of anything with a proprietary file format. That last one is particularly nasty for creative types--either you export to some universal format before you cancel your subscription, or you can't get to any of your own data.
     
Charles Martin
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Apr 15, 2016, 04:57 PM
 
I hate to disagree, but I will. $50/month for the entire CC suite is a stone-cold bargain for anyone making even a modest living doing graphic design or similar work for a living. The suite formerly sold for around $1800 (and didn't include nearly as many tools), and each component's upgrade would be a few hundred each time. For those who needed to stay up-to-date, you were dropping a couple of grand a year on the suite. Even back when I was doing pro graphic design, $600 was less than a full day's billing. And that was quite a while ago.

I completely agree with the point made in the article about subscription fatigue, though. As I said on the podcast, for me to pay a subscription for software, it has to be (first) something I can make a living with so I can earn that cost (and much, much more) back, and (second) it must be a compelling value. The Adobe "Photographer's Bundle" meets those qualifications, TextExpander (even now) IMHO does not.
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HPeet
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Apr 16, 2016, 06:55 AM
 
"That second problem is subscription fatigue. Nobody yearns to pay a subscription, but we all do. Maybe you call it a mortgage..."

"Mortgage" is the wrong term here as one gets to pay this off and actually 'own' the underlying property. "Rent" is probably a better choice.

I too have subscription fatigue. It is like a death by a thousand cuts when the credit card statement comes in.
     
Inkling
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Apr 16, 2016, 08:49 AM
 
Thanks for an excellent article and great comments. Here's mine. As a new business model, software developers are still learning how to manage subscriptions, hence all this controversy. The model works best when users need frequent updates and the developer is suppying them. As a result, users see value in subscribing. For Adobe, that's true for video and web developers. Those apps are improving at a rapid pace. It's not true for an InDesign user like myself. The pace of improvement for ID has slowed dramatically with subscriptions and is concentrated in a few areas (i.e. Publish Online) that are of little value to me. I'm so displeased, I'm thinking of dumping my $50 subscription and opting for a $20, single-app one. But even that irritates me. As an layout editor, I'm like a photographer in that I use a single app in my business. So why does do I have to pay twice as much as a photographer, particularly when Photoshop is getting improvements much faster than ID? That doesn't seem fair.
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Stuke
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Apr 16, 2016, 08:43 PM
 
Count me out. Perpetual licenses only. I buy a car and run it until it does not work. I don't rent (lease) it with mileage restrictions (...or, in SW case, terms and conditions that can and will change as software companies tweak their SAAS models in years to come...basically changing the rate by slowing down version releases or the price). So, I'll stick with a time stamp version that I have control over mastering the softwares output benefits vs. OS updates, giving me the option to shop around when several years pass if necessary. Nope, subscriptions (rentals) will not be on my devices.
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Apr 16, 2016, 11:47 PM
 
The more software goes to subscription, the less software I will pay for. Think about it.
     
Steve Wilkinson
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Apr 17, 2016, 12:38 AM
 
re: "Except, developers can't think of subscriptions in the way they used to think of prices. It is not a cost-plus model, where you work out what you had to invest to develop this, add on a bit for profit, and then divide by your anticipated number of users. A subscription price is not about the product, it is about the user. It is about what they are willing to pay, and about what you have that will make them want to."

I agree with this assessment, but not the overall premise of the article. My reaction to what Smile did wasn't about the move to SaaS over buying it every year or two. It is totally about the price point.

The thing about SaaS pricing, is that you're getting a guaranteed even revenue stream, but you're going to have to price it reasonably. SaaS isn't an excuse to raise prices by 50-100%. People expect a bit of a deal in trade for that subscription. I wouldn't subscribe to Netflix if it were $40 instead of $10, even if it replaced $50 worth of Blockbuster trips.

But, where I'm calling a bit of baloney on one of the main points the article makes is in the whole 'we have to do this to survive' thing. People like Smile were surviving when the potential Mac market was 1/10th the size it is now at the old lower pricing model. The prices for this stuff haven't come down much on the Mac side. Yes, the pricing model on mobile is more difficult, but then you're talking a WAY bigger potential market as well. There's never been a better time to be a Mac developer.

About the only place prices of software have fallen that I can see (aside from mobile) is in high-end software like 3D, CAD, video production, etc... in other words the pro tools. Part of that is simply competition. If there are only 2 or 3 choices, the prices can be held higher than when there are a dozen. But, with a much bigger market at hand, it's at least possible to make back up in volume.

