
Subscribers are the new, new thing in business - kawera
https://www.economist.com/news/business/21739944-companies-face-fresh-set-difficulties-locking-their-customers
======
tonyedgecombe
As a consumer I really dislike subscription services, they quickly add up to a
lot of money. I can see how it works for businesses but by definition that
means its not so good for me.

~~~
cecja
To be honest the main problem for me is I gladly pay 10$ for Spotify or
Netflix but I just can't bring myself to pay 8$ for a todo app or 10$ for
Dropbox when my hosting with 500GB and the ability to run my own cloud costs
4.99$. Most of the time it's just to much for just the convince. Besides I
despise apps like Dropbox or Evernote that nag people I share stuff with to
sign up for their service.

~~~
pavlov
For this reason I feel that SaaS services that fall in the $10-$30 bracket are
problematic. The price is too much for consumers who compare it to Netflix,
whereas for businesses it's often ridiculously small and effectively leaves
money on the table.

I like Discourse's pricing model:
[https://www.discourse.org](https://www.discourse.org)

Their plans start at $100 / month, which is not a problem for real businesses.
For everyone else, the software is full open source and it's reasonably easy
to install on that $5/month cloud server instance.

The "free or $100+" model conveniently eliminates the support hassle of $10 /
month users who typically are the most clueless and demanding.

~~~
osrec
Interesting. Do you think they miss out on a fair amount of customers at that
price point?

~~~
nunez
They probably get customers that they actually want: businesses who are fine
with paying >$100/month for their service and individuals who will likely be
very, very supportive of their service since they value it enough to pay that
much per month for it over other alternatives

~~~
naravara
I wonder if the free tier that appeals largely to enthusiasts and nerds also
helps as a lead generation process. People use it and like it, they get jobs
where they have a say in procurement decisions, and they advocate for
platforms they like when they do.

It’s also a good “eat your own dogfood” way to make sure your platform is up
to commercial standards for UI/UX and feature sets. A lot of enterprise
software is garbage specifically because the people doing the procurement
aren’t the people using the tools.

~~~
Silhouette
_I wonder if the free tier that appeals largely to enthusiasts and nerds also
helps as a lead generation process._

That seems like a reasonable business strategy. Software companies have long
offered heavily discounted products to home and educational users, or simply
turned a blind eye to piracy within those demographics. Then everyone leaves
school and equates "word processor" and "spreadsheet" with Microsoft Office,
"graphics program" with Adobe Creative Suite, etc. These days a lot of those
big players seem to be trying to pull in more direct revenue from those
markets with lower-priced versions of their subscription offerings instead,
but that doesn't mean their previous business model wasn't good for them.

------
PeterStuer
The real secret in the formula is perpetual billing. Surprisingly few people
cancel their contract even long after they stopped consuming the services.
Money for nothing!

~~~
baxtr
Always use a credit card as payment method. At least, it has an expiration
date, which will force you into rethinking your subscription

~~~
vinceguidry
Or PayPal. When NYT wouldn't let me cancel without a phone call, I simply
canceled the sub via PayPal. They sent me nasty collection agency-style "your
account is past due" emails before finally canceling, 2 months after I stopped
paying them.

I now pay careful attention to cancellation procedures when signing up for
stuff.

~~~
distances
> When NYT wouldn't let me cancel without a phone call, I simply canceled the
> sub via PayPal. They sent me nasty collection agency-style "your account is
> past due" emails before finally canceling, 2 months after I stopped paying
> them.

I don't know how widespread problem this is, but definitely affects Germany
too: companies have asymmetric requirements for signup and cancellation. We
should get legislation that lets consumers cancel with the same method they
used to subscribe.

In Germany companies won't accept non-payment as cancellation though, and
_will_ send your bill to collections.

------
xg15
One of the main advantages free market systems have for consumers is
ostensibly that you can freely choose, switch and combine products and
services as you see fit.

As such it's somewhat ironic that the article sees the main disadvantage of
subscription models in that they don't combat "consumer illoyality" _enough_.

~~~
golergka
Because it's written from a business point of view. You and business have
interests that are partly aligned, partly in odds with one another. In terms
of loyalty, I think it's a little bit of both.

~~~
xg15
Yes, that absolutely makes sense. Of course, from the _providers '_ point of
view, subscriptions are absolutely desirable and customer illoyality is a
problem.

I think what irked me was that the article somehow presented the advantages
and disadvantages as absolute when in reality they only apply to one side.
Though yes, of course, this is the "business" section, so maybe that makes
sense in context.

~~~
ghaff
>from the providers' point of view, subscriptions are absolutely desirable

It's fair to say that businesses mostly like subscriptions but balance against
that a few factors.

\- Consumers often do not which can make it harder to acquire a customer in
the first place.

\- It's an ongoing revenue stream that can be canceled at any time rather than
a larger up-front purchase.

------
scarface74
Now that I think about it. I have a lot of subscriptions...

Hulu w/ no ads - $11.99

DirecTV Now - $35

Netflix - $2 (T-Mobile pays the base price. I pay for four connections.)

