Subscription or no subscription? That is not the question.
Companies selling apps via subscriptions embrace the drama: “Either subscription or we die.” As customers, we don’t like to add more recurring payments to our monthly credit card bill. Begrudgingly we try to accept subscriptions as a new reality. But there is a limit to how many we can add to our credit card bill before we ask: Is this necessary? Is there only one business model for software, and, well, for anything now? Does everything have to be a subscription? The short answer is No. Read on for the full answer.
If you’re not in the subscription space, you’re missing out and need to move much quicker than you are to make sure your business survives.” –How Adobe, GoPro, Microsoft and Gillette saved their businesses through subscription revenue
That’s what they say. There is rarely just one way to do things. There are plenty of other business models off and online. Why does everyone want you to buy a subscription? Why all that drama “We’ll die otherwise”? Isn’t that at least exaggerated? At iA, we have developed our app for over 10 years without a subscription. And we are growing in revenue, in users, and in quality. We are not the only developer selling apps. Some of the very best sell apps. Here are the questions we have:
- Why are subscriptions surging even though everyone hates them?
- Aren’t there other models?
- When do subscriptions work?
- When do subscriptions not work?
- What are our plans?
- What can you do?
Warning: This is half a book. You don’t need to read it top to bottom. Pick the chapters you like. Just don’t come back and say “you forgot to mention…” before you read the whole article.
1. Why are subscriptions surging even though everyone hates them?
1.1 Everything is a subscription!
Not just the App Store switched to subscriptions. In today’s so-called gig economy, everything is a subscription. Your cellphone contract is a subscription. Your bike. Your glasses. Even tractors are sold as subscriptions. Like the Beatles said:
If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold, I’ll tax the heat
If you take a walk, I’ll tax your feet
– The Beatles
It gets harder and harder to own anything of value. Land, houses, and cars are to be leased or rented. If you are lucky to own one of these things, you better partially rent your house, car, holiday apartment out. Airbnb, Uber, and Co. sell us this opportunity as open, modern, and exciting.
Last year, the Bureau of Labor Statistics reported that 55 million people in the U.S. are ‘gig workers,’ which is more than 35% of the U.S. workforce. That number is projected to jump to 43% by 2020.” – Forbes: What Are The Pros And Cons Of The Gig Economy?
Gig economy optimists would argue that young people don’t care about ownership anymore. They care about experiences! You can’t care about ownership if you don’t have the means. One of the many reasons why things are as they are is that those who decide, want to keep things as they are. And maybe that they “managed to spend less money”:
“Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.” – Terry Pratchett, Men at Arms: The Play
1.2 Apple loves subscriptions
Selling software without trial is not a walk in the park. Getting someone to subscribe to your app for a cup of coffee is not easy, but easier than getting someone to pay 30 Dollars without trial. And then, paid software comes in versions. Getting people to replace their old expensive app with a new expensive version at full price needs the king of pitches.
But… Just offer trials! And discounted upgrades! Yeah… Consumers expect trials and a discount if they move to a new version. And understandably so. But there are no real trials and no paid upgrades in Apple’s ecosystem. If you tell your customers “Sorry, but there are no update discounts on App Store,” they call you a greedy liar and report you to Apple for fraud. Oh, the irony!
Unfortunately, productivity apps are a terrible match for app store economics.” – Stratechery: Why Doesn’t Apple Enable Sustainable Businesses on the App Store?
What productivity apps need are high price ranges with trials and paid upgrade support. Apple doesn’t care much about paid or productivity apps. Apple is in love with subscriptions, games, and entertainment apps. AppleCare, Apple Music, Apple TV, iCloud… you can even buy iPhones through subscriptions. Clearly, subscriptions work well for them.
