An Argument For Micro-Subscriptions

Why should the new trend for subscription services — content, software, you name it — stop at monthly billing cycles?

We’ve probably all heard the story where back in the old days (I’ll let you figure out how far back that is), software delivered to users was in its final form, more or less perfect or at least following what the software writers wanted you to have. It was expensive to distribute software, as back then, you had to distribute them through floppy disks (and later on, CD-ROMs). Also, most computers were offline so there was no chance of doing the now-obiquitous software updates if a bug was found. Shipping software was a do-or-die thing — either it shipped perfectly and people happily used it, or there was a bug and people stopped using it.

Another thing that surfaced after software became even more dependent on an online connection (aside from software updates), was a shift in pricing. Previously, I had to shell out 200 bucks to get the most recent Office for Mac package (yes, it was 200 bucks as I couldn’t buy it online and had to buy it at one of those Apple Authorised Resellers at a premium), but now, I can ‘simply’ subscribe to Office 365 for as low as 7 bucks a month. I haven’t tried 365 yet as I’m quite happy with my current Office for Mac (which is at least 3 years old, gosh!) and I do have the installer, which for all intents and purposes, belongs to me (unless I missed something in the EULA which nobody ever reads).

Subscription-based software, especially for essential business tools like Microsoft Office and Adobe Creative Cloud, is probably very sexy for both Microsoft and Adobe alike. Instead of selling software packages for a gazillion rupiah and sending incremental software updates, Adobe Creative Cloud charges prices that are probably more sensible for a lot of people. But should it really stop there?

Let’s face it — 50 bucks a month for Adobe Creative Cloud is not cheap; especially if you consider the spending power of most aspiring designers in the South East Asia area, who have grown up mostly with their pirated Adobe Photoshop copies. Setting aside the issue of copyright infringement and whatnot, Adobe Photoshop (and Adobe Illustrator) have become the dominant tool for graphics work, not only in high-billing advertising agencies, but even in non-creative offices looking to do some photo adjustments, make their own posters, and so on. How could it not? Instead of looking for some design firm or a freelancer, pay expensively for the service (and probably subsidise their investment in an original Adobe software pack priced in the thousands of dollars), it’s much easier to grab a pirated DVD installer for 100,000 rupiah (around 10 bucks) and use it to your heart’s content.

It wouldn’t be that hard of a sell to this large base of users that the recent versions of Office or Adobe CC available through subscription is more advanced — even it being new can sell it. But the pricing will have to make sense in proportion to what they want to do.

Take myself for example. I don’t need to use Adobe Photoshop often, but when I do, I’d like to use it (instead of using other software, even though I’m quite happy with Pixelmator right now). Sometimes I might need to use Adobe Illustrator. Why can’t I just pay for a day’s use, or even a week’s use? Surely there are more users like me who only occasionally need to use such software? Same goes for Office — believe it or not, not everybody needs the powerful Microsoft Excel.

When I worked in music, I worked with telcos to sell ringbacktones. What was just a monthly subscription thing priced at 9000 rupiah (about 90 cents), grew to weekly offerings at 3000 rupiah (around 30 cents), and eventually daily pricing was introduced. As with most subscription models, subscribing to a shorter billing period will get you charged more expensively — i.e. the monthly pricing is cheaper than paying the weekly pricing 4 times. Naturally, growth of the ringbacktone services grew once the public were properly educated about the various pricing levels.

Of course, this is somewhat closer to an Asian type of pricing scheme, where they offer you micro-transactions in the hope that you will get a million of them in a prepaid world, compared to the US (and probably Europe) where most people are on postpaid, are used to monthly billing (and the telco screwing them around with stupid pricing).

Providing lower pricing tiers (with shorter usage periods) might have a lot of churn, but you’ll get a lot of user growth. And if it’s easy and cheap, people will use it often, and you — I don’t mean just Microsoft or Adobe, but anyone selling a subscription-worthy service or software — will get money for your trouble anyway.

For example — why would you need to buy a Lambo when you can rent it daily for, I dunno, 1000 bucks? When all you need to use it for is pick up your girlfriend?

[hat tip to @amasna who is writing about the same thing right now, but probably in many ways better].