The Future Is Subscription For All Productivity Apps

To back up my comments about paid apps being dead, Ben Thompson writes about Adobe’s business model switch. [1] (If you missed it, all Adobe products will forever more be subscription only.) His point is that the economic surplus of productivity apps makes them far more valuable then the prices charged so a switch to subscription makes a ton of sense (for all productivity apps, not just Adobe).

(He makes such pretty graphs.) Ben’s comments:

The challenges facing Adobe are shared by almost all productivity apps.

  • Productivity apps are indispensable (and thus priceless) to some users
  • Productivity apps usually have high learning curves
  • Well-done productivity apps require significant investment up-front
  • Productivity apps require regular maintenance and upgrades

Unfortunately, app store economics don’t really work here.

  • If you have a low price, you need massive volume to make up for the upfront costs
  • If you have a high price, users are much less likely to buy your app, especially since there is likely a learning curve
  • If you can’t monetize over time, your users are extracting MUCH more value than you are receiving in revenue. That’s great if you’re a user, up until the company you love sells out because they can’t make money. Sparrow is the canonical example here. How many Sparrow devotees would gladly pay $5 a month to have the app available and continually updated?

The challenge here — and I think this is a huge challenge for Adobe — is that I’m not certain the traditional software apps can make this transition. Take Quickbooks for example. $20 per month gets you access and store your data with Intuit, and that price doesn’t even include everything the Windows version does for $100. Does Intuit make more? Sure, but it leaves me feeling bitter that Intuit is trying to extract $480 worth of value for what used to cost me $100. [2] My general feeling: over my dead body.

I have a hard time believing that my customers would accept paying even $20 per year for powerOne, even if it was available on all platforms and the web, synced templates and more. [3] powerOne is designed as a “buy one time” product, like almost all productivity apps of yesteryear. It’s not my customer’s fault that that product is now priced too low to support my company. That’s app store dynamics at work.

Re-thinking the product to go along with the model change is imperative.

[1] If you aren’t reading this guy, you should be. Amazingly good writer and thinker. Haven’t been this blown away since Horace Dediu at Asymco appeared on the scene four years ago.

[2] Most people I know only upgrade every couple of years.

[3] In fact I know I’d lose most of them. We asked about advanced features for even $5 per year and had very few takers.

3 thoughts on “The Future Is Subscription For All Productivity Apps

  1. FWIW, paid apps on Firefox OS, that don’t make substantial use of device services like the Contacts Db (and thus installable only from an app store) or have an online component, will be unprofitable, because it’s EASIER to install a bootleg copy (click a button on a bootleg website) than buy from an app store. Since artificial dependencies on a server are straightforward to remove, apps on FFOS will be like the web in that regard, too: subscription is the way to profitability.

    Not that I like any of this – if software runs mostly on my machine, “pay once for a license” seems much more fair to me.

  2. Pingback: Hardware’s Impact on Software Pricing | Elia Insider

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