On the developer side, moving to subscriptions can be a gate to hell. They usually make less at first. Incidentally the first year you pay the higher fee. Over time they can make more—if you manage to keep your users. That is not a given. The switch from paid to subscription can cost you a fortune. Not technically. The technology is there. It will cost you: users. And angry users don’t just leave, they rate you angrily and write angry comments. They feel harmed and they try to harm you as much as possible. Anonymous ratings, upvoting, and reviews make revenge fast, easy, and cheap.
1.3 Developers are pushed towards subscriptions
You might have noticed that there are no subscriptions for Apple’s own productivity apps. They are either free, like Pages, Numbers, Keynote, or very expensive and paid, like Logic, FinalCut, Motion. There is something humiliating about renting professional tools. Professionals like owning their tools. Imagine a hairdresser renting scissors, or a shoemaker that has to rent that leather cutter! How annoying would it be to pay for Final Cut monthly if you use it every day! As annoying as subscribing to Adobe’s Creative Suite. It’s very annoying if you are an independent designer or small agency working at 60 bucks per hour. A corporation that charges 300 Dollars per hour for their 300 designers obviously don’t care that much about the subscription. More about that below.
The logic that professionals like to own their tools can easily be turned around. “You make money with it, we make it happen, so you may as well pay us regularly!” Like a tax on my work? Get out!
Apple makes an exception for its Pro tools. Maybe that will change, too. Let’s hope not. But with its developers, implicitly or explicitly, Apple tries to get everyone on a subscription. Moving to subscriptions wreaks havoc every time a developer does it. Users protest and trash the developer. You can survive the anger waves, but you’ll keep some heavy scars. Why do developers switch when they know that their customers hate subscriptions?
- Apple takes 15% instead of 30% of a developer’s revenue if they offer subscriptions. That in itself is reason enough for developers to switch to subscriptions. At 30% your chances to make a profit — and that means: running a business — are hair-thin.
- Apple is more likely to promote you on the App Store if you have a subscription-based app because they see that with this model they can make a lot of money. Being promoted on App Stores, in Key Notes, in Apple Stores, and in marketing materials is invaluable.
- As bad comes to worse, if Apple doesn’t promote you, you have to spend money on App Store Search Ads, which takes another heavy cut away from your revenue. Are you feeling the pain?
- Apple doesn’t offer the ability to let users pay for upgrades. A paid app that runs out of sales because it saturated its reach thus has to convince everyone from the existing, loved app to switch to the new, unfamiliar one. Good luck with that.
- Subscription-based apps are listed under free, which is misleading and causes a lot of confusion, but it gives them additional exposure. That makes users click.
In short, Apple’s monopoly on the mobile market most probably doesn’t counter the surge of subscriptions everywhere. Cutting the Apple tax in half created a key incentive for developers to switch. Unless you manage to make over 30% profit, which is absolutely exceptional in our industry, Apple will skim that up every month.
It’s extremely difficult for anyone with employees, or any individuals without other income, to afford to be here. Some people can make enough to cover full-time expenses, but most can’t. (Although I’d say the same thing about the entire App Store, really.)” – Marco Arment
But if you offer subscriptions, you get to keep 15% more of your revenue. 15% is about half of the profit a digital company makes, on average.
We were ecstatic when we first heard about the lower revenue share. Then we observed what happens and we pictured the scenario asking for a subscription on our productivity tools and the excitement dropped week after week. We discussed it internally, up and down. We concluded that, if we offer subscriptions, we had to find a way to offer both ownership and subscription. In spite of the beating one takes it’s not obvious to say no to subscriptions. The technology is right there to be used. The incitement is huge. Here is an illustration for those who are more visual:
Apple is more likely to help, feature, and support a popular app if it has a subscription. Apple will still show interest in your future if you sell a lot of apps. If there is no subscription planned, Apple’s interest vanishes in circles. They come back, showing interest in a featuring here and there, asking questions about your future, and if your response is “no subscriptions” or “no subscriptions only” their interest evaporates. Until they don’t ask anymore.
