Ap­ple’s push to sub­scrip­tions

Are soft­ware sub­scrip­tions the an­swer or just a costly pipe dream?

Macworld (USA) - - Contents - BY CHUCK LA TOURNOUS

You may think you own that ap­pli­ca­tion you just down­loaded, but chances are good you merely li­cense it. If Ap­ple has any­thing to say about it, that fact may soon have a much big­ger im­pact on your wal­let.

Re­cently, Busi­ness In­sider re­ported ( go. mac­world.com/lxlf) on a “se­cret” meet­ing last year be­tween Ap­ple and some IOS app de­vel­op­ers. Ap­ple ap­par­ently en­cour­aged the de­vel­op­ers to switch from one-time, stand-alone pur­chases to a sub­scrip­tion-based model. The move is re­port­edly in­tended to give de­vel­op­ers a more sta­ble source of re­cur­ring rev­enue. It

would also, of course, pro­vide that re­cur­ring rev­enue to Ap­ple as well, which takes a 30 per­cent cut on the first year of sub­scrip­tions, and 15 per­cent there­after.

Ser­vices have be­come a big part ( go. mac­world.com/bgpt) of Ap­ple’s rev­enue stream. In Ap­ple’s last earn­ings call ( go. mac­world.com/mnqt), it re­ported a record quar­ter for its ser­vices busi­ness, which in­cludes the App Store and now ac­counts for al­most 18 per­cent ( go.mac­world.com18ic) of the com­pany’s over­all in­come—far more than sales of its Mac­in­tosh com­put­ers.

A move to a sub­scrip­tion model has been gain­ing pop­u­lar­ity among some de­vel­op­ers for sev­eral years now, with many mov­ing away from the tra­di­tional model of one-time pric­ing with paid up­grades.

A move to a sub­scrip­tion model has been gain­ing pop­u­lar­ity among some de­vel­op­ers for sev­eral years now, with many mov­ing away from the tra­di­tional model of one-time pric­ing with paid up­grades. Some say the sta­bilty of rev­enue from sub­scrip­tions keep them afloat and coun­ters the down­ward pric­ing pres­sure and “freemium” mod­els that have been per­va­sive in the App Store. They also say it gives them the in­cen­tive to main­tain and keep im­prov­ing their apps.

NICE APP YOU HAVE THERE. BE A SHAME IF ANY­THING HAP­PENED TO IT

Crit­ics point to the fact that sub­scrip­tions can in­crease the cost to cus­tomers for apps, some­times dra­mat­i­cally so. They counter that with­out the need to im­prove their apps to at­tract new users and con­vice ex­ist­ing users to up­grade, de­vel­op­ers will in­stead get com­pla­cent, coast­ing on rev­enue they don’t have to earn and re­ly­ing on “good enough” apps with no in­cen­tive to make them bet­ter. A user can be held hostage when an app they paid for can sim­ply stop work­ing for no other rea­son than they stopped pay­ing a fee to con­tinue to use it.

No one ar­gues that be­ing a de­vel­oper is easy or a sure­fire way to get rich. Get­ting dis­cov­ered in the App Store is in­creas­ingly dif­fi­cult, even for qual­ity apps, and the lim­its Ap­ple has long put on de­vel­op­ers that pro­hib­ited them from of­fer­ing free trial pe­ri­ods or up­grade pric­ing haven’t helped. The App Store is lit­tered with aban­doned apps that both il­lus­trate the dif­fi­culty of run­ning a vi­able busi­ness sell­ing them and make it harder for other apps to be found in the clut­ter.

Sev­eral pop­u­lar Mac and IOS de­vel­op­ers have made the move to a

sub­scrip­tion model, and not al­ways ( go. mac­world.com/apso) to the de­light of their cus­tomers. Adobe and Mi­crosoft have both moved their ap­pli­ca­tion suites to a sub­scrip­tion model, and sev­eral smaller de­vel­op­ers have made the switch as well.

