Damn Near Every Digital Service is Ripping You Off to Float Free-riders

Hackers, if you have any doubt that we live in the idiocracy timeline, let us cogitate here on the economic absurdity that almost every digital service or good offered in the current year has a free version and then starts at about $10 a month or $100 a year.

Years ago, I paid $2 for lifetime access to the premium version of the Sleep Cycle app. It turns your phone or tablet into a smart alarm clock that wakes you up at the ideal time between REM cycles. If you need an alarm clock, it actually works pretty well and improved my sleep for years - for two bucks.

Once upon a time, I paid about $40 for a lifetime Brain.FM membership, this is an app/website that produces awesome holosync-style psychoactive music for focus, relaxation, meditation, or sleep. Their focus tracks really are an enabler of creative flowstate for me; they provided the auditory wind in my sails while I penned two books, scripted hundreds of videos, and created both my magnum opus course for men and Limitless Mindset's new flagship transformation program. Pretty sweet for forty bucks!

I got life-changing value (for going on half a decade now) out of these digital offerings precisely because they were reasonably priced.

Let's look at an example of another digital personal empowerment tool, that's got its pricing wrong (in my opinion)...

More recently, I trialed the Othership breathwork app. It provides guided breathwork sessions (somewhat similar to guided meditation sessions) for starting the morning right, some pick-me-up energy in the midafternoon, relaxation, gratitude, getting to sleep, and even partner breathwork sessions (for sexytime!) The audio engineering makes the tracks a sublime pleasure to listen to, while there's some room for improvement with the design/UI of the app itself. But when the lengthy free trial that Othership generously extended me ended, I stopped doing breathwork with the app because it cost $18/monthly or $130/yearly.

Now, I'm really not shy about investing money into my health and well-being, a significant portion of our household income goes into supplements, self-quantification, healthy food, and gym memberships. But $130/year for an app membership? Sorry Othership, no thanks! And the Othership offer is similar to so many I see these days across the internet, overpriced. Here's why...

1. It's just an app that plays MP3s of guided breathwork sessions. Let's say that I spent two whole hours finding, downloading, and converting to MP3 the best publicly available breathwork sessions on the internet and organizing them in a VLC playlist (emulating what Othership does) - my time would be "worth" $65/hour (this would take a lot less than two hours in reality). If an app costs so much that my digital DIYing of it values my time at above $50/hour, I won't pay for it. My first job was cleaning grocery store floors for $7.25 an hour, so I'm really not above $50 an hour!
2. An app that costs $130 a year should be PERFECT. It MUST work flawlessly and instantaneously on every device. It should have every feature my heart desires. It should have a design/UI that would make Leonardo Davinci cry. The Othership app is good, but NOT that good.
3. For $130, I expect to be personally served by another human being in some small way. The website hosting services that I've paid for most of my adult life often cost less than $130 a year and include real human beings that I can call up or email anytime I have a problem with my website. With an app that just delivers MP3s, nobody is really serving me personally.

I like what the folks at Othership are all about, I appreciate the creativity and effort that clearly go into their guided meditation tracks, and I'd love to support their mission. Othership would be a total no-brainer for me and many others at $20 a year or $40 for a lifetime membership. I'm disappointed that they have deprived me of the opportunity to reward them by grossly overpricing their offering!

Instead, they've turned me into a "free rider" - I've cost them server resources for my trialing of their app. I'm a (very small) part of the reason some of their customers have to pay $130 a year, for an app. I don't think Othership is overpriced because the folks behind it are rapacious capitalists. I think it's a case of unoriginal thinking; entrepreneurs see that everyone else is doing digital subscription services at around a hundred bucks a year so they figure that's what they should offer.

But Othership is far from the only digital offering getting its pricing wrong...

Another recent example, I've been using Suno.com to make Limitless Mindset music about Biohacking and lifehacking (that might seem terribly gimmicky, but listen to some of the songs in my library - they sound about as good as anything you'll hear on the radio!) For Father's Day, I made my brother a funny hip-hop song about how he flips the pancakes while teaching his daughters critical thinking skills that blew his mind and, he told me, got him out of a funk he had been in. It's a pretty awesome tool, that lets you make up to five songs daily for free. I'd love to thank Suno by becoming a customer, but their premium plan is overpriced at $10/month or $96/year. If it was just $10/year, it would be a total no-brainer!

