The subscription model (‘subscription economy’ was a term apparently coined at least four years ago) is becoming de rigeur in many zones. App Annie’s recent State of Mobile report found that In App subscriptions contributed to 96% of spend in the top non-gaming apps. As an overall proportion of spend they rose from 18% in 2016 to 28% in 2019 (games, of course, still dominate.) It concluded in a recent post: “Clearly companies across industries need to not only be thinking about their mobile strategy, but also their subscription strategy, if they want to succeed in 2020.”
But is this a wise move?
The attention economy, as folk call it, depends on competing for a limited resource — our attention. But it will always be trumped by a resource that determines what can be done with that attention — money. If we have no job, then our attention tends to be focused elsewhere. If we have a job but not much money, or are afraid of losing that job, then our attention to other non-job issues is probably limited.
The other thing the attention economy relies on increasingly is the subscription model. Recurring fees are much more appealing to a company than a one-time cost, which is why everyone is heading that way. But the subscription model has an achilles heel: most services that used the subscription model in the old dayswere because of the way they were produced and delivered — electricity, water, telephone, gas, newspapers, cable. And most involved some lock-in: an annual or quarterly contract etc, which hid the overhead costs of connecting, delivering and disconnecting in the subscription. But to disrupt these entrenched subscription services OTT upstarts which didn’t have those costs like Netflix made it real easy to subscribe — and unsubscribe.
And here’s the rub. When subscription becomes a discretionary spend — something you can shed like a skin when the rain comes, then you find the weakness of the subscription model. This is why old guard subscription model players like the New York Times have transferred their approach to digital, knowing it’s better to alienate a few users by making unsubscribing disproportionately harder than subscribing, absorbing the hit of a few angry folk like me in order to keep the bulk of subscribers who couldn’t be bothered to jump through the hoops.
So when the Coronavirus Recession hits you, what are you going to shed? Discretionary spend is the first one to go, and that usual means monthly outgoings that just don’t seem to be as important as they were when you were coasting. Indeed, a lot subscription economy players, like Statista and others, only offer an annual subscription, although they price it per month to make it sound less. It’s cheaper, and more predictable, to charge per year.
I’m not convinced that software is a good candidate for subscription models. I understand its appeal, and I am as frustrated as them how the mobile appstore has reduced the amount that people are willing to pay for good software.
When Fantastical, a calendar on steroids for macOS and iOS from Flexibits, went from a one-time fee to a subscription model it split the community — especially those on iOS who suddenly had to pay 10 times what they were paying before. John Gruber argued $40 a year for a professional task app on all Mac platforms was a decent deal, arguing that those who don’t want to upgrade can still use the old version, and he’s probably right. But I haven’t upgraded and have instead shifted over to another calendar app, BusyCal, that is included in Setapp, another subscription model which bundles together multiple apps for $10 a month. In part that was because of the annoyance of finding certain features still available as menu items in Fantastical but blocked by popups:
Not the kind of productive experience I am looking for. Hobbling or crippling, as it’s sometimes called, is never a pretty look. You either have the functionality or you hide it.
A better route is to be flexible. Of course, there’s an upside to monthly subscriptions that are real easy to start and stop — when the sun shines, you can easily resubscribe. Indeed, the smartest subscription model in my book is the freemium one — where you can easily move between subscription levels depending on usage and how empty your pockets are. I recently canceled my paid Calendly subscription, downgrading to the free model and was told by a helpful customer service person that “you can certainly choose the monthly plan on your billing page and pay for only the months you need it for! That might work better for you.”
I would recommend any company moving to the subscription model to do this. Or to pursue the bundling model. Not to lock people in — where one subscription depends on another — but to make what might have been discretionary spend something that becomes necessary spend through a compelling use case. Setapp is that model (though sometimes I baulk and wonder if I’m paying over the odds). A lot of the apps I use on Setapp are ones that I would have not otherwise found — and I’m an inveterate hunter of new apps. By making the marginal cost of using them zero, I find they worm their way into my workflow. Setapp helps this by taking an interesting route, in that its appstore-like mothership is so baked into macOS that searching for an app installed on my computer via Spotlight or Alfred will include in the results apps that haven’t been installed but are part of Setapp. So if I’m looking for a photo editor, or screenshot taker, or calendar app, on my Mac the results will include those in Setapp that I haven’t installed.
This shoehorns productivity into the subscription model. It’s helping to make Setapp more useful by introducing me to new apps it is has in its portfolio — thus making all the apps in Setapp more recession-proof because the more Setapp apps I use, the less likely I’m going to cancel the subscription overall. (Yes, those apps I don’t install or use won’t get a cut, or will get a smaller cut, but the overall rising tide will help keep all the boats afloat. Or in a tweak of the analogy: all the apps in the Setapp boat, amid the buffeting recessional sea, rely on the size of the boat to keep them all afloat. Only if the boat sinks will they sink).
Bundling makes a lot of sense in disparate fields — I’ve been advising media clients to seek out bundling options with other subscription model companies which previously might have been regarded as competitors. Bundling should not be the cable TV model of putting the good stuff and crap together and forcing subscribers to pay for both, but to try to anticipate — if your customer data is good enough you shouldn’t have to guess — what else of value is in your customer’s discretionary bucket, and try to move both yours and those into a necessary one. A tech news site coupling with a tech research service, say.
In the meantime, expect a lot of subscription-based approaches to suffer in the recession. I expect by the end of it the subscription model won’t be so appealing, or will require more creative thought processes to evolve. The key is in not treating the consumer as either stupid (that we don’t realise $5 a month adds up over a year) or lazy (that we won’t do what is necessary to cancel a subscription if we have to), but to take the freemium model seriously: make it really easy to reduce our payment when we need to, and really easy to go back when we’re feeling flush again. Just don’t cripple the quality of the service you have committed to deliver, even if it’s free, by ads beseeching us to pony up or by drawing arbitrary and punitive lines which make the free version more irritating than alluring.
Then just wait out the storm, as are we all, and hopefully you’ll remain useful enough in the free version to stay on our radar when the sun returns.
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This article first appeared on the Loose Wire Blog: http://www.loosewireblog.com/2020/02/how-do-subscriptions-fare-in-a-recession.html
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I’ve covered the subscription economy in the past. A couple of notable ones are: Subscription Model Redux: Loadsa Money for Uncertain Returns and Subscription Fatigue: A New Economy, or a Bubble?