1.4 Developers are scared
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take Arms against a Sea of troubles
– Shakespeare, Hamlet
As we have seen repeatedly this year, there are exceptions, but, generally speaking, developers are scared to talk about their issues with Apple. Understandably. Apple generally discourages going public. And Apple is the hand that feeds us.
I like to bury my bad news in long posts with neutral headlines knowing the dramapress won’t have the attention span to read it” –@cabel
To say that “many developers do not want to speak out for fear of falling afoul of Apple” is an understatement. Almost none do. And one thing I’ve learned this week — mostly via private communication, because, again, they fear speaking out publicly — is that there are a lot of them.” – Daring Fireball
What do developers fear? That Epic’s provocative update got taken down is logical and expected. That they are about to get banned from developing all Apple software is a demonstration of power. Developers are not afraid of that. Getting ignored is already bad enough. And why is that bad? Apple’s App Store is a labyrinth. Apple has planned and constructed it and it has almost total control over it. In other words, they control the exposure you get inside the App Store.
If they don’t give you any exposure, you need to pay for it, or somehow create an avalanche of traffic, direct it to the App Store and hope that your potential customers through the walls, don’t get distracted and buy your app. If you believe Apple’s Analytics, chances are low that your traffic generates sales. They are much lower than selling it directly.
So why don’t you sell your apps directly? You simply can’t on iOS. And if you have iOS, you want to offer the full package on both App Stores, for the sake of your customers, for the sake of your support crew, for the sake of Apple and their algorithms.
1.5 Consumers don’t care
Naturally, consumers don’t care about what happens after they pay. Life is hard. Business is business. And then life goes on. So cry me a river. Consumers pay for their app and the money’s out of the window. Why should you worry about who gets what share? You don’t worry much about where the money goes when you buy a Mars. You eat the chocolate bar and then move on to your next task. As a consumer, you don’t think that 1/3 of what you earn goes to Apple. And even if you knew that you wouldn’t care. 70% sounds fine. Apple must have its reasons. They build all this stuff! It’s capitalism! They deserve a share! After all, Mars also pays a share to the resellers! Ha! Case closed!
2. What other models are there?
For physical goods and services, there are a variety of business models. Different types of goods and services relate to different types of transactions.
- You can rent houses or buy them.
- You can negotiate at the flea market, but not at the supermarket.
- Insurances, water, and electricity come as a monthly fee. A subscription for a restaurant is not likely to be successful.
- Coupons are a great fit for chain restaurants but not for selling cars.
- You can give away things you don’t want, you can put them on eBay or ask your friends if they want them for free.
- You pay taxes by the mile and lawyers by the hour.
- And when it comes to plane tickets… What a crazy pricing model do they have!
In other words: Even though they are very en vogue now, subscriptions are not a universally superior model for all types of transactions. Sometimes they make sense, and sometimes, they don’t.
When it comes to software though they get annoyingly ubiquitous. Adobe, Microsoft, Netflix, Spotify, Slack, Google… they all sell or want to sell subscriptions… And some of them are extremely successful:
Netflix’s penetration of OTT households [is] 75%” Business of Apps: Netflix Revenue and Usage Statistics (2020)
That you and all of your friends are happy users of Netflix and Spotify doesn’t mean that your users will be excited to pay you monthly for your ultra-minimalist calculator app. That Adobe and Microsoft were successful with their power move from paid software to a subscription model doesn’t mean that copying them will get you on the cover of Forbes. That Apple pushes subscriptions as if there was no other way to sell software doesn’t mean that subscriptions are the only way to run a software business.
Subscriptions can work. But it depends on what you offer. There are plenty of ways to charge for digital products, Free, Ads, In-App Purchases, Freemium, Paid, Subscriptions… There is a wide range of ways to charge for your digital services. So when do subscriptions work? And when do they not work?
3. When do subscriptions work?
There are plenty of instances when subscriptions make sense. It’s difficult to systematically think of every instance.
