Tuesday, August 14, 2018 [Tweets] [Favorites]

2 Years of App Subscriptions 2.0

Kif Leswing (via Dan Masters):

Developers, Apple said, needed to realize the business model of apps was changing. Successful apps tended to focus on long-term engagement instead of upfront cost. Indie developers who wanted to capitalize on this needed to move to a subscription model, as Apple had made possible in the past year in a splashy announcement.

[…]

10 years later, the App Store isn’t new anymore, and Apple continues to tweak its rules so that developers can create sustainable business models, instead of selling high-quality software for a few dollars or monetizing through advertising. If Apple can’t make it worthwhile for developers to make high-quality utilities for the iPhone, then the vibrant software ecosystem that made it so valuable could decay.

Apple’s main tool to fight the downward pricing pressure on iPhone apps is subscriptions.

[…]

Still, even with some hammer-makers finding huge success, the majority of Apple’s subscription revenue doesn’t appear to come from apps that are specific tools — instead, it’s coming from big content businesses like Pandora, HBO, and Netflix.

“My suspicion is that a good portion of those subscriptions are content subscriptions,” independent Apple analyst Neil Cybart wrote in May.

I love how this is framed as Apple enlightening developers that one-time purchases are not a sustainable model. Developers had been trying to tell Apple this since day one of the App Store, and even when Apple did add subscriptions it limited which apps were allowed to use them.

Two years later, at least judging from my iPhone’s home screen, the transition to subscriptions has barely begun. There remains a high implementation hurdle.

Previously: Productivity Apps and Subscription Pricing, Pre-WWDC App Store Changes.

Update (2018-08-15): Steve Troughton-Smith:

Apple is without a doubt preparing for a world without paid-upfront apps. There are a lot of developers who are not gonna like where things are leading[…] IOW, the App Store was so big and impactful that it’s going to ruin the consumer software industry’s business model forever. As a user, I would love a Netflix-style model for apps. As a developer, this is horrifying

Joseph Slinker:

Apple created a self fulfilling prophecy in not allowing paid apps to have a trial period. If Apple added the option for people to try paid apps before they bought them, I would predict a hug change in this trend.

John Gruber (tweet):

Up front paid apps are going the way of the dodo. Whether you think that’s good or bad, it doesn’t matter. That’s where things are going.

Riccardo Mori:

So, Apple is pushing the subscription model for apps... This may be the future, but it’s not going to be my future as a customer. I have no problems paying a bit more for quality apps, but either it’s pay upfront, or it’s highly unlikely I’ll subscribe to an app. Sorry, devs.

Emilio Pavia:

developers should publicly push Apple to deliver a reliable sandbox for developing subscriptions

Bob Burrough:

The article glossed over an important question. It said 15% of App Store revenue was paid apps, but then started talking about subscriptions. The question is “what constitutes the other 85%?” I think in-app-purchase is the predominant revenue driver.

Marc Edwards:

Yep, we all know free-to-play games make up the bulk of the revenue. The question is: What kind of platform do they want? These kinds of changes could easily decimate what’s left of the indie scene.

Dan Counsell:

It’s a shame Apple is pushing so hard on this, I understand why, but it’s a shame. The main winner from this will be Apple, not customers, and certainly not developers. Apple comes first, customers second, developers third, that’s the way it’s always been

Rory Prior:

What they are perhaps missing is that it’s the small devs that keep the Mac relevant for a lot of people. You can run the big dev’s apps on Windows and save a fortune on hardware and avoid a lot of the headaches post 2011 Apple has been inflicting on its users.

It’s no surprise that paid-upfront isn’t working well, since the App Store doesn’t allow free trials or paid upgrades. But it’s not really designed to support subscriptions well, either. They are time-consuming to implement and difficult to test. They don’t work with Family Sharing. You can’t transfer your app to another developer if you use a subscription.

And what if you already have an app and want to transition it to a subscription model? Unless you want to take away the old version that your existing customers are using, you have to create a whole new SKU. You lose your reviews and ratings, and there’s no indication to customers that the new version is available.

Previously: Panel Discussion on Moving to Subscriptions, Ulysses Switches to Subscription, Testing Auto-Renewable Subscriptions on iOS.

Update (2018-08-16): Gareth:

Subscriptions have to have high value, and deliver someone unique. I subscribe to Office 365 (I just need it) and to Adobe CC photography. Both are good deals. I’m not going to subscribe to a podcast app. Same as Netflix and Amazon Prime. Both worth it.

Bryan Jones:

Exactly. So Apple attempting to convince “utility” apps that subscriptions “are the present” is just dumb. They’re doing that because they don’t have an actual answer to the monetization problem. Nobody does...yet.

Nick Lockwood:

Up-front purchase doesn’t work well for supporting apps due to maintenance. Paid feature releases also fall down once an app is feature complete.

