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Why Is Software Being Sold As A Subscription?

Saturday, March 9th, 2013 by | Filed Under: I've Always Wanted To Know...
 
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I’ve Always Wanted To Know:

Why Is Software Being Sold As A Subscription?

Answer:

The early days of software were simple times: you purchased a floppy disk with a piece of software on it and you could use it wherever you wanted for an unlimited amount of time. Fast forward 40 years and we’re being offered many popular software packages as subscriptions or limited-time versions, but why? What is the advantage for software developers and what does it mean for consumers?

Software Developers Reason For Subscriptions: Money.

In the early days of software things like patches, online galleries, cloud services or integration into social media sites were not an issue. Once you finished writing your software you sold it, that was all the money you needed to invest in programmers and developers.  These days, popular programs like photo editing programs need to support the latest cameras, virus scanners need to be constantly updated with new detection definitions and algorithms, office software is expected to work in the cloud and many more examples just like this.

This requires companies to have teams continually update programs. That requires expensive staff, distribution servers and software. If you pay for a subscription, they can guarantee a revenue stream to pay for these updates. This brings about the natural question: Why don’t they just build that support cost into the initial price of the software?

The other reason for offering subscriptions is because the core functionality of the software isn’t improving as fast as it once was. The latest version of Microsoft Office isn’t a significantly better word processor then the 2003 version. Studies have shown that consumers would rather pay a smaller monthly fee and get the latest and greatest then pay a large up-front fee and need to repurchase every year or two.  Encouraging people to move over to a cheaper up-front fee (or no fee at all) with a subscription guarantees revenue and offers consumers the latest versions as long as they subscribe.

What do subscriptions mean for consumers?

This really is a glass half-empty/half-full kind of situation. If you’re a naturally positive person, you can enjoy the latest version of a particular software for a set monthly or yearly fee. You don’t have to worry about spending nearly the full purchase price again to get a small feature or two you may want and you’re always guaranteed to have the security updates and compatibility improvements.

If you’re a glass half-empty type of person, then you probably did the math in your head and realized that copy of Office 2003 you’re still using would of cost you almost $1,000 dollars by now instead of the $299 you probably paid for it. You don’t want the new interface, don’t need the online cloud integration and why should you be forced to pay for it? If you can’t afford the monthly fee any longer, then you still have your office 2003 copy while the guy who is paying for the subscription has nothing at all.

In my opinion the subscription model is here to stay but hopefully software developers keep the old “buy it for life” model around for those people who prefer it. You may start seeing a more drastic difference in the support and updates depending on how you purchased the software. Time will tell and people will vote with their spending dollar on which model survives and which does not.

-Tim

P.S. What’s the most popular software as a subscription? Anti-Virus programs. Expect to pay anywhere from $15 to $35 per year for the updates and the latest definitions. Don’t be upset, it’s still a huge savings over paying a technician to clean up just one virus infection.


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3 Responses to “Why Is Software Being Sold As A Subscription?”

  1. Back in July, Corel announced that it had acquired Avid Studio and
    the Pinnacle Studio family, along with the rest of Avid’s video editing products geared toward hobbyist users (Avid isn’t “gone” – it’s just focusing on its products for the pro-level audience now). Here are some tips on how to make this folder smaller, as well as how to deal with export and compression in a way to lower the overall drive space taken up. The best part of using Elements is it allows novice filmmakers do a lot and makes it easy.

  2. Mark says:

    Actually in the truly early days of software you bought a license to use it and paid a monthly or yearly subscription for updates and fixes and it was delivered on tape. In the even earlier days you either wrote it yourself or you didn’t have it.

    Oh I am sorry when you said early days you actually meant in the early days of personal computer software which is probably the only type of computer you have ever worked on. OK now I understand.

    Actually a pretty good article for your intended audience I just couldn’t resist getting that little old timer dig in there.

  3. K.Vee.Shanker says:

    Hi Tim,

    Thanks for your detailed analysis. Most of us do not require the latest and the greatest, as we do only ordinary things on net. But, two problems with owned copies of software, as pointed out by you, is the compatibility and security in changing times.

    I prefer two modes of subscription, namely one for maintenance and the other including new features too. It would be nice, if developers offer these types for some years at least. I do agree that one has to move up after some time, just as no one can afford to stay with WIN 98 anymore.

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