Productivity Apps and Subscription Pricing
Day One is evolving. We’re transitioning to a more stable subscription business model to ensure this app and these services always stick around.
This week we’re releasing the Day One Premium subscription service. It includes the ability to create more than ten journals and access all future premium features.
If you have already purchased Day One (version 2.0 and later), the features you currently have will always be yours to use without any additional cost.
I think Day One Journal is an awesome app. Maybe the best journaling app around. The developer (Paul Mayne) has always seemed professional and nice when I’ve interacted with him. This is exactly what makes me sad. These are the reviews for Day One since the announcement.
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This is my fear for iOS. Apple showed their customers what the bottom of the barrel looks like. It’s free apps forever. 10 years after the iPhone, I think we are seeing where it’s headed – Apple-made apps with an endless supply of third party coin-grubbing games. There was a time when a new, amazing, and high quality application was released on iOS almost every week. But today, the market grows fallow. What were once top-tier apps are either languishing un-updated or being kept alive by experimenting with new business models.
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My impression is that the subscription model is a move to stay profitable. I don’t think this will be a magic bullet. Customers simply don’t want to pay the price for top-tier self sustaining apps on iOS, especially when the full annual cost of $50 is spelled out in black and white.
I spoke with a developer friend that makes legal-related apps. He explained the transition of his app to a subscription model as a last resort to keep the lights on but also “the worst two months of my life”. This new app economy has been particularly rough on quality productivity apps. Those apps take a lot of time and attention to do right while at the same time consumers are not used to paying subscriptions for them. Nevertheless, that is probably the best model available to them at this point.
My fear, as someone who really likes quality productivity apps is that all this will end up driving productivity apps out of business.
It’s certainly true that people are wary of subscriptions. But I wonder how much of the recent backlash is due to the subscription model itself and how much is due to the fact that, in practice, transitions to subscriptions have effectively been large price increases. Here are some examples:
Day One debuted in 2012, and Day One 2 was $10 for iOS and $40 for Mac; the subscription is $50/year ($35/year for now).
I most recently rebought the Mac version of 1Password for $20 from the Mac App Store in 2011 (see comment), and I bought the iOS version for $8 in 2012. Since then there have been zero paid updates. My license, amazingly, is still valid. Now, the individual subscription is $36/year.
For TextExpander, even the discounted subscription for previous customers was more than double the previous per-year average price.
In May 2015, Adobe offered Lightroom for either a flat or monthly fee. I chose $149 instead of $10/month. Now 26 months later, it seems that the next major release is still a ways off, so people who chose the subscription paid more. Rumors are that Adobe will remove the standalone option in the next major version.
Microsoft Office is perhaps the exception. Office 365 Personal is $70/year, whereas Office 2011 was $200 (no upgrade pricing), and Office 2008 and Office 2004 were each more than $200, though with more complicated pricing so it’s harder to compare. Office is the app whose subscription pricing I hear the fewest complaints about.
My hunch is that, for an app under ongoing development, many people would be fine paying a subscription that averages out to about the same amount they had previously been paying per year (initial purchase plus occasional upgrades). When I hear that an app is switching to a “sustainable model,” this is what I assume people mean is happening. The benefits to the developer are obvious, and provided that development continues at the same pace it seems fair to the customer as well. (Let’s put aside for now the concern that subscriptions change incentives, so that you’d be paying the same price but not getting the type of development that you want.) It may even be beneficial because the costs are more predictable, and you can avoid large up-front payments for big apps.
But that doesn’t seem to be what’s been happening. Instead, we’ve seen subscriptions combined with price increases, customers balking, and insinuations that people just don’t want to pay for anything anymore. With more than one variable changing at once, I don’t think we can conclude that people hate subscriptions. Am I missing any examples of apps that switched to subscriptions without really changing the price?
Update (2017-07-20): See also: Nick Heer.
Update (2017-07-21): See also: Stuart Breckenridge.
Update (2017-07-22): See also: Michael Rockwell.
Update (2017-07-27): Michael Yacavone:
The cloud. Pairs well with subscriptions.
Update (2017-11-01): EconTech:
In other words, the total cost of ownership (TCO) of [Fiery Feeds] probably doubled or tripled for the average user—and will increase even more when the new price will be in place.
Update (2018-04-20): John Gordon:
Subscriptions do not appear to be Family Shareable. An issue as more apps move to subscription models. Favors the old “use parent’s Store Apple ID”.
