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July 20, 2005
subscription fatigue
I've noticed recently a move towards one-off payments and away from monthly subscriptions. It used to be that services and online things were monthly subscriptions, but hardware was a one-off purchase. However, most hardware these days is in some way networked and connected, and sometimes relies on this for utility and use. The traditional model has been to go for a monthly fee, but I think we're reaching a point where being nickel-and-dimed on our credit card bills each month has gone too far, and people are looking for easy-to-understand (old fashioned) purchases.
Luckily it seems some hardware manufacturers (or is everone a service provider these days?) are listening. The CEO of the company making the Slingbox (a nifty place-shifting TV->Internet->computer device) mentions "subscription fatigue". His model is: you buy the box, plug it in, it works. The same goes for the PhoneGnome VoIP device. Even though there must be servers to run, infrastructure, even customer support, it's absorbed as being a cost of doing business, funded by people purchasing boxes in Best Buy. A simple business model that means it's probably far easier to justify new features and upgrades rather than the extreme nitpicking of cost-benefit analyses.
The same is happening in gaming - consoles are becoming connected (stealth media centres), and again we're seeing a push towards no monthly cost. Nintendo are opening free hotspots in game stores for DS owners, and Xbox 360 will come out of the box with free registration for Live and free network play at weekends.
So what about pure Internet services? I think there will even be a push here to make more one-off purchases rather than continual drains of cash. Compare, say, Flickr to the old-fashioned way of pricing - Typepad and Backpack. Flickr is $24.95. Sure, you are actually buying one year of service, but it's sold as a one-off purchase, a yearly event; far less taxing that a constant auto-renewing drain.
I'm also intrigued about the cost: the cost of infrastructure can't be cheap for Flickr. They're serving and storing an awful lot of pictures, as you can upload up to 2 gigabytes a month. They're backing it up. And yet, Backpack is, at the lowest pricing level, over double the price, for what must be far less data and less bandwidth. Sure, it's perceived value that people will pay for, but with things like Flickr and Google Mail, it seems there's a big sea-change in Internet service pricing coming (and this is where I'd love to know if 37signals policy of not doing user-testing might hurt them).
The final area that seems to be changing is software. The traditional model is to release a new version every year, and make people pay for the upgrades (which means the total cost of the product grows each year, increasing the barrier to purchase tremedously). There have been several applications, notably small homegrown Macintosh software, that have chosen the route of a single one-off payment, with all upgrades free, forever. This gives users reassurance that something newer and spanglier won't come out tommorrow, they get new features as they come out, quicker and faster upgrade of the userbase, lower support costs, and makes sure the price stays low enough to give no-one a good reason not to pay.
Pricing is probably cyclical, and we're hitting a wave of one-off purchase at the moment, but it's very interesting when service providers are considering getting into hardware and vice-versa.
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