Update (2018-08-17): Michael Love:

missing in much of the discussion of app monetization is that in the good old days, we didn’t really need to worry as much about apps’ recurring revenue because everything kept working for years without being updated.

This phenomenon of developers being encouraged to spend a lot of time/money updating their app simply to keep it working on the latest OS / form factor / whatever is really something specific to the mobile era.

19 Comments

I can count the number of apps I am willing to do a subscription for on one hand. I can't stand trying to get any work done on iOS so if "professional" productivity apps I use from time to time switch to subscriptions I just drop them with minimal impact on me. Developer's need for large/more stable income totally makes sense to me, but if Apple wants to help with that problem they should stop stealing 30% from developers and offer the ability to offer upgrade pricing.

@zchrykng: "I can count the number of apps I am willing to do a subscription for on one hand."

On a hand that has no fingers. I have no problem with paying five or six bucks for an app just to try it out (and repeating that a few times before I find the right app), because when I do find the right app, I can get ten times that in value out of it. But there's no freaking way I will commit to paying every month for an app.

Hint to developers: wake up and smell the coffee. Your app is not worth paying for on a monthly basis, and if you think it is you are not living in the real world.

It sucks that Apple has not implemented any kind of try before you buy scheme (Something simple like "if you delete the app within 24 hours of first launch, you don't get billed"). But rushing off to implement a subscription is not going to save your company. Unless you limit yourself to the tiny market of tech nerds who are OK with paying a subscription for an app, that dog will not hunt.

I have no problems paying a bit more for quality apps, but either it’s pay upfront, or it’s highly unlikely I’ll subscribe to an app. Sorry, devs.

I don't believe this or the two comments on this story for a second. You're telling me nobody would pay $1-$2 a year for an app that costs $5? If you don't use it often, it's cheaper to have a full year to try it out.

Many apps are charging too much for their subscriptions. It's the "Cup of Starbucks Pricing Metaphor Fallacy" reversed. "Netflix charges $10 a month. so my subscription price should be in the ballpark. $4 a month is a steal for a subscription!"

No. $4 a month is insane for your app. Price accordingly. Microsubscriptions are the proverbial future.

And for expensive apps, well, MS Office and Adobe Photoshop have already shown the market doesn't mind subscriptions. And businesses have been paying for yearly subscriptions for years.

@Ruffin This makes a lot of sense to me. A $2/year subscription seems like a good deal for both sides for a small iOS app. But I wonder if we’re missing something since developers don’t seem to be doing this.

"But I wonder if we’re missing something since developers don’t seem to be doing this."

Greed.

Yeah, where's the $2/year apps? Seems kind of strawmanesque to suggest this is a great possibility if there's not any apps currently making that value proposition to it's customers.

Well, looks like Joe Cieplinski is [coincidentally] giving it a shot. $5 a year.

Though he does then make the Cup of Starbucks Pricing Metaphor Fallacy. You win some...

>Greed.

Nobody writes a productivity app out of greed. Indie devs who create productivity apps aren't exactly driving around in Lamborghinis. It's all fine to write snippy "Sorry, devs" tweets and complain about Starbucks fallacies, but if people don't pay sustainable prices for these apps, they will disappear. I mean, disappear even more than they already have. So in the end, the joke will be on us, not on the devs, because they'll find jobs working for large companies that actually *do* pay Lamborghini-level wages to highly qualified software engineers, while we're stuck without useful apps.

But at least we'll have a few bucks more for Starbucks lattes each month.

Not everyone always needs a last version and constant stream of updates for an application. I'm still very happy with IA Writer 2.1.6 on iOS, it does everything that I need. I looked into the last version and I just don't need anything from these new features. Also I'm still using Clear which I bought years ago, and I don't really see any reason to update. But I usually buy every new version of Tweetbot for iOS and Mac, just because it has some interesting new features every time. And with the subscription model I will not have that choice, I don't need a constant support for each and every app, but if I see something in the new version that is valuable for me I will not hesitate to buy a new version.

Lukas,
I pay for my apps (those that cost money anyway), full price most times, but I don't pay any subscriptions for apps. Services? Sure. SaaS is a little bit of marketing BS, and I don't typically pay for it.

I even paid a license fee for Carbon Copy Cloner when I didn't have any Macs to run it on. That's how much I loved that app and had used it for years when it was free(donation?)ware figured it was fair to pay one more round of license fees.

Ps I think Starbucks and even if I drank coffee, I wouldn't be a patron, so the stupid comparisons to Starbucks is getting very annoying. I don't routinely waste money on stupid frivolous things, so if that's the chief value proposition, developers aren't even trying.