Update (2018-07-02): Ben Bajarin:
One thing became clear in our recent study on apps. Consumers use what I call the “investment mindset” when confronted with a subscription business model.
This mindset will challenge developers who want to charge subscriptions for their apps.
Update (2019-02-11): Boinx:
Once Mouseposé is ready for prime time, the license will be available at $9.99 per year. For the early birds who like to save some money, during the beta phase (which will not be terribly long, so get it now!) it will be only $7.99 per year.
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[…] Michael Tsai wonders if the hostile reviews are from prices going up, but they’re just catching up to desktop/web service prices, usually because a subscription gets you cross-platform access now. […]
I use(d) a lot of this software, mostly when they followed the fixed-cost "shrinkwrap" model. Let's go down the list.
Day One - Early adopter, kept asking them to add journal entry merging (merge entries that I've made via IFTTT into one journal so I can "fill in" text in between generated images). They never did, instead want a subscription for "unlimited journals" and more than 10 pics per entry. I've never hit the limits, so will not subscribe. If they force users to "Premium" then I'll use until I cannot use anymore and find something else.
1 Password - Their subscription is actually reasonable, but under NO circumstance am I migrating my vaults to yet-another SaaS cloud. Dropbox + strong crypto works fine for me. Also, interesting timing that 1P does that incendiary blog entry that a couple viable competitors announce 1P's *old feature set* as competition. See @enpassapp on twitter as an example.
Text Expander - Became (at least to me) too bloated. Again, great timing, @AlfredApp + Pro Pack (Twitter) gained clipboard history and useable text expansion. So I consolidated to Alfred. Converted all my old expansions and made more. Alfred has become my text manipulation core tool.
Adobe CS - As I was more "cut and crop" than power user, it was easy for me to go to a combo of Acorn, Graphic Converter for batch converting, and Affinity Photo & Designer. Per my workflows I'm just not missing CS (which I stopped when they went 'subscription'.
MSFT Office - Still on :Mac 2011. Reading that 2011 won't work so well on High Sierra. May move to Open Office after that.
I'm noting that other tools I use have NOT gone to subscription. Little Snitch? Nope. Transmit? Nope. Many Tricks tools? Nope. PDFPen and every other PDF Viewer/Editor? Nope! In most cases devs are keeping more of their "wealth" because they don't have to deal with the AppStore and its hidden costs.
Doing business in the AppStore incurs significant cost. And what if your App is not accepted by Apple, or later is rejected because of "re-interpretation" of increasingly byzantine review guidelines? Or yes, even "Thinking Different" politics? @GetOnGab comes to mind.
Apple has forced these Devs chained to their ecosystem to what we see now. If Apple really wants iOS App innovation to continue, they may have to 1/ take MUCH less of a cut, and 2/ relax App Review back to previous, maybe even Scott Forstall levels. And yes, cut out the politics.
All this aside, and not Apple's fault, the other thing that really irks me is this screaming WE LOVE OUR USERS followed by outsourcing a previously robust App to some SaaS/cloud; even cutting previously working options like Dropbox in the process. And then charging users for the so-called "privilege".
That's another deal breaker for me.
The other issue is many / most of these apps have an implicit data hostage model, whereby you add data as you use them but as soon as you want to stop your subscription you're at best in read-only mode, and likely faced with the daunting proposition of migrating your data away or abandoning it entirely. Migrating almost always will be a lossy process as apps tend to have custom metadata.
This means the switching costs are higher (by an uncertain amount) and the choice to subscribe is a much bigger commitment than one or two months.
I agree with this - it's something I've been thinking about recently too.
I suspect a lot of developers are thinking "we can have fewer customers, paying more", and they are likely to be the "good" customers (engaged, constructive feedback, etc).
That may or may not be the right long term decision.
It's also supposably easier to lower prices that raise prices, so it will be interesting to see if there are any price changes over the next few years.
"But I wonder how much of the recent backlash is due to the subscription model itself and how much is due to the fact that, in practice, transitions to subscriptions have effectively been large price increases.
Thank you. Is there money on the table in subscriptions that many aren't picking up? Probably, but I've always envisioned adding "micro-subscriptions" to my apps when they deserve it rather than these full price versions. If you want full price buy in for a major release, and then three or four bucks a year to keep the lights on while you work on the next major upgrade, I bet that's a much easier sell than full price for what's now limited usage by time.