There are many different types of subscription models. Most are very straightforward, you get a monthly box and choose which products you keep and send back the ones you don’t want. Often, there’s a price incentive to keep everything in the box. Some will tell you what’s in the box before it’s shipped so you can opt in or out beforehand. Others are rental sites, like the way Netflix worked when it only had DVD’s: you choose what you want and they send it to you after you send back the last things you rented.” –Forbes
Here are seven business models that warrant a subscription:
3.1 You offer Entertainment services like Netflix and Spotify
If you offer a waterfall of movies or galaxies of music for the previous price of owning 5 songs or renting one movie, people will pay for it. The offer of 15 Dollars for all the music you can listen to, or all the movies you can watch is plain irresistible. The deal changes fundamentally if you, for instance, offer news instead of music and movies. Newspaper subscriptions are a tough sell unless… see below.
3.2 You own a Monopoly like Microsoft and Adobe
If you have a de facto monopoly, then you might get people to grudgingly subscribe to your change of terms. As a designer, for many years, there was simply no way around Adobe. They were able to push subscriptions on us because they knew that we needed them. But even for them, it wasn’t easy. After an initial slump in sales, they caught up and are now doing better than ever. Ask your independent designer friends though. Chances are high that they hate Adobe as much as paying state taxes.
3.3 You are part of a global elite
There are not many examples of city newspapers that can live off subscriptions. The New York Times is called New York Times, but in fact it is the global king of newspapers. The quality is unmatched, and people around the globe read it.
As always, we should note that The New York Times is a poor proxy for the performance of the rest of the American newspaper industry. It’s a lot easier to sell digital news to a national and global audience than it is to the residents of one city.” –Nieman Lab
3.4 You offer a way to make much more money
The Wall Street Journal and the Financial Times are doing well because reading these papers is a professional requirement for those working in finance. If you don’t work in finance subscribing to the WSJ is not taxing a tool you work with. It is not a constant weight on your purse like the Adobe tax is for the indie designer. It’s not you doing the work and being taxed for using a particular tool. It’s a tiny investment in an information source with a huge return on investment. Here is the real kicker: The affluent financial companies and not private people pay for it. And companies don’t mind subscriptions that much.
3.5 You make companies pay the fee
Companies like subscriptions because they offer control. You need to hire 100 more designers? Get 100 Adobe subscriptions! You fire them again? Cancel the Adobe subscriptions. Buying 100 copies of Creative Suite would be a high sudden expense. Renting Creative Cloud instead of purchasing it allows for short-term reactions to dynamic projects. This flexibility more than pays for the extra expense that could occur over a longer period. More importantly, companies don’t examine and cross-examine every single entry on their credit card bill month after month. Here is another way:
You get one free subscription every 30-days to use to support your favorite streamers. They get financial benefits; you don’t have to pay. When you go to click subscribe on their page you’ll be shown the option to use your free subscription while you have it.” – One Two Stream: Do Streamers Get Money from Twitch Prime Subs?
Streamers can get a ton of cash directly from Amazon, rather than individual users. If you have an Amazon Prime account, you can link that to Twitch and subscribe to your favorite streamer. This gives you one free subscription to any streamer per month. And Bezos will pay them the fee. Meaning: Amazon pays itself. It doesn’t renew automatically, so if you want to keep “subscribing” with your Prime-bucks, you have to engage more with Twitch as a platform. Amazon knows engagement is what keeps a platform alive, so sharing a portion of the cost of Prime subscription with the Twitch arm is more than reasonable.
3.6 You offer heavyweight cloud and server-side technology like Amazon, MailChimp and Dropbox
We understand that what MailChimp and Dropbox do is happening in a place, at a pace and at a scale that requires serious tech muscle. We pay for Google Business Accounts because we understand that someone very competent needs to maintain all these servers. We pay for MailChimp because we cannot use our email app to send out 10,000 newsletters by hand, and our WordPress plugin can’t handle 1,000 newsletters. “Servers!” is a ticket to ride. (In fact, having “servers!” is not that expensive anymore, but consumers don’t know that.)