Words missing, man, "I think Starbucks is a waste of money and even…"

On further reflection, the Starbucks comparison might be apt given the target demographic of the market. These devices are stupidly expensive so comparing app purchases to unnecessarily expensive coffee makes sense.

@Glaurung and @Lukas, this is neither about developers' greed nor users' cheapness. Reducing this debate to that is ridiculous and it doesn't help anyone.

We all are on the same boat. Lets no forget it: without users, we'll be stuck without useful apps too.

> Not everyone always needs a last version

That's part of the problem. If people don't buy upgrades, the app will die, and then it will stop working when Apple deprecates and removes the wrong API. And then everybody loses. Subscription pricing fixes that issue.

> I even paid a license fee for Carbon Copy Cloner

That's great, and if CCC can survive on normal license fees, awesome for them. Not every app can, apparently. So if they choice is between an app disappearing, and switching to subscriptions, then by all means, they should go to subscriptions. I'd rather have an app that has a subscription than no app.

> I don't routinely waste money on stupid frivolous things, so if that's the chief value proposition, developers aren't even trying.

You do understand that people do that, though, right? People go to Starbucks and buy a latte without even thinking twice about it, but they are all up in arms about paying a few bucks each month for an app that is actually useful to them. That's the point of the comparison. People pay lots of money for stupid things, but they don't want to pay small amounts of money for useful things. I can't believe I have to spell this out.

@Ruffin I was joking about the cup of coffee reference. I've written about the logical fallacy several times.

I do think not enough people have tried the $5, $2 a year route. There's zero sense in charging $2 for an app when you can do a free trial and then $2 a year. Thus, my experiment.

I'm just going to shrug at apple's attempts to teach developers how to rent-seek the way they do.

Data points: I only pay for what is in front of my face ALL THE TIME and write BRs for.

Carrot Weather: $2/year, every year.
Fiery Feeds: $4 year every year.

So far I have dropped or reduced use on:
DayOne (remaining a "plus" user, that's all I need.
Drafts: $19/year? RIDICULOUS. It's a text editor. I pay for BBEDit on Mac and found other tools.

There's one exception to the above, and they really understand their users:
1Password: I pay for the individual apps, 1P knows enough marketing not to "go full subscription" or GTFO. They get more of my money b/c they understand.

--

Apple is really not adding additional value here. They already banned Gab, as well as AdGuard Pro iOS. I really don't care what "Apple wants" if they reduce user freedom, privacy and security on the platform. Now they're dictating "what works" for them? To Devs?

Devs need to push back.

Personally I'm not feeding a beast that limits my choices any more than I have to. If Apple really goes the way of Sun then they'll make my choice for me.

@joe @ruffin If Joe had not made the comparison, someone would have had to make it. It was too good to pass up, I agree. Well done, Joe!

@lukas Thanks for the awesome rant on that "greed" snarky comment. I tweeted it, because I liked it so much, and it got a huge response (at least for my standards, and my limited experience of using twitter 2-3 times a month).

Has anyone done experiments with year-long subscriptions that average out to $1-3 per month?

Say, a Mac app that would traditionally have been $18-$50 one time purchase. Has anyone tried pricing that app as a freemium download + $12/year subscription?

This is kind of what Overcast does: $10/year "support the app" tier.

Might try it for an upcoming Mac app. But maybe due to blowback etc. I'd be better off pricing it as $29.99 premium unlock.

I left a comment on Ruffin's blog about subscriptions for software in general. I've published a few apps and I know I can't make money at the game, whether in subscription form or one-time-pay. As a consumer, I can say I don't want to rent apps. I want to buy them for indefinite use.

I'd like to pay a reasonable amount for a purchase; however, app store pricing has killed the software market. Very few can make money at these levels but we keep ratcheting downward. But subscriptions are not the way. Apple might introduce a 1 cent per year pricing tier- what are you going to do then when 80% of the apps in your category are available at 1 cent per year?

My real problem with subscriptions is that I don't want to watch all my store purchases in great detail every month. I want to make a conscious decision to buy something once, then see it show up on a bill (once).

I don't generally want upgrades-- if the app does not do what I want right away, why would I buy it? What could you possibly add in one upgrade cycle that would make me eager to upgrade? I can say from many years of upgrades: Nothing. App upgrades do, however, require some relearning for (in my estimation) very little consumer advantage.

It is possible that after 2-3 years (multiple versions), the new version has enough new features to be compelling. In which case, feel free to charge me an upgrade fee. I might not take it but I'll respect and support your decision to charge for the upgrade.

In the App world, OS and UI upgrades mean that apps might have to change too. Frankly, if Apple creates a breaking change, it should pay each developer to upgrade apps. Apple could take a single one of its billions for this purpose. As a bonus, taxing Apple in this way would give Apple an incentive to clean up the App Store of garbage apps.

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