Alan Marsden

@AlanMarsden

The Subscription App Paradox

Are app developers misguided?

I needed a new business suit so off to the shops I went.

It took an hour to try different styles until I found the right one. Once decided, I took the suit to the cash desk with bank card ready.

“That’ll be £200 Sir,” said the store manager, “and £10 per month.”

“Why £10 a month?” I asked.

“Well Sir, although we make money on the original sale, we need a regular income from our customers, like Netflix”.

I don’t mind paying extra for alterations or occasional dry cleaning, but not to wear the suit after I paid.

I left the shop to try other options.

On the subject of renting, I received terrible news. No one had died — it was worse — Ulysses, my favourite writing app, changed to a subscription model.

comedic scream — I’m not really angry

I was heartbroken. I recalled the posts I’d written, the PDF exports and the patience I showed for the iOS version. It wasn’t romance, but we had fun.

Now the relationship has ended, because of another annual fee. I paid £50 for the Mac version and £25 for iOS — now here comes a subscription too.

App developers are espousing the subscription model to survive and put food on their plates. To replace one-off purchases, users are being asked to pay every year.

Subscriptions are not bad, but they’ve become ubiquitous and overpriced.

The Push For Your Cash

You must sympathise with developers — they have challenges.

Creation of their beloved product, start-up funding, product refinement, launch, new features, making new friends because the others lost touch, oil to burn at midnight and divorce proceedings, etc.

Developers and entrepreneurs deserve to get paid for what they produce.

What I want to challenge is the preconceived notion that subscriptions are the best way.

Subscriptions are direct debits from your bank account and every $30 adds up.

Users need to think hard about the first rental and later renewals.

The Catalyst

Subscriptions or rentals, have been a business model since I can remember. Buying TVs in the 1970s was madness because they exploded, so we always rented.

Software companies switched to rental options in recent years. Adobe Photoshop could have cost you £600–700 but £20 a month for today’s subscription is affordable.

Microsoft charges £80 a year for Office 365 and while not much cheaper than a £120 one-off purchase, the latter excludes new feature updates and technical help.

Unlike larger software packages, apps are going through both an economic and cultural shift from one-off fees to rental.

In June 2016, Apple changed the iOS app store to encourage app subscriptions. Apple reduced their commission, 15% instead of 30%, and created 200 different price points for maximum flexibility. Google followed.

Hence, industry leaders push subscriptions with one purpose — to make more money.

The Fallacy of Recurring Revenue

One selling point for subscription based apps is the alleged continuous revenue it generates for the developer.

The assumption relies on customers re-subscribing each year and new customer subscriptions to compensate for those who leave.

The size of the marketplace guarantees profit, with growth in customers projected to be 2.87 billion smartphone users by 2020. If the subscription model carves out only a small fraction of these users, it will gain traction. Revenue from app stores will pass $190 billion by 2020 so there’s room for every business model.

Pay per download is falling out of favour with developers, everyone hates Ads, and the freemium model fails to guarantee user upgrades.

Subscriptions are here to stay and we need to accept it.

The challenge for app creators is to reverse the trend where 80% of users abandon apps within the year.

The User Experience

I can appreciate subscription benefits:

  • Support for ongoing development.
  • Removal of ads that sit beside the menu I need to click.
  • Lower entry costs.
  • Survival of the app.

But how do benefits stack up against real life experience?

As a writer, I rely on a range of apps to support workflow.

Gone are the days of my iPhone 3GS when I spent all night downloading apps because they were there. I reached over 100 apps, such as barcode scanners, lasers to help me straighten pictures and Doodle Jump. I’m embarrassed.

What would it cost to keep my popular services on subscription apps today?

I will not pay £84.50 a month for apps — and you won’t either.

Developers argue that their app only costs equivalent to a cup of coffee a month — some are more but my total adds to a hell of a lot of coffee.

It’s expensive to be a writer who reads, meditates, keeps notes, keeps fit, listens to music and cares about Wi-Fi security.

Developers’ profits might win in the short term, and there’ll be enough churn in the marketplace to make it worth their while.

But if I pay £7.50 per month for Netflix why wouldn’t I pay £4.50 for a high quality text editor like Ulysses?

Netflix offers thousands of hours of entertainment, no contracts, and if you leave, you have no creative work to lose. You don’t own or create the material.

When you create content through an app, you risk loss of access should you end your subscription, and the longer you use an app, the more you get locked in, making it harder to leave.

Some providers protect your access under their terms.

For example, if you unsubscribed from 1Password, your data remains accessible and secure but your account becomes read-only.

If the market tries to coerce users to subscribe users will refuse on cost.

Other negatives to consider:

  • Users can feel forced into annual rentals because developers make monthly plans extortionate.
  • If you stay on the free plan, expect to get bombarded with messages to go ‘pro’.

The User Reaction

Developers should not take us for granted. Subscriptions are not permanent.

Users will discern if they’re a light user. Others will not think twice funding their favourite app.

The industry, by separating light and pro users, is fuelling user churn. Finances may improve, but long term loyalty from a broad customer base will take a hit.

A reader’s poll conducted by Ben Lovejoy, for 9To5 Mac, finds users like me (Happy with a handful) in a minority, while the majority of customers still need convinced.

Look at the comment section of any app that has converted and you’ll see a battle of words.

Positive reaction to Ulysses
Negative reaction to Ulysses
Reactions to DayOne

The Undiscovered Country

The future of the subscription model will remain controversial.

Developers will chase the revenue curve and customers will think hard before every download.

Customer churn will be a market norm with reduced numbers paying, but remaining committed to the product.

The paradox is profitable growth through fewer paying customers.

When I started to write this story I intended it to be an opinion piece against subscriptions. However, I’ve come to understand their place and will continue to be happy with a handful.

If you’re not a developer’s ideal customer, move on.

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