A final example, I like listening to audiobooks at the gym or while getting water for my family from the Roman spring here in Sofia. I don't want to give Jeff Bezos yet more money via Audible so I found a not-bad app, NaturalReader, which converts epub/mobi ebook files into audiobooks that it reads to you with AI voice narration that sounds almost like a normal audiobook. But it's overpriced at about $9 a month or $110 a year!

For $110 I could get a yearly Audible membership or purchase enough audiobooks to give me enough to listen to (and I get the pleasure of professional human narration that never mispronounces a word!) So I'll just stick with their free plan (which provides pretty decent narration), NaturalReader has turned me into yet another free rider.

The free rider problem

I once spent a weekend in Wroclaw, Poland salsa dancing with the very pretty and surprisingly friendly locals. The next day I must have been still dreaming about the Polish girls as I forgot to pay for my ticket before jumping on the public transit to head back to my hostel. I was a "free rider" but I was made to pay the cost by a very grouchy old fair checker, he made me pay an 80 euro fine. Given the exchange rate, with that 80 euros I could have gone on five dates with Polish girls! I learned my lesson and always pay for public transit tickets now.

The free rider problem shows up because humans really like free things, if you offer free things so many cheapskates (like me!) will take them that the whole system becomes unsustainable.

Why is damn near every digital offering dramatically overpriced?

I asked on Quora...

Why do SO MANY digital goods, apps, and subscription services cost about $10 a month or $100 a year? Why not sell them to like 10X more customers at $10/year (especially considering economies of scale)? Is this just irrational corporate greed?

And got a couple of intelligent responses, most of them making the argument that about $100 a year is the actual cost of delivering the service to me as a user plus a reasonable profit (I'm a capitalist, I'm fine with people making a profit. I'd love Othership's parking lot to be full of Ferraris!) But I call bullshit! on this answer because many of these services offer an unlimited free plan that is quite good, with many of the same features as the paid plan. I suspect the reason these services cost so much is that their user base kind of looks like a population age vs taxpayer base chart for Greece...

I suspect that these services are overpriced because they are creating a free rider problem for themselves! As a person who offers on the internet...

• A free website full of helpful information about lifehacking and biohacking
• A free-to-download podcast
• Hundreds of free videos
• A free book (it's a pretty good book actually!)
• Free 30-minute consultations

I know that about 80% of my audience is never going to give me a cent; only about 20% will ever buy things I recommend via my affiliate links, buy my books, support me on Substack, or hire me as a lifecoach or Biohacking consultant one day. I'm sure that these apps and digital services have an even more stark proportion of free riders to customers.

A European paper, The Freemium Effect, shows that consumers consistently view freemium services as more valuable than premium. Growth hacking tech entrepreneurs hope that an awesome free product will convince users to shell out for the paid premium product, but very few will.

When you pay $10/month or $100/year for one of these services you are NOT paying for yourself plus a reasonable profit margin, you're paying for yourself plus anywhere from 10-100 free riders using the free version of the service.

The other reason $10/month or $100/year is so common is that it's what we call in the biz a great internet marketing price. $10 (or $9.99 or $9.87) is the largest psychologically insignificant price. It's an amount of money you might lose in the laundry and only spend 60 seconds searching for. So you'll impulsively sign up for their subscription service without thinking much about it. And $10/month makes $100/year look like a hot new girlfriend, you feel smart for snagging that 20% savings!

Another reason I think the answer I got on Quora ("$100/year is the actual cost of delivering what you want plus a reasonable profit margin") is BS is because of the examples I cited earlier; Sleep Cycle and Brain.FM. Has the cost of hosting, bandwidth, cloud services, and tech talent gone up dramatically since I paid $2 for Sleep Cycle (it now costs $40 a year)? Tech salaries are the only thing you could argue has gone up, the other costs have gone in the other direction.

Why this sucks: Photobucket wants to sell your face

Remember Photobucket? In my past life, I used them to host the flyer images for the events I would organize at nightclubs on MySpace (Remember MySpace? Remember clubbin'? Good times!)