Full price for limited time is by definition worse than full price for perpetual use. More than full price for limited usage is kind-bogglingly worse. If the goal is to have fewer customers to reduce support costs, I get it, but I haven't heard that argued yet.
Charge what the subscription is worth. It's not worth more than what we were recently willing to pay for a perpetual license.
@Andrew Yes, it’s important to remember that the switch could be a smashing success for the developer and leave a vocal minority of customers unhappy. It really felt like TextExpander was trying to fire customers like me, who were happy paying for upgrades but didn’t want/need the cloud stuff, because catering to us would mess up their plans for the business market.
@Ruffin Right—even at the same price a subscription is giving the customer less if not accompanied by some other service. Lightroom had a neat twist on this; Adobe made some new features available earlier to subscribers; if you pay for perpetual you get them bundled together at the next paid upgrade.
Anyway, my point is not that any of these subscriptions are right or wrong, just that there are some details that have been mostly unacknowledged but which matter a lot.
When developers switch to subscription models, they are putting themselves in the same category as all the other things that send me a bill every month. Comcast. Verizon. The mortgage company. Netflix. Car insurance. Other insurance. Do I enjoy paying those people every month? (No.) Do I have good feelings about the quality of service they provide? (No.) Do I need to have another thing hitting my monthly paycheck, that I have to spend some mental overhead on keeping track of or evaluating the usefulness of? (No!)
Subscriptions add complexity to my life. Subscriptions hit a different part of my budget: monthly income vs. one time expenditures that I don't have to think about again.
If developers want to add subscriptions to tools that can be written off as business expenses, fine, who cares. Anyone who pays for them knows exactly what their profit/loss ratio is, and can figure out for themselves if it makes sense to spend time instead to use something less convenient. If you are Microsoft, you are ok. If you are Adobe, you are not, because the vast majority of your users are hobbyists, who by definition are trading time for money.
Oh, and all hail Pinboard. That's good money spent right there.
I've been thinking a lot about going subscription as well, especially in the context of AppStore without real trials. For example, PdfCompress used to be $20 ( $35 earlier ), but there are mostly nonfunctional "competitors" for around a dollar. The difference in quality/compression is tremendous, but that is hard to ascertain from a few screenshots and descriptions. In addition, there are PDF files that just don't compress any further, so without trials there will always be a few disgruntled customers.
So, instead of a $20 up-front charge with uncertain outcomes, a $1-$2 yearly subscription lowers the sticker shock while keeping average total expenditure around the same. I guess there should be an option to switch to a one-time payment and be done with it.
I like the Jetbrains model. I pay a subscription but after a point I get a permanent license for the product should I stop my subscription. Adobe on the other hand lost me after I needed to stop my subscription and they wanted me to pay the remainder of a year to get out. Subscriptions should be month to month but Adobe's feels like a lease.
I won't pay $40 a year to use an app that I should be able to buy for the same price. Perhaps $25 a year but something closer to half of what I would consider a good purchase price.
There is one more issue with many subscriptions.
Let's say, there is an app that you want to use occasionally, there was a moment you need it, so you paid, now you do not use it that much, but it won't work without subscription. Many people don't want to have yet another regular payment occurring.
Bohemian Coding done this part right, no paid subscription, no updates, but the stuff they done when you were paying will work.
Yet their approach is an exception.
The $20 price for 1Password had to be a limited launch-time promotion. I am pretty sure the regular price for 1Password launched in the Mac App Store was about $40-$50 at the time.
It is not much different from the 1Password subscriptions where we offered 6 months for free.
@Roustem Based on these posts, it looks like 1Password 3.9 was initially 50% off because you removed the direct sale version and couldn’t transfer people’s licenses to the Mac App Store. 1Password 4 was then a free upgrade to make up for that. So thanks for the correction that $20 was not the normal price. However, this does not change the conclusion about the long-term cost of the old way vs. the subscription.
I have no problem for Day One going subscription, but it, like many other apps transitioning, suffers from feature bloat. I don't need a Sync feature when iCloud and Dropbox work fine (and much more securely, in terms of data breach and loss, or in terms of downtime -- just look at their Twitter feed and count Sync downtime PSAs).
I feel my money was poured down the black hole of those features I shall never use, and they only develop new features because they need them to keep subscription going. Whereas in an ideal world, only minimal effort should be put into maintenance after first launch, and an upfront payment would suffice.