3.7 You are unique
Obvious subscription services are tied to big organizations that constantly invest in the service we profit from. An army of filmmakers at Netflix, an army of musicians behind Spotify, an army of journalists at The New York Times, and an army of tech experts at Google are constantly at work. What they offer is close to unmatched and it cannot be easily done without a constant flow of money from a huge group of people.
If you have unique information, you can try selling a subscription for your newsletter, but it needs to be a hell of a newsletter. You need to offer diabolically unique information. But be warned: Chances are low that you are this special.
If you sell small to mid-scale software, and it’s obvious that you only need a handful of people to do what you do, it already gets difficult. People that trust you and love you like a friend or a family member will subscribe to your minimalist calculator if you ask them in a charming, compelling way. Clearly, it’s more likely that you get fans paying for your talents on Twitch, YouTube, or on your PodCast than your productivity app.
4. Subscriptions do not work when…
Looking at the sheer number of offline business models and how they relate to what they sell, it shouldn’t come as a surprise that online and offline there are more cases where subscriptions don’t work than cases where they work. A complete list would be longer than you want to scroll. Here are also the top seven that come to mind:
4.1 Customers don’t understand the work behind the subscription
If you don’t live stream multimedia poetry walking up and down Japan, and you offer pretty much the very same thing month after month, people will feel like you charge rent because you can, not because it costs you money to run your operation. People have to understand, and see, and feel, and experience why they need to pay you constantly.
Not all value is visible: In product-based subscription businesses, as well as the traditional buy-sell paradigm, the value-for-value exchange is clear-cut: pay money, get the product. In the service-based subscription economy, that dynamic isn’t always so simple.” – CBInsights: 7 Surprising Industries Turning To Subscription Business Models
This is impossible. People think making software is not a big deal. After all, a copy of your app costs you nothing! They expect support but don’t think about its cost. They expect that it works on the latest iPhone but don’t think that updating it costs you. That may be unfair, but not everyone is an expert on software development economics.
4.2 Customers feel that they get a bad deal
Renting an apartment will be more expensive over time than buying it, but, short term, renting has a lot of upsides. Compared to buying, renting is easy. Renting is less of a financial risk and you stay flexible to change apartments.
If you buy subscriptions but you feel that you end up paying more for the subscription in a year, than you paid for the full version previously, you feel bad. Subscriptions over a year should be substantially cheaper than your previous full version or your paid competitor’s app.
4.3 Customers love to compare
Customers always compare prices. They compare everything to everything. They compare indie gigs to Microsoft, Google Docs to Slack, and calculators to Pizza. They compare features, prices, and colors. And it doesn’t help if you compare the price of your app to a cup of coffee. People are better and faster at negative comparisons than you are at favorable comparisons.
Subscriptions need to live up to all comparisons. Subscriptions are compared to similar subscriptions, and to all other subscriptions. Paying 15 dollars per month for Netflix and Spotify sets a tough precedent. If you ask for 15 Dollars, you better be as good and important as they are. If it’s a third, your operation better costs a third of Netflix’ operation. Ouch!
Netflix and Spotify win all comparisons because they set an annoyingly low bar. Compared to buying DVDs, CDs or Mp3s or any other model, they win any comparison hands down. But you will always lose when compared to them.
People will compare your monthly subscription to other unrelated subscriptions. They will not just compare your minimalist pocket calculator to paid minimalist pocket calculators. They will again compare it to Netflix. They will compare the price, they will compare how much time they use between your app and Netflix, and they will compare their layman estimates of how hard these things are to make. So be cautious when inviting comparisons of time:
“Because a person’s experience with a product tends to foster feelings of personal connection with it, referring to time typically leads to more favorable attitudes—and to more purchases.” – Jennifer Aaker, the General Atlantic Professor of Marketing at Stanford Graduate School of Business, in: Quicksprout, The Psychology Of Pricing
Referring to the time people spend with your product can work if they spend more time on your app than on Netflix. If not, they will start comparing both time and price. With a pro productivity app you do have a chance to compete with Netflix, but only with pros and passionate amateurs.
