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Subscription software model: “Progressive?” Premature? How about just a bad deal for consumers?

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Adobe has certainly stirred the proverbial pot with their bombshell announcement Monday at its Adobe MAX Creativity Conference in Los Angeles that, henceforth, new versions of their industry standard Photoshop image editing software and the rest of their Creative Suite imaging and video applications will be available only on a monthly rental basis via their Creative Cloud online service—at fifty bucks a month, no less. Ergo, no more shrinkwrapped versions sold for a licensing fee in perpetuity. Aside from the immediate and future direct implications for Creative Suite users, this development has created apprehension that it will become a more comprehensive software marketing and delivery motif adopted by other application software and computer operating system developers.

Microsoft is both, and an ominous conceptual proposal in a May 7th blog entry by Microsoft’s Clint Patterson commenting on Adobe’s policy move adds to the apprehension.

In his blog, Mr. Patterson notes that industry reaction has been mixed, with some pundits projecting the software rental dynamic as the future, while others perceive challenge. Some wonder specifically whether Microsoft’s Office is next.

Now, here’s the ominous part: Mr. Patterson unequivocally affirms that Microsoft, like Adobe, thinks subscription software-as-a-service represents the future. He alleges that “benefits to consumers are huge,” arguing that subscription software is always up-to-date, and can be used across the array of devices that many of us have in service these days, current examples being services like Microsoft’s SkyDrive, Skype and Redmond’s new Office 365 Home Premium.

Microsoft Office

However, he says that unlike Adobe, Microsoft believes that consumers’ psychological and conceptual shift from the packaged software model to subscription services will take time, but he is confident that in a decade or so’s time, everyone will choose subscription software because, in Microsoft’s estimation, the benefits are undeniable.

Some of us would argue not so much. As I noted here this week in my own commentary on the Adobe’s marketing policy move, I have a visceral aversion to the concept of my computer software becoming another suction hose siphoning my wallet on a monthly or semi-monthly schedule.

Mr. Patterson does reassure us that, at least for now, Microsoft remains committed to offering choice, with its Office software—also an industry standard—sold as both a license fee package and as an online service by subscription.

However, he cites more rapid than expected takeup of Office 365 Home Premium, which was launched in January, as possible evidence a paradigm shift for consumers is coming faster than they’d projected, with more than a quarter of consumers buying Office opting for the subscription mode.

On the other hand, Microsoft hasn’t been exactly on a roll lately with accurately reading consumer sentiment and conviction. For example the dismal sales of Windows 8 and their Surface tablet computers.

Nevertheless, Mr. Patterson frames the software subscriptions issue only as either “progressive,” or “premature,” asking consumers to weigh in with their opinions on the matter. For what it’s worth, my personal answer is “neither,” and I propose a third response: “Bad idea for consumers whose time will never come,” at least in my estimation.

I would be interested in learning the demographic profile of those 25% of Office purchasers who are opting for the software in the Cloud subscription model. My expectation would be a heavy weighting toward enterprise users for whom a software subscription model offers capital cost and taxation benefits similar to those of automobile leasing as opposed to outright purchase.

For private user consumers, subscription software, like auto leasing, makes far less sense is a dollars and cents context. The subscription software model also appears to be swimming against the tide of actual consumer behavior.

An example is a report by The Telegraph’s Joel Gunter on Wednesday citing new research metrics from survey of 1,700 people by uSwitch.com, revealing that British smartphone users on average pay for just one in ten of the apps they download, and that with an average of 29 apps on a typical user’s phone, that calculates to a total spend of just £8.94 per user, with only one in seven having spent more than £20 on smartphone apps.

That finding is underscored by data from consulting firm AppManifesto noting that 57.58% of apps on Apple’s U.S. App Store are freeware, another 21% costing just 99 cents, and no price point higher than $4.99 cracking greater than 1% save for the psychologically significant $9.99, which accounts for 1.04% of downloads.

So what’s your take on subscription software?

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4 Comments

  1. I agree with you whole-heartedly. That is why I stopped using, for example, Intego software which requires not only purchase and upgrade payments but also annual payments just to keep their purchased, upgraded software relevantly functional. I already pay at least 3 levels of taxes; why would I want to grant individual private corporations a right to levy more?

    jeremy
  2. Upon reaching the saturation point, new ways of raking in money need to be devised. Options include raising the price (more per package), lowering the price (attempting to increase the volume of sales), or going with a subscription mode. The first two options are unsustainable and would result in financial stagnation. I, for one, do not approve of a subscription mode with software any more than I enjoy a mobile phone contract. When owning, the consumer can decide when or if to upgrade. I don’t like to be forced, and forcing will occur once there is an incompatibility with the current OS. My first thought was one of anger. Now, I don’t care. There are many good alternatives out there. True to form, they try to convince the consumer that this new model will actually benefit them. Hogwash, I say.

    RayCon
  3. I have volume licenses at work for the Adobe suite on multiple Macs and it turns out that Adobe is no longer doing maintenance agreements, so that they can instead charge us about twice is much for subscriptions. I’m so pissed about it that we’ll stay using our CS6 suites and skip the next several updates until we buy new Macs again. Forget it Adobe…

    AJ
  4. Yep, I have CS6 suite and that will be my last update unless Adobe changes their mind. Good luck with the new pricing model, I can survive with what I have.

    Thomas