PluralSight - $30

BackBlaze - $5

Office 365 - $99/year

Amazon Prime - $129/year

Resharper - $10/month

Evernote - $3.99/month (I guess I could just Apple Notes)

My son has a subscription to XBoxLive and Playstation Plus. My wife has an
Apple Music subscription.

~~~
whichdan
For what it's worth, if you consider that most people used to pay $60/mo for
TV, that would easily cover Netflix, Hulu, Amazon Prime, BackBlaze, Office
365, Evernote, and Apple Music. That's a _lot_ of value.

(This is more of a response to the other comment saying that subscriptions get
expensive. You just had a nice enumerated list to work with!)

~~~
scarface74
It's even better....

The total price of cable for us would be:

\- cable tv with the same subscription level ~$50 a month

\- 5 extra set top boxes (yes we have 6 TVs) - $50

\- various fees (network access, regulatory, franchise fee) - $15

\- HD Technology Fee - $10

The numbers may make less sense if we didn't have unlimited gigabit internet
for $70 a month from AT&T. We also have unlimited Internet on our phones (and
my iPad).

In total $125 a month just fur TV. That's not to mention that our older son
who doesn't live with us also gets to use Netflix and Hulu. Also, my wife has
a split shift. When she isn't at the gym, she can watch content on her phone.

I've made back in increased salary more than enough to make the $360 year for
PluralSight worth it.

------
DmitryOlshansky
“You reached the limit of free subscription”

The irony, now I can’t read about subscription addiction.

~~~
stephengillie
"Learn how this one hacker cured his subscription addiction!"

------
jaggederest
I think the thing that is most compelling about subscriptions is that it's
much more difficult to extract e.g. $300 in lifetime value in a single
transaction, versus over 10 months.

That psychological barrier is really the root of the reason it's so effective,
in the same way that free shipping drives online retail and "discounting"
drives retail clothing stores.

------
grincho
In software, at least, I've argued that subscription pricing is innately
deceptive and, long term, deleterious to the quality of the product. It's a
market distortion born of the App Store model, where it's difficult to charge
for updates. And that, in turn, is an artificial constraint imposed by OS
vendors who have an incentive to keep people on the latest OS (without
breaking their apps). There's a full-length rant at
[https://www.grinchcentral.com/an-open-letter-to-
subscription...](https://www.grinchcentral.com/an-open-letter-to-subscription-
software-authors).

~~~
burlesona
I respectfully disagree, at least that you can't generalize this to all
software. For many products, incentives are better aligned for both the
customer and the business if usage is based on an ongoing subscription. There
are plenty of people who have spelled this out, but the recent switch of
Ulysses (word processor) to subscription was one of the nicest explanations
I've seen [1]. Sketch App also explained this when they made the switch,
though perhaps not as eloquently [2].

[1]: [https://medium.com/building-ulysses/why-were-switching-
ulyss...](https://medium.com/building-ulysses/why-were-switching-ulysses-to-
subscription-47f80b07a9cd)

[2]: [https://blog.sketchapp.com/versioning-licensing-and-
sketch-4...](https://blog.sketchapp.com/versioning-licensing-and-
sketch-4-0-8ad98783e9ba)

------
Dawny33
This trend is fast catching up in India too, esp with the food delivery
companies.

Zomato's treats, Freshmenu's freshclub, Zomato's Gold, etc.

Others would be MakeMyTrip's black.

------
mnm1
With companies that offer a free month such as Netflix, Amazon Prime, Hulu and
others, yet offer little to no incentive to keep the service afterwards, the
only thing that keeps people subscribing is the incredibly slight
inconvenience of signing up again and again every month with a new email.
Spotify on the other hand does offer a valuable service because remembering
history seems to me to be more important in music, where one often listens to
the same music over and over again versus Netflix where one is unlikely to
watch things multiple times and the few times one does that, it's fairly easy
to remember the titles. I wonder if the run-of-the-mill customers will start
figuring this out and if so, how these companies will respond. Until then,
it'll be easy to get a ton of free services at the slight cost--usually a few
minutes--of signing up again and again.

~~~
dazc
It's very easy to stop and start a Netflix or Prime subscription and, I
believe, this is one of the ways they've managed to grow so quickly.

I've subscribed to other media services a couple of times and the process of
cancelling has put me off even thinking about trying it again.

------
hownottowrite
Cached: [https://archive.is/wFAL4](https://archive.is/wFAL4)

------
dosycorp
I like this article but my favorite part was the Economist header subscribe
button, a constant fixture of my read.

------
Gaussian
Good to see that the Economist is totally on top of the trends sweeping
through commerce in 2014.

------
boffinism
I don't get the last point in the article. Customers often have subscriptions
to multiple, theoretically competing, services, sure. But why is that bad for
subscription-based services? Surely that just means market share is easier to
come by?

------
cheschire
Subscription models create a haves / have-nots divide, which is fine for some
things, but seems immoral for journalism. Too bad that model's been around
since long before the internet.

------
pibefision
New new thing? Every telco of this world was a subcription service since 25
years ago...

------
shubhamjain
Subscription is a long-lasting, predictable revenue stream. Even if one-off
sales bring more revenue the subscription system fares much better. I was
listening to Sam Harris' podcast recently, and they seem to have discontinued
the one-time donations entirely. You don't want to deal with the instability
of exceedingly high revenue one month, and barely any in the other.

Another thing I noticed is that with subscriptions in place, you can
understand—and grow—your customers in all sorts of ways. For eg, Netflix has
analyzed that "if you have watched 15 hours of content per month, you're 75%
less likely to cancel. If they drop below 5 hours, there is a 95% chance they
will cancel." [1] So, now, they only have to figure out how to hook their
users to watch Netflix for that many hours. I don't think it's very much
possible in a traditional business setting.

[1]: [https://blog.kissmetrics.com/how-netflix-uses-
analytics/](https://blog.kissmetrics.com/how-netflix-uses-analytics/)

------
EADGBE
It’s great when this model takes over; no one will own anything anymore.
Simply rent. The concept of equity is a thing of the past. Good luck retiring
cheaply/at an appropriate age.

