App subscriptions must offer value

Software authors are increasingly switching to subscription models to make their work “sustainable”. Too often they’re forgetting to make a value proposition that helps their customers. Here’s a hint: if you have to write a Medium post explaining why I should support your new business model, you’re doing it wrong.

I understand why authors can’t afford to write an app and then offer free upgrades for the following decade. That’s a great way to cut off the income supply that keeps new development happening. Neither authors nor their customers want that! Creators want to be compensated for their time and users want up-to-date software with competitive features. Buying an application one time shouldn’t come with the expectation that I should get all the newest work for free, forever.

The alternative is not that purchasers are an endless font of cash and goodwill, though. A recent trend is for annual app subscriptions to cost roughly the same as buying a copy of the app each year. In the real world, no one does this and it’s not sustainable. If you want to move to a subscription model, your price has to make sense as a value proposition by itself. Customers don’t care about pretty words and guilt trips in long blog posts. They want a good deal from their own perspective.

From a customer’s point of view, the math is simple: your target annual fee is the previous price divided by the number of years I would have expected to keep a paid copy before upgrading. For instance, if your upgrades used to cost $40, and you released new paid major versions every two years, I can be convinced to subscribe at a rate of $20 per year. Anything beyond that is a price increase, and that increase must be justified exactly as if you were selling me a new copy instead of a monthly rental. That is, you can’t tack on “…and now with cloud sync!”, or “…for teams!”, or pack it with other features I won’t care about and expect that I’ll happily pay twice the old price.

1Password did this right: although their new “1Password Families” service costs more than their old software licenses, it offers lots of features that genuinely make it more useful. Smile Software did this wrong: their new annual TextExpander subscription service costs about the same as their previous one-time software licenses, but all of the new features were geared to a workflow that could not have been less attractive to me if they’d tried. They were asking me to pay a lot more and get nothing of value to me in return.

In summary, you want to make money. I want you to run a profitable business so that you’ll continue to make the software I enjoy. But you have to remember that while your app is your labor of love, for me it’s just a tool I use for work or play and it’s not my life’s ambition. It’s the one among several competitors that had the best value proposition. If that ever changes, I’ll re-evaluate and move on to one of the others. I’m frustrated that this is 101-level business class stuff, and we shouldn’t need to keep learning this lesson anew.