Photobucket is the most recent platform to royally screw the PR pooch by changing its terms of service to include selling biometric data from your images to the highest bidder. This means AI image generators might get trained on regrettable photos of you taking body shots in Club Sutra in 2009! I think we can thank the freemium model for this sort of behavior. If Photobucket wasn't sinking under the weight of many millions of free riders, would they even consider doing creepy things like selling our images? How many other freemium services are getting away with similar invasive abuse of users (without the much-deserved spanking from the internet's outrage-azzi)?

Why $10/month or $100/year is overpriced - Opportunity cost

Perhaps at this point, you're saying...

Jonathan, you cheap bastard! how poor are you?

Whenever you spend money on a subscription service you have to ask what you are NOT spending that money on.

Storytime: Back in the day, I bought this very stylish blackSean Jean button-down shirt for (inflation-adjusted) about $100 and it lasted me 16 years. I wore it thousands of times and it made me look great. I wore it to job interviews for multiple jobs I had. I wore it on my first date with my wife. Am I going to get the value from a $10/month or $100/year digital subscription service that I got out of that Sean Jean shirt? Doubtful.

Maybe you don't see the ROI in fashion, but I bet you do in health. Red light therapy devices are simply one of the smartest investments you can make into your longevity, vitality, and getting good sleep. 20 minutes of red light therapy a day hasrejuvenating effects similar to what you get from high-end anti-aging supplements that will set you back $50-$70 monthly. A quality red light therapy device is going to cost you $300-$500 and you'll get 5-10 years of use out of it (even after dropping it on the floor a few times!) If you have a couple of subscription services, that's money you're choosing not to spend on something that could dramatically improve your overall health this decade!

The FlexBeam - it would be a really smart idea to use this on your overworked hacker hands for 20 minutes a week to save yourself from carpal tunnel!

Pseudo-Premium

The purveyors of these subscription services often call their paid plans premium, but are they really? Premium should mean perfect, or so delightfully good that imperfections are easily forgotten and overlooked.

Storytime: In March, my wife and I splurged about a third of our yearly dining and entertainment budget one evening on a dining-in-the-dark experience at a local restaurant. Everything about the experience blew our socks off; the food was mouthwatering, the hostess and front-of-the-house staff seemed genuinely honored to service us, and our blind waiter, the best waiter of my life, seemed so interested in us that we almost asked if we could send her a friend request. The night was a memory we'll treasure till death do us part. That's what premium is!

$100 is certainly a premium price for a digital subscription service, and I'm sure you tried a few of them. Are they perfect? Are they surprisingly and delightfully good? Or were they just slightly better than the free version? With a few annoying bugs and limitations? And customer service that left you wanting?

I'll add that Sleep Cycle and Brain.FM (the Biohacking apps I mentioned at the beginning) are not perfect apps, I've had little issues and disappointments with both - of which I am very forgiving. This is because of their cost, even with their imperfections they are an awesome value. If you charge a hundred dollars a year for your service you turn your customers into entitled and demanding prima donnas the moment your tech is less than flawless.

Big publishing went the wrong way

My wife is Bulgarian and Bulgarians really like to torrent things. I explained to my wife that piracy of just about any media distributed online is pretty justified because, about 10 years ago the big corporate publishers, facing the disruption of their industry by the internet, went the wrong way. Digital distribution of books, for example, dramatically decreases the cost of doing business. In the past, to distribute books you had to...

• Cut down trees
• Put trees into a giant truck with a massive crane
• Ship trees (hundreds or thousands of miles) to be processed into paper in a factory
• Ship paper to another factory
• Print and bind the book
• Ship books to a bookstore
• Operating an inviting bookstore and pay employees to work there (making sure homeless guys don't pee on the floor)

Now, distributing books is just a file download - the minuscule amount of bandwidth it takes to get a 500KB file from their computer to your computer. It's probably less than 1/100th the cost it used to be YET digital books now often cost as much as print books do. Talk about overpriced!

I began this article by stating that we're living in the Idiocracy timeline. Big publishing could have gone in a different direction, they could have had their Manhattan PR firms craft some variation of this message to the public:

It now costs us a tiny fraction of what it used to to deliver you our product. So good news, we're going to decrease our prices sharply for digital media that you buy online AND with all the money we're now saving, we're going to double or triple the royalties we pay to the authors, artists, and musicians that you love. But, here's the catch, this only works if you don't pirate their stuff. Pretty please, don't do that!