4.4 Customers reluctantly pay for it privately
We all have enough on our monthly bill. But people are different. Some don’t mind subscriptions as much as others. You can convince some of a higher one-time expense. You can convince others of paying smaller fees constantly. There is a third group that doesn’t mind a smaller fee to try something. They try your product for a month. And then they leave or they pay and pay again. Sometimes they pay without using it, and then they pay so much that they feel like they need to use it. Maybe that will motivate them to do work. That’s not how software works. That’s how fitness clubs work. And getting fees based on self-guilt is not that cool there either.
Convincing a private person to reserve a chunk of their expenses for a piece of software is just not easy. Convincing them to keep paying from their purse is not easy. Convincing someone that hasn’t used your software to stay on board is not easy.
That the monthly expense they see on their credit card is helping poor developers if they don’t use your software regularly is not going to convince anyone to keep paying. Developers are not seen as poor people that need support.
4.5 Customers feel forced to switch from paid to subscription
Changing the deal is never a good idea. Especially if you charged a high price for your app, people see this as an investment in the future. You can release a new version or make them pay for an update, but changing the deal is a Darth Vader move.
4.6 Customers aren’t easily charmed
If you are charming, you can convince some, but you can’t convince everyone to buy a subscription. The same old claim that software can’t survive without subscriptions is getting quickly old. Software made it this far without it. For decades, software was sold successfully. And when it comes to productivity software, as we speak, the very best developers, like Cultured Code, Panic, or Omni, sell their apps with great success.
You could try to explain that you wanted to please Apple, get around buying App Store Search Terms and make a profit to grow. The argument won’t work on customers. As explained, customers don’t care whom they pay. Unless you are very charming.
4.7 You could offer both
Not everything needs to be a subscription. And, likely, not everything needs to be owned or can be owned. But isn’t it always nice to offer a choice? What if you could choose to buy or to subscribe? Under pressure from customers who worried about us going down the subscription lane as well, we took the public stand that iA Writer should offer both. Finally, we found a way to do just that with iA Writer for Android.
5. What are iA’s plans?
Since July, we offer our customers a choice between subscription and ownership for our Android customers. The initial results are encouraging.
5.1 What are the results?
For obvious reasons, we won’t share raw sales data. Basically, Android was always a struggle, but for the first time since the very beginning, Android is moving towards sustainability.
We tried different things before. We tried high prices, mid-range prices, low prices, free, and freemium. Getting Android users to pay for software is not for the feeble-hearted. So far, offering a free basic version with a choice between paid and subscription seems to be the only thing that works. And that doesn’t mean we buy yachts, it means that we might be sustainable in one or two years.
The share of customers that decide to either buy or subscribe is at 50/50. Note: The subscription (USD 5.-) is substantially cheaper than buying the app (USD 30.-). In other words, we make substantially more via paid apps.
5.2 How did you set the prices?
The difference between ownership (30.–) and subscription ($5.-) is big. There are several reasons for that.
- 30 USD is what all our apps cost. They do not feature par, but every app has things another app doesn’t have. iA Writer for Android has online collaboration. A big feature including all sorts of server-side magic that is completely missing on other platforms. We decided to make ownership the same price for all.
- We believe there should be a way for everyone to use our apps. Five dollars per year is really not much by any measure.
- Typically our version cycles are long. With the current iOS and macOS apps, we had one update in 10 years. The current versions have gotten free upgrades for 7 years.
Five Dollars per year is not much by any standard, but we adjusted the prices for different markets. This is possible on Google Play. Apple’s App Stores allows some flexibility for paid apps as well, but the same full flexibility is only available for subscription apps.