Originally, I was more against SaaS. Adobe is a great example. They delivered such a good deal via SaaS now, that it's mostly a no-brainer for anyone who formerly would have bought their products, and it's even a low enough bar for entry, that some startup that wouldn't have been able to buy it previously, can pretty easily fit it into their monthly budget. (Previously, they'd have had to save up that monthly budget for a year or two just to get into the game. And, a lot of people just pirated until they had enough cash flow to justify buying it.)

But, aside from pricing (i.e.: SaaS sometimes being a better deal and drawing me in), the longevity of compatibility has also changed. It used to be that if I purchased some software package, while I might have *wanted* to upgrade once per year or more, I might end up waiting a few versions. And, if my budget got crunched, I could probably use that product for 5+ years before it wouldn't work any longer. Now, a lot of these apps are 'broken' anyway within a year or two if you're overall keeping up OSs and equipment.
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Lynn_Fredricks
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Apr 17, 2016, 01:06 PM
 
I like to refer to this model as a rental model, rather than a subscription model. There are subscription models which are not rentals (ie software doesn't turn off when you stop paying).

Rentals would not be an issue were the first major ones not completely dominant in their market. Adobe can afford to aggressively assert a subscription model because its products are the dominant ones in professional markets and there are no easy replacements (not until the open source alternatives get much better).

Make no mistake - subscriptions provide no improvement to the end user. As a metered piece of software, your rights are a moving target, while previously you had far more flexibility.

No products are feature complete; instead, they remain competitive both with other products and themselves, and the companies that make them have to provide customers with legitimate reasons to upgrade.

The only legitimate reason I see for vendors to move to the rental model is to combat piracy. It is the workaround solution to the 'remote deactivation' problem which I believe is not legal in key target markets.

Subscriptions are the future though, because users have allowed it to happen. Enjoy paying again and again for the same features, or even kiss some features goodbye as the subscription model becomes more granular in time.
     
DiabloConQueso
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Apr 17, 2016, 03:05 PM
 
"Make no mistake - subscriptions provide no improvement to the end user."

Well, except for a substantially lowered cost of entry (I can start using the entire Adobe suite for $75 instead of over $1,000), and the fact that I only need to pay for what I need (so I can pay $30 for, say, Photoshop for 1 month to complete a project, then not pay for it at all for the months and years ahead that I may not need it).

This is not a defense of the trend of software companies moving toward rental models, it's simply an observation. While the drawbacks may outnumber the benefits, chanting the mantra, "There are zero benefits!" is simply hyperbolic and dishonest.
     
aroxnicadi
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Apr 18, 2016, 12:43 PM
 
They want to charge a subscription then the software has to free. I refuse to pay for a piece of software and then on top of it have to pay a subscription to use it.
     
GaryDeezy
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Apr 18, 2016, 02:55 PM
 
As a true-blue capitalist, I have no problems with vendors requiring subscriptions to their software. I don't necessarily agree with that model, but I respect their ability to charge how/what they wish.

I can tell you for a fact that Adobe has priced itself out of the range of my small business, and we will be moving away from their tools as quickly as possible. Let the profit chips fall where they may.
     
Steve Wilkinson
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Apr 18, 2016, 03:02 PM
 
Originally Posted by Lynn_Fredricks View Post
Adobe can afford to aggressively assert a subscription model because its products are the dominant ones in professional markets and there are no easy replacements (not until the open source alternatives get much better).
Actually, there are some great replacements (IMO, even better ones). It's more a question of compatibility. I worked with an industrial design firm for a few years many years ago. We initially shared office space with an architectural firm. They used AutoCAD because they had to have compatibility with other firms and clients using it. We used an app from Ashlar called Vellum 3D. We could run circles around them unless they were using special add-ons for specific tasks. They were a bit envious, but they had no choice.

I'm currently debating a similar kind of thing for my own business. While Adobe's pricing is now quite reasonable, I actually started using alternatives a few years back, and I'm not sure I *want* to use Adobe's suite any longer. Every once in a while, I see a cool file, template, or tutorial that requires a unique PhotoShop feature, but for the most part, I can do as much, or more, with my current tools. So, while it's priced well, I'm not quite compelled to buy at this point.

Originally Posted by aroxnicadi View Post
They want to charge a subscription then the software has to free. I refuse to pay for a piece of software and then on top of it have to pay a subscription to use it.
My understanding is that it will be subscription based (and you'll probably get it on all platforms?). If so, that actually softens the blow just a bit, as we've previously had to buy it on each platform (and upgrade every so often).
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