That, and the fact that Day One for Mac is shit.
Agreeing with Teng Liu that the Mac app can be problematic. I've reported a few bugs this year. In one case I had text loss upon image attachment in iOS, in another there's a repeatable Mac bug where data disappears then reappears when you click to re-edit a saved entry under specific circumstances.
If there were some alternative app ecosystem where I could have stable multiple journals, multiple photos per entry, historic 'on this day' reports, links to weather/location/steps, end-to-end encryption, etc I'd consider it. But I see nothing comparable for Mac+iOS.
So the apps are useful regardless of bugs, and I'm mostly satisfied with them. I'm not about to jump ship because there's no equivalent Mac/iOS competition that does as much, as well.
Current owners get both apps as part of the subscription (Mac app used to be something like $30-$40, right?) at a discounted $25/year. Discount is permanent, I was told, though that price might creep up over time as inflation/costs increase. Still, I think that's pretty fair. $35/year is less fair, and I personally wouldn't consider it at $50/year, but that's me.
Subscription pricing can actually be a good thing, and there's nothing inherently wrong with monthly fees. We don't bat an eye when we write checks for cable TV, Internet, phone, gas, electric, magazines, mortgage, and so on. We don't even object to paying monthly fees for digital services. Netflix, after all, has 44 million people worldwide paying monthly.
There are benefits to users and to companies for subscription pricing. It's not always ideal but the benefits for developers incde: they can roll out updates to users automatically and add support for new standards and features outside of the confines of a standard product cycle (instead of specific, halting upgrades saved up over time to give 'value' to potential users at upgrade time), and by doing so they'll know they're bringing all their users with them, which reduces support costs for old versions.
More: developers can fund more r&d with a predictable and constant revenue stream. (They don't have to worry as much about month-to-month cashflow and paying bills when they can better predict incoming cashflows.) And that revenue stream can grow as some pirates open up their wallets and move to affordable subscriptions - in areas like Poland where piracy is historically extremely high, Adobe has found that the percentage of Creative Cloud subscribers is significantly higher than average. Why? Because offering a monthly plan makes it easier for individuals to buy products that they may have not been able to afford with an up-front perpetual license.
Finally, with a more predictable income flow devs can be able to afford to blend in additional services that they couldn't scale to or afford.
Re: 1Password: I'd happily give them money every year for a subscription, but when you change to their cloud-based vault, they disable automatic local backups of your vault data... that's a non-starter when this service involves some of my most critical information.
Re: subscriptions in general: Preferences on this may end up being more psychological than anything else. For me, I'd prefer predictable monthly/annual pricing as opposed to, say, 3 important apps announcing paid upgrades in a short period of time (as happened this month with Acorn, Little Snitch, and Transmit). I'm happy to give these devs my money, but just from my personal perspective, it's a more disruptive and negative experience to suddenly hear "Surprise! Continuing user/OS support is now contingent on you buying this upgrade now". For me, that approach is an interruption, rather than giving a dev a set amount of money every month/year in exchange for them working on stuff and releasing new features when they're ready.
And as skeptical as I am of centralized platforms, I think a subscription model for software would really benefit from a platform where your card is only getting charged once per month for all your subs. A single transaction fee might also help get more money to devs who would charge smaller amounts for smaller apps.
> And as skeptical as I am of centralized platforms, I think a subscription model for software would really benefit from a platform where your card is only getting charged once per month for all your subs. A single transaction fee might also help get more money to devs who would charge smaller amounts for smaller apps.
@remmah you're describing Setapp, except no Acorn, Little Snitch or Transmit there ;-)
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As a user I hate subscription models: I bought a screwdriver, and it should just work when I need it. Subscriptions only work if their charges to add up unnoticeably, or if the benefit is very noticeable, but I only use most software in short bouts. If I literally had to decide every month "do I want to renew this?" the cognitive load would make me say no, which is why I avoid entanglements. If it's a subscription, I don't need it. At least with subscriptions for magazines you make a decision for one year, pay, and then get asked again in a year's time.
But as a developer, I don't have much choice. Apple keeps breaking stuff, so I have to spend testing things that work to make sure Apple didn't break it again. The user is getting a new screwdriver that works with Apple's latest "and greatest". And acquiring a customer costs a lot more than keeping him. It's like Alice in Wonderland: you have to run to stay where you are.