5.3 What are the setbacks?
We know that offering almost the same app, with an updated text view and optimized to run on Androids’ latest versions doesn’t give a strong incentive to change. We haven’t advertised the new app in the old app yet, but we have about 10% of our current free users to use the new paid app. This is higher than expected but it is still not where we want to be.
We get a lot of flack in the comments from people complaining that the app is too expensive. Here is the deal: iA Writer for Android was a free app for years and it attracted a lot of people that like free. On a platform that attracts people that like free stuff.
Moving from free to 30 Dollars is a much tougher pitch than moving from paid to subscription. So, naturally, we take a lot of hard punches, now. Overall though, the result is incomparably better than anything we have tried before.
We can do better explaining what we do. For instance, there is a 30 day free trial for the subscription, but you only see it after clicking the first button. We are learning every day.
Offering the choice between paid and subscription is nice because it puts subscriptions and ownership into perspective. It anchors the prices mutually. 5 dollars per year is low. It is even lower when compared to the 30 Dollars for owning the app. Owning the app in return looks high. And it should be. In fact buying, not subscribing one is how users invest.
With all the talk about subscriptions as a way to support a software companies’ future, ironically, buying the app, not paying a small fee now and maybe again, or maybe not, deciding month by month, buying not renting is you show a company that you want to support them long term.
Talking about subscriptions in public is a delicate matter. Apple is jealously watching what developers say. Competitors are watching and trying to get ahead of the game. Customers are watching and might get worried: What are they planning!? McKinsey suggests that you could offer both subscriptions and paid options in the transition from paid to subscription.
For B2B software vendors serving large enterprises, a hybrid model combining both perpetual and subscription offerings for a two- to three-year period can protect revenue and offer a safe transition. A still decisive—but not big-bang—transition allows vendors to capture the full benefit from customers that value the subscription model’s flexibility most.
This is not where we are going. We believe in the choice and we want to bring the choice to buy or subscribe to all platforms. Customers like the choice, and we like it. Clearly, after seven years of offering free updates, there will be a new version of our apps at some point. And even though Apple doesn’t offer upgrade discounts, this, next to offering a choice, is exactly what we want to do. We just have to find a way around the hurdles. But we have lots of other things planned, that we can’t talk about yet. It won’t be a simple move from paid to a choice between paid and subscriptions. It will be even better.
Maybe subscriptions are not the best fit for productivity software. But, as laid out above, some do prefer subscriptions, especially if they are reasonably lower than buying the apps. In that sense, subscriptions will allow you to charge a fair price for your app and not compete in the race to the bottom. But if you offer the choice, you offer customers the opportunity to decide for themselves how they support you.
6. What can you do?
Nothing. Unless you are Apple. So, if you are Apple, here is what you can do: Stop pushing us to a single business model that users hate. Being the App Store of App Stores, asking for 30% for paid apps you set a horrible standard for all other Stores. And, no, that all other stores, Google Play, Play Station, Windows App Store, and PlayStation ask for 30% is not a good sign. It may just you being you, setting standards, but it looks a lot like collusion when such different places ask for the very same fee.
If all the major app stores charge exactly the same fee across the board without sound business justification (and what are the chances that every store has the exact same operating costs?) then even if there is no active collusion between the parties, there is still a case to be made regarding the anti-trust laws.– EnglishMike in the comments section on The Verge
In the end though it doesn’t matter. 30% is too much. Now, here is what you can do if you are Apple:
- Lower the revenue share for both subscription and paid apps to the same level. Something in the range of credit cards, 5% would be great and get you out of the monopoly abuse zone with your direct competitors. 15% is still steep, but, short term, developers would not reject a 15% reduction for paid apps. You can keep your first year 30% share to save face.
- Simply allow trials. Please. It’s very very easy to do. But, pretty please, don’t mix the comments of cheap people that click around for five minutes and just don’t like to pay for software with the reviews of those who used and paid for the app. Let people who don’t like it move on and give room for reviews to those who know the app.
- Allow paid upgrades. Pretty please with sugar on top.
That is all.