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.
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. 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.