~~~
radix07
Are you saying this model is gonna take over real estate in a new way and that
we will lose our biggest potential source of equity? Or that we have so much
equity to bank on from our old records, tapes, and discs? Or that this a new
thing and that people haven't been retiring and using cable, phone or
disposable news/media since forever ago?

~~~
EADGBE
It's more towards Volvo's Care [1] subscription plan than anything else (large
amounts of money in return for convenience; a leased car, bundled insurance,
maintenance subscription) - but yes - death by a thousand subscriptions.

A subscription here and there isn't going to change anyone's mind, but a dozen
or so subscriptions every month as long as you need the service (sometimes
lifetime) surely comes out to more cost over time.

[1] [https://www.volvocars.com/us/cars/new-models/xc40/care-by-
vo...](https://www.volvocars.com/us/cars/new-models/xc40/care-by-volvo)

~~~
radix07
Didn't see any mention of the Volvo Care thing, but leasing any car is
typically a bad idea, Volvo is just packing more crap in for extra lazy people
that like paying even more.

I don't see the death of a thousand cuts thing currently. No one needs a dozen
subscriptions. Our household has 3: Netflix, Amazon Prime, and Spotify.

\- Netflix is cheaper than buying 1 movie/month.

\- Spotify is cheaper than buying 1 album/month.

\- Amazon Prime is a net savings on shipping and trips to the store plus
videos, books and music and whatever else in there...

Comes out to an overall savings from most people's spending habits before
these things were around, especially if you cut cable. What else does a
typical family need to subscribe to that is draining all of their money?

------
sametmax
We need bundles of subscriptions.

If I pay 10$ for netflix, you can't pay 5 for a todolist.

But i would pay 15 for netflix + todolist + calendard + others things.

~~~
hinkley
I don’t know about where you are, but here there are two cellular networks
that give you a 480p Netflix account for the life of your contract.

I mean it’s not gonna cause you to cancel your netflix subscription but you
might cut back on the simultaneous streams to save a few bucks.

~~~
sametmax
My cellular network cost 25$ a month, I don't see where they would fit the
netflix contract cost in there.

~~~
hinkley
It’s probably cross marketing. Each side takes a couple dollars of loss for
the increased in signups.

Like when amazon made a partnership with coin star. If you get an amazon gift
card you don’t pay the coin counting fee, and amazon pays coinstar half the
fee value.

------
trigger
Ironic that to read this article I have to subscribe to the Enconomist.

~~~
dx034
And while you can do this online, changing your subscription or cancelling it
can only be done over the phone. You can't even change your method of payment
online.

~~~
uid8362749
Cancelling at least can be done by email.

~~~
Semaphor
I'm not sure about the specifics, but in the EU it's not legal to offer a
sign-up method that is not available as cancellation method.

~~~
dx034
Do you have a source for that? The Economist certainly doesn't, cancellation
online is not possible but sign-up is.

The email method didn't work for me last time, I just got a reply asking me to
call them.

~~~
Semaphor
Hm, I could have sworn I read about it a few years back that it was
introduced. Also, it might have been only Germany? Can't find anything as
google has the worst result for that search I've ever seen.

------
vs2
I tried to read the article but I hit my max number of free articles a week

Have you ever tried to unsubscribe from The Economist? You have to phone them
up!

~~~
dx034
You even need that to change your subscription. I love their articles but the
subscription service is the worst I've encountered so far.

------
vhost-
There's a bright red bar on the bottom with buttons to subscribe to the
economist for 12 weeks :-D

------
tjic
Website won't let me read the article without signing in.

Thesis proven!

------
taylodl
It's ironic that I've reached my article limit with _The Economist_.
Apparently it's a lifetime limit too, which means pretty soon we'll stop
seeing posts from _The Economist_ on HN.

~~~
pwg
Are you sure that the 'tracking' is not simply a cookie in your browser that
were you to delete the cookie, would reset the limit back to zero?

~~~
taylodl
It probably is, but so what? _The Economist_ has made it clear they don't want
me reading their material. So I'm obliging.