Smile Soft­ware was one of the first. In 2016, it switched its ven­er­a­ble Tex­tEx­pander to a sub­scrip­tion plan. The re­sult­ing “out­rage” ( go.mac­world.com/otrg) took the de­vel­op­ers by sur­prise, and they soon dra­mat­i­cally low­ered their pric­ing, gave ex­ist­ing users a hefty dis­count, and of­fered the pre­vi­ous ver­sion for a sin­gle pay­ment price. The move still had its crit­ics, in­clud­ing Kirk Mcel­hearn (who has writ­ten for Mac­world), who wrote ( go. mac­world.com/tex6) “I re­ally do feel bad to have to say this; I think the peo­ple at Smile are great, and they make ex­cel­lent soft­ware. But I think they’ve made a big mis­take, es­sen­tially in­creas­ing the price of this app by more than dou­ble.” Two years later, the com­pany still of­fers Tex­tex­pander 5 as a stand-alone pur­chase.

Shortly af­ter­ward, pop­u­lar pass­word man­ager 1Pass­word also went to a sub­scrip­tion model. How­ever, it still of­fers a stand-alone ver­sion, al­beit qui­etly. The com­pany ex­plained in a sup­port fo­rum post ( go.mac­world.com/spfp) that “we still of­fer stand-alone li­censes for those that know they want them, but we’re not ad­ver­tis­ing them.” Agilebits con­firmed that stand-alone pric­ing is still avail­able for those who want it, but it rec­om­mends a sub­scrip­tion (called “mem­ber­ship”) “to take ad­van­tage of the ex­tra fea­tures ( go.mac­world.com/1pmb).”

Some de­vel­op­ers have gone all-in on sub­scrip­tions. Text edi­tor app Ulysses made the switch last sum­mer. It went from a $45 Mac app/$25 IOS app to a $5 per month or $40 per year sub­scrip­tion that un­locks apps on both plat­forms. In a long, thought­ful post ( go.mac­world.com/ulys) on Medium, Ulysses’s Max Seele­mann ex­plained the rea­sons for the move, not­ing among other things, “if you bought Ulysses at its launch in April 2013, you will now have re­ceived nine ma­jor fea­ture re­leases. For free, at no ad­di­tional cost.” The other side of that is that for the same pe­riod of

time un­der a sub­scrip­tion, users will have paid ap­prox­i­mately $160 ver­sus $70. Whether ei­ther price is fair is cer­tainly up for dis­cus­sion, but that’s a big jump in what cus­tomers pay.

THE LINES (OF CODE) ARE DRAWN

The move has its sup­port­ers, es­pe­cially (but per­haps not sur­pris­ingly) from the tech and de­vel­oper com­mu­nity. Dar­ing Fire­ball’s John Gru­ber said ( go.mac­world.com/pdap) the writ­ing is on the wall. “Up front paid apps are go­ing the way of the dodo. Whether you think that’s good or bad, it doesn’t mat­ter. That’s where things are go­ing.”

Oth­ers aren’t so sure. Codekit de­vel­o­pler Bryan Jones tweeted ( go. mac­world.com/bnjn), “Sub­scrip­tions aren’t the fu­ture; no­body wants 26 sub­scrip­tions.” He lays at least some of the dif­fi­cul­ties of stand-alone apps squarely on Ap­ple, who he said “ac­tively killed paidup-front apps by re­fus­ing to sup­port tri­als for a decade and count­ing.”

“Sub­scrip­tions are a part of the fu­ture, for a cer­tain type of app,” he con­tin­ued. “But Ap­ple at­tempt­ing to shoe­horn ev­ery­one into that box is doomed to fail. It’s com­mon sense: no­body will pay $2/mo for a calculator. It’s the wrong model.”

Pcalc de­vel­oper James Thom­son took a dif­fer­ent route. He nei­ther fol­lowed the trend to price apps lower and lower nor went to a sub­scrip­tion. In the same Twit­ter thread, he wrote ( go.mac­world.com/jmth):

“The key, I be­lieve, is not sell­ing a $2 calculator, but sell­ing a $10 calculator.”

In an in­ter­view, Thom­son said “peo­ple like to feel that they own their apps, and can up­grade them at the time of their choos­ing. I don’t al­ways up­grade apps my­self—i might wait a few ma­jor ver­sions if the app is still work­ing and I don’t need the new fea­tures.”

The trend is not with­out its de­trac­tors, how­ever. “Nat­u­rally, some users were up­set and some even an­gry,” Ulysses’s Seele­mann said. We tried to ex­plain our rea­sons then, and found un­der­stand­ing here and there. But we’re still get­ting 1-star re­views for the move ev­ery sin­gle day.”

