App subscriptions

Volume 19, Issue 15; 10 Jun 2016

Would you like to buy this app, or rent it?

I can’t be the only one who could see that app subscriptions were the obvious next step after “in-app purchases”. It will be interesting to see how this plays out. I’m not on iOS, so this is a bit theoretical for me at the moment, but I don’t see Google Play resisting the temptation to follow along. Developers will presumably begin demanding it immediately.

There will be wailing and gnashing of teeth. But let’s start by looking at this as having at least in theory a good side. Developers have to eat and pay their bills and I think it would be best if they could afford to go on holiday occasionally and live comfortably. The economics of the app store are scandalous from this perspective. App prices have been pushed to near zero; even if the app isn’t absolutely free, the developer gets only a fraction of the price paid.

in-app purchases apparently work well for some apps and some consumers. They don’t work very well on me. Hindsight in Words With Friends is possibly the only in app purchase I have ever made. Most solicitations for in-app purchases feel either like cheating or like extortion and I’m not inclined to engage in either.

App store pricing doesn’t seem reasonable or sustainable to me. In fairness, I don’t know what is reasonable or sustainable; would a $1.99 app have to cost closer to $20 or $200 or more to make the system viable? That depends on a lot of factors that, frankly, I know nothing about.

Nevertheless, for apps that I use regularly, I don’t think it’s wrong, in principle, to offer a subscription model.

But what about in practice? This is where the hard problems lie.

I’m immediately uneasy about this new arrangement, because I see that I’m agreeing to put myself over a barrel. If I buy an app and use that app and put data in that app, I can have that data as long as I use that app. If I rent an app and put data in that app, I can have that data as long as I continue to pay rent. Flickr already holds me over this barrel, I continue to pay for my “Pro” subscription annually, despite not having put a picture into it in years, because…well, because if I don’t, most of my Flickr images will go away and so far I’ve considered it worth $25/yr to maintain those URIs in someone else’s URI space.See also, photos.nwalsh.com; my URI space, thank you very much.

Things I’m already subscribed to are a second source of concern. I already purchase annual subscriptions to many apps that I use, either because I have to (I’m looking at you, Adobe) or because I see it as a reasonable way to support the developers (Evernote, Trello, and TripIt, for example). If I’m already paying annually for your service, and you imagine that you’re going to increase revenue by also charging me for the mobile app for your service, we’re going to have a problem.

The other obvious problem is the total cost. I despise Adobe for coercing rent out of me because I was quite happy to pay a fairly hefty chunk of money every few years for an upgrade. I’m only a hobby photographer, there’s no economic justification for Adobe tools except that they’re very good and I sometimes choose to invest in them with disposable income. I only had to upgrade if I cared about new features or wanted support for new hardware, and everything continued to work indefinitely if I didn’t have the disposable income or elected to spend it elsewhere. Now I send them rent every month, even on the months when I don’t use the tools at all, and I’m aware that the cost of Adobe tools is now unbounded.

Adobe is a big software suite. It’s a serious tool that accomplishes tasks I couldn’t accomplish without it. That’s just not true of most software. I’m simply not going to be willing to pay an unbounded price for most applications. Games are a big category and they’re the exact opposite of a serious tool. I don’t have a lot of game apps, but I have a few. I’ve bought the paid versions of all of them, I think, because the alternative revenue stream is ads and I really hate ads.

How do the economics work for games? Well, while I might think $1.99 is an unreasonably low price, if I think a reasonable price is closer to ten times that, I’m going to be doing some mental arithmetic: how long, at the subscription price, will it take before I’ve paid more than I think it’s worth and will now continue to be paying more and more after that?

Switching an app from a purchase to a subscription fundamentally changes the question from “what is the app worth” to “how much value/entertainment does it deliver on a per-unit basis”? Those are really different questions. On airplanes and trains and in waiting rooms, I play one of the solitaire variants pretty regularly, but I’m not sure I’d be willing to subscribe to it for even a pittance. It’s a nice game, I’d be very happy to reward the developer reasonably, but I want to buy a deck of cards, not rent it.

I thought when I started writing this posting, that I’d have a section about apps that I would be willing to subscribe to because I think they deliver more value than the near zero cost I paid for them. It turns out that the obvious apps in this category have already found ways to charge me annually, so I’m not going to casually agree to subscribe to them. (If it turns out to be cheaper for them to collect revenue through the app store, I don’t mind if they switch to it, but I don’t want to be “double dipped” for the service and the app.)

There are a few others that I might subscribe to, but only for very small annual amounts. I like my third party alarm clock but I don’t think it delivers more than a few cents of value a day.

I think I’d be happy if the subscription model opened up a way for developers to offer either purchase for a reasonable price or a small subscription cost. But I have no idea if that’s going to be either economically feasible or allowed by the app store terms and conditions.

In short: I think subscriptions offer an interesting revenue model. I don’t think they are necessarily an unmitigated evil, but if I had skin in the game, I’d really be struggling to figure out how to approach them.