/ Business Advice

Why Subscriptions Might Not Be Right for Your App

The real push towards subscription based apps started in June 2016 when Apple announced that subscription pricing was available for regular apps. I'm noticing more and more indie developers considering the move, and some have already made the jump to this new pricing model.

Some apps are perfect for the subscription model. For example, if an app has a server component that stores or delivers data to the client app then charging users a decent monthly fee to keep those servers running makes sense. Even if your app is suited to subscriptions, doesn't mean it's going to be easy.

The idea that developers will be able to charge their users a few bucks a year and make a living from it is bonkers. You only have to do the maths to see this is going to be tough for anyone what tries it:

$3/app * 10,000/users = $30,000 (USD) year. Let's not forget Apple's take at 30%. This leaves just $21,000 (USD).

It's hard for apps to get 10,000 active users, let alone 10,000 paying subscribers. To see this kind of subscription rate I think you're going to need at least 200,000 active users and a damn good app.

Any developers that get this model to work are going to be the exception. Most will fail because it's harder to get someone to subscribe to a service than it is to get them to a make a one off payment.

Who Benefits From Subscriptions?

I believe consumers don't want more subscriptions in their life (I know I don't), so why are we even considering this as a good way forward for making apps sustainable?

It's because Apple is the main one to profit from this push towards subscriptions. That's why they introduced the feature, and that's why they've been pushing the idea that it's "a better way to go".

If I were Apple, I'd probably want apps to be subscription based instead of paid. Subscriptions can be a steady stream of revenue, but best of all you can predict and estimate growth more efficiently than paid sales.

No sane person wants to subscribe to each app they use on their phone. This would soon start to add up, before you know it you could be spending 100s of dollars every month. Subscription fatigue is a real thing, and a lot of people are feeling it.

I did an unscientific straw poll on Twitter, I asked my followers if they prefer subscriptions over paid upgrades for apps? The consensus was no, they prefer paid upgrades.

Paid Upgrades In Disguise

I know there is plenty of software out there doing well on a subscription based model. I know some of you will cite Sketch and Framer as proof that the subscription model can work for apps without a server component. But, before you get too excited let's break it down a little and look at how they do it:

The user purchases a license for Sketch, that license entitles them to one year of free upgrades. When their license expires after a year they can continue using that version of the software they have installed. However, they won't receive any updates after that.

If they want to start receiving updates again, they need to renew their license for another year, seems fair.

But hang on a minute, this sounds quite familiar, doesn't it? It's almost the same way classic paid upgrades work!

If you're going to do subscriptions I believe this is a good way to do it. However, you can only do it if you're selling direct to the customer. This form of subscription isn't possible on the Mac App Store or on the iOS App Store for that matter.

Give us the Option of Paid Upgrades

As we've discussed, subscriptions are great for some apps, but that model doesn't work for everything. Here's how I'd like monetise my apps on the App Store:

I release version 1.0 of my app on the App Store. I continue to ship free updates just like I do now. Then when I'm ready to release version 2.0, the App Store can prompt all my existing users and asks if they'd like to purchase the upgrade. The user can choose to upgrade then, or ignore it.

The upgrade prompt could be done via an API that limits the developer to ask the user a maximum of 3 times a year, just like the recently released review prompt API.

Within the boundaries of the App Store, this would be pretty great. I think paid upgrades would be very popular, especially for professional apps.

If Apple wants to see more pro apps on the iPad, this pricing model would be one more step towards helping that happen.

The Future of Software Pricing

For me, these conversations about pricing and sustainability always arrive back at the gradual devaluation of software. The iOS App Store devalued software and made it worthless (in the eyes of the consumer). As developers on the platform we're partly to blame for it too. We all went along with it as it was great at the time, then the race to the bottom happened fairly fast, then freemium and ad based apps started to take off. The good times were over and it became hard for the majority of indie developers to make a living from the App Store.

On the Mac, we still have the option to distribute and charge for software how we like. If Apple continue to lock down the Mac, and I have every belief that they will, then software on the Mac will be in the same position as software is on iOS. Functionally crippled. No demos. No paid upgrades. No flexible subscription-based licensing. You won't be able to release software on the Mac when you want. Apple will need to review it. If they don't like what you've built, they can stop you from releasing it.

The transition will not be quick. It started with the Mac App Store and the introduction of GateKeeper. With each subsequent release of macOS Apple have made it progressively harder to install non App Store based apps. This trend will continue. Ultimately Apple will lock down macOS, just like they have iOS is, it's just a matter of time.