It’s no secret that a ton of services and software have moved to a subscription-based model and are having amazing success with it. A subscription-based model, when talking about products or services, basically means that you pay a subscription fee (monthly, usually) to access the product or the software you want to use. Traditionally, software was sold in a packaged bundle: pay $199.99 for this accounting software and have it forever. I’ll talk quickly about why the shift is happening, and then expand on some ideas of where I think it might go.
Why the shift away from the traditional model?
Updates
Back in the day (i.e. a few years ago), you had to buy a CD with a software on it, put it in your CD-ROM drive (ha!) and install the software. When an update came out, you had to buy the new version… Office 2003, Office 2005, etc. This made sense, because updates weren’t super quick, and it was like buying a new pair of shoes; you buy what you need now, and by the time you’re ready for a new pair, new technology has come out.
Nowadays, patches for software are coming out on an almost weekly basis, and new features are being added to existing products all the time. There’s no longer a need for CD-ROM drives as you can download the newest version from the web, and this means that companies can update their products quickly and efficiently. This can work with the traditional model; you buy a license key and then sign in to your account online to download the updates, but it comes with security risks and a logistical hassle when you need to manage users and keys.
Less Risk for the Buyer
For the customer, there’s less risk in trying out a product for $30 for a month as opposed to buying it for $720 and expecting to use it for two years. This is pretty obvious, and makes it easy for consumers to make an educated choice.
Increase in Product Quality
This isn’t an argument that directly helps the service providers or product creators, but I think it’s something that naturally evolved due to competition. You can no longer sell your product based on bullet point descriptions and images, because people get to try it without committing a huge amount of money. That means that the quality bar is raised, and now when people start using your program or software, they need to be presented with a fully functional, easy-to-use solution.
What’s Next?
We’ve already seen a ton of games move to a subscription model, as well as the online play portion of console games. Our accounting software that we use at Clever Endeavour Games (the games company where I work) is subscription based, as is our website hosting, email management (Google for business), the game engine we use, etc. Almost all of these things used to have a fixed price that you would pay at once, and they’re all moving away.
But what happens after this? What industries can you think about that are currently selling products in a traditional way, that might move to subscription models soon?
The first one I’m thinking of is transportation. There’s already a lease system, which is somewhere between rental / subscription and purchasing. But with things like Communauto (here in Montreal), people can register to the service for a monthly or yearly fee, and take a car wherever they want. They don’t own anything, just a license to take the car from point A to point B and forget about it. Imagine a world where you could take any kind of car you’d like, have it pick you up and drop you off where you’d like, and all it required was a monthly subscription… I think this is next once we have consistent self-driving cars.
Next thing is clothing. Wait what? Why would you want to wear clothes used by someone else? Well… you already do. People rent tuxedos for weddings, ball gowns, and elaborate Halloween costumes. If you’re looking for the perfect outfit for your night out, why be limited to the clothes you own? Imagine being able to pick up whatever you wanted from a huge catalog, and the clothes were clean every time you wanted to wear them? This wouldn’t be for every day of course, but I could definitely see its potential for special events in the future.
Flights might also be something that could be subscription based… if you’re someone who flies often or in some sort of consistent manner, it might be easier to simply pay a yearly or monthly fee and be free to fly wherever you want.
This all came up because I’m going to soon be starting to pay a subscription for a virtual instrument pack for music production, which costs $25/mo. This is instead of a software which costs around $900, and requires a $200 update every year. The goal of the subscription-based model is that they can update the instruments more often, and as long as you’re signed up, you can open projects which use those instruments. For me, I get to try it for $25 and see if I want to continue. For them, they can rope me in by offering me over $900 of value worth of instruments, and keep me longer term if I like it.
Anyway, just some food for thought. It’s incredible how obvious this kind of thing seems, but it took a while since the internet was a thing to actually start taking over. Let’s see what the future has in store for us!
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