Per­haps there’s no one-size-fits-all so­lu­tion. Sub­scrip­tion-based pric­ing may make sense for apps that pro­vide re­cur­ring ser­vices, but less sense for “self-con­tained” apps like text ed­i­tors, cam­era apps, and cal­cu­la­tors. Thom­son agrees: “Ap­pli­ca­tions with a sig­nif­i­cant server side as­pect are best for sub­scrip­tions,” he noted. “I don’t think stand-alone util­ity apps like Pcalc are at all.”

Seele­mann con­curs, but adds the mar­ket Ulysses tar­gets. “Out­side the pro­fes­sional seg­ment, I think paid-up­front is still the way to go—es­pe­cially for util­i­ties and games.”

Thom­son said he felt sim­i­lar pres­sures when he first re­leased Pcalc. “I ex­per­i­mented early on with small in-app pur­chases and Pcalc Lite, but it was clear that peo­ple pre­ferred pay­ing the full price out­right. Yes, I was cer­tainly lucky—pcalc was rea­son­ably well known be­fore the IOS ver­sion, and it was there on day one so it’s had quite a head start,” he said. “I wouldn’t like to be start­ing to­day with a new app.”

“De­vel­op­ers have to pay their rents as well, and users want to be cer­tain that their tools of choice still ex­ist the other day,” Seele­mann said. For cer­tain apps, at least, “that’s only pos­si­ble with sus­tain­able busi­nesses, and for those, sub­scrip­tion (mod­els) will win out in the end.”

THE BUF­FET MODEL

In an in­ter­est­ing al­ter­na­tive, a ser­vice called Se­tapp ( go.mac­world.com/setp) of­fers a sub­scrip­tion-based ser­vice with a dif­fer­ence: It’s a sort of all-you-can-eat sub­scrip­tion ser­vice that al­lows cus­tomers ac­cess to all its apps for one (re­cur­ring) cost. The ap­peal here is that cus­tomers can use as many of the apps as they like, for a price that’s of­ten only a lit­tle more than a di­rect sub­scrip­tion to one. Whether that turns out to be a sus­tain­able model or an overly op­ti­mistic Moviepass-style ex­per­i­ment ( go.mac­world.com/mvps) re­mains to be seen. (Ulysses is one of the apps avail­able as part of the Se­tapp suite.)

THE TIMES, THEY ARE A-CHANGIN’

Steve Jobs fa­mously said ( go.mac­world. com/sjit) “no­body wants to rent their mu­sic.” But time moved on and that changed, as

ev­i­denced by Ap­ple Mu­sic, Spo­tify, and oth­ers. Many have said the same about soft­ware. Per­haps that’s chang­ing too.

Thom­son ob­serves that it’s a phe­nom­e­non that goes be­yond mu­sic or apps: “They’ve been trend­ing to­wards zero,” he agrees—but “the per­ceived value of most me­dia has, so this is a wider thing than just the App Store.”

No one wants a sit­u­a­tion where de­vel­op­ers can’t af­ford to de­velop, main­tain, and im­prove their apps. But higher prices don’t al­ways trans­late to higher rev­enues. If you dou­ble the price of your app, but lose over half of your cus­tomers, you’re in a worse sit­u­a­tion than when you started. Con­versely, if cut­ting your price in half brings in three times as many cus­tomers, you’re ahead of the game.

De­vel­op­ers are un­der­stand­ably reluc­tant to dis­close de­tails on sales, but Seele­mann says his team is happy with the move and they’re not look­ing back. “With a sub­scrip­tion model, we gained a pre­dictable in­come, and are, for the first time, able to make long-term plans,” he said. “We are able to put more fo­cus on sta­bil­ity and per­for­mance and so on, so it’s a good sit­u­a­tion to be in.”

What­ever is learned in this ex­per­i­ment, it could be a costly les­son for de­vel­op­ers, cus­tomers—or both. ■

Smile Soft­ware switch to a sub­scrip­tion model for Tex­tex­pander back in 2016.

Sub­scrip­tions don’t seem like the proper model for ap­pli­ca­tions such as Pcalc.

Se­tapp.

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