Instead, they chose greed and fear. They could have beaten piracy by bringing the cost of their product down a little more in line with their actual costs of distribution and publishing. If downloading a book or movie cost a fourth of what a physical copy used to, I wager even Bulgarians would pay for it!

Digital pricing done right

At this point, you might be saying (especially, if you're an entrepreneur offering a $100/year subscription service)...

These digital services cost this much because they must. If you want all these cool apps and digital services making your life a little easier that's just what they need to charge to stay in business.

I contend that's not the case because there are plenty of examples of digital businesses thriving on what we could call micro-transactions.

Recently, I've been engrossed with the excellent computer game Total War: Shogun 2. The strategy game captures the epic warfare of the Shinjuku period in Japan. The game costs just $3 on Steam. You might think it's impossible to provide customer service at this price point, but the publisher of Shogun 2 actually provides customer support. I had a little issue running the game on my Mac (which I was again, very forgiving of given the price). I emailed their customer service and they got back to me a few days later with a solution.

As a gamer ballin' on a budget, you'll never be bored as you can always find some truly great games on Steam under $10. Steam and game publishers are smart enough to know that if priced higher, they'd lose a lot of customers who would just torrent the games.

Recently, I broke up with Evernote (it wasn't me, it was them!) because they jacked up their full-featured premium plan to $130 a year (I once paid $25 for it!) Sorry Evernote, you're fancy but NOT that fancy! So I switched to Amplenote which has almost all the same features for $70 a year.

A final example of a well-designed app that did its pricing right. Dual N-Back brain training is one of the best things you can do for your mind. It's the most scientifically efficacious brain training task, which will actually increase your IQ. But the problem is that it's challenging and boring. It's tough to stick with for enough sessions to benefit you, so the N-Back Challenge app is free as long as you play for 10 minutes every day, if you miss a day they ask you to "buy them a coffee" for about a buck or you can unlock unrestricted use by "Buying them a pizza" for about $9. This motivated me to brain train every day, completing their 21-day challenge.

Entrepreneurs, STOP doing this!

I'm hoping that there are some smart entrepreneurs out there reading this now convinced to price their offerings reasonably.

The full-featured freemium offer and the $100/year premium plan are NOT the ideal offering, selected with infinite intelligence by the unseen hand of the market. It just what everybody else is doing, and remember what your mom told you about doing what everybody else is doing, just because everybody else is doing it? An entrepreneur's job is to think outside of the box.

• If you're going to do the freemium model, make the freemium significantly less awesome than the paid option.
• Don't offer forever freemium, a week or two trial is enough for people to evaluate it and decide whether they want to pay for it.
• Take all the money you're saving from booting the free riders off the bus, and invest it in a better product and customer service. Invest in marketing, and hire a ninja copyrighter to articulate this message cleverly to your potential customers; We're breaking the mold by pricing our offering lower than the competition, we can do this because you're just paying for yourself, not a bunch of free riders! If you get value from our product, pay for it!

Who's fault is the economic absurdistan?

Yours. You thought this whole article was just going to be beating up on greedy companies overpricing their mediocre services? Nope. A big part of the free rider problem is in the mirror, my friend. A big part of the reason the internet economy is such an Absurdistan is that the consuming public, you and I included, act like your buddy's hot (yet so very entitled) new girlfriend; just for existing she expects free dinners at swanky spots, $12 cocktails at the club, luxurious gifts from the mall, and all-expenses-paid trips to exotic places where your buddy gets sunburnt.

The consuming public has become trained to expect the digital services that enrich our lives to come at a cost of zero. And entrepreneurs are fundamentally in the business of giving people what they want and expect. So they overprice their offerings to make up for the mass of entitled free riders on the bus. If you dislike the economic Absurdistan I characterize here, pay for more of the digital services you enjoy (you're not 22 years old in a miniskirt).

This is my first piece of writing for HackerNoon, if you like it leave a comment below letting me know what you think of all these $10/month subscription services.

Do you agree that damn near every digital offering is overpriced in the current year?