Subscription Models vs Value-Add Propositions in 2024 -part 1

The pricing models have evolved from:

One-time payment -> Microtransactions -> Subscription

Now we still have a mix of all these of course, but Subscription seems to have taken the lead as the way to go. You could call it a trend, as companies are following each other on this path.

Is this path good?

It can be great, it can bring a much needed steady source of revenue, keep people employed, keep customers happy, and the product is a living and breathing entity that is further enhanced and improved due to that stream of income and everything is fine.

Not quite…

It can also be bad, it can lose customers, thus laying off employees, thus having the product suffer due to lack of funds and everything is not fine.

I’m going to argue that we are seeing much more of the bad than the good in 2024 and probably beyond if companies don’t start changing their models and approach.

Before I go into examples to solidify these thoughts and therefore try to formulate some sort of inference towards some sort of solution let’s look at the causes:

The economy.

This includes inflation, cost of living, earning and purchasing power as well as the market saturation.

In 2021 at the peak (and end) of greed, where you have people spending and making millions off NFTs, Cryptos, watches, cars, houses etc. The jobs were coming in hot, the houses were being sold off the lots and everyone was just cruising through the pandemic that started a few years prior.

Then 2021 was over, and the world got hit with reality. Add to the mix social media which…well I’ve argued is not making things better. If anything we have become isolated, selfish, mentally drained, lost, can’t tell reality from fake, and lazy…our phones are our curse. We live life through a lens when reality is right there behind it. Anyways…I digress because I’ve already spoken about this.

Ok so, how does the economy now affect the trend of subscription models?

People have less money now, they realize they need to consume less and prepare for the future. Obvious point but look at what people have to consume today if they need some services:

TV channels - all subscriptions. How many? Alot. You either get ads or you pay, or you get ads and still pay. Either way, you want to watch something? That’s 7-20 dollars a month multiplied by the separate subs because shows are exclusive many times. 15 * 4 = $60/month

Internet, phone, utilities, all a given I would call the ‘normal’ subscription items you need.

Ok let’s see other things:?

Gaming - MMOs might be dying, but now the sub models have extended beyond that genre and generally you’re paying at least $12-15 a month…oh I forgot, publishing services…EA, Ubisoft, Gamepass etc. are of course monthly. It helps that Gamepass consolidates with EA but let’s guess an average of $30/month

Exercise - I have a Peloton, the sub fee is $44/month and if you want to watch YouTube or Netflix on it then you are adding another $70-80 I believe which I will use as an example later to the value-add proposition that needs to be analyzed. Suffice to say I canceled my Peloton sub FYI.

Creativity/Productivity - Adobe now has a sub model which runs from min 20/mo. To upwards of $60 a month for apps that you could once buy and get updates for a one-time price. Same with Office apps and other productivity apps you can think of. Nevermind mobile apps.

Music - no albums anymore, nope, pay for a service, or get ads. Luckily most music services are built into one of the others like YouTube Music but the artist is suffering more as CD sales are non-existent and streaming revenue needs a boost as well.

I can keep going here, but my point is this:

Add up all those monthly subscriptions, multiply that by 12, and keep going if you want to use them. That’s not counting inflation, cost of living and mortgage/rents going up. Mortgage goes up in the way of real estate taxes and those you can expect to go up.?

Extrapolate all these factors, and you quickly see that it’s unsustainable. Something will give and it has.

?EVERYTHING is going up. Have wages gone up? Yes, in the sense that…well they had to, but not enough to match the intensity that companies are trying to boost for profits today. Wages are not going to fuel all these services we had before and are now on a monthly charge to you.

In a way it’s good and a wake up call, if the economy kept going strong like pre-2022, then who knows how much higher services would get. I’m not an economist so maybe the opposite effect would have happened in a stronger economy and companies would just keep going…but…2008 taught us, greed can’t keep growing without a full reset. Guess that’s the capitalistic cycle that has brought down empires.

Anyways…my examples:

Peloton has recently laid off a percentage of their workforce. They were once flourishing now they are in financial straits.

Did it have to be that way? We have enough predictive technology today (AI) and sophistication that someone over there should have said, maybe charging 70+ for the privilege of watching YouTube when you already have YouTube is not going to be popular. Or the almost $50 a month to watch someone else bike while you bike…sure analytics are great too that they provide, but you can get that from your smartwatch. If you banking on a product to sell a sub, and the product is not the bike itself but the app and content, then you need to really look at the value-add for customers, your audience and then factor in, the economy tanked and unless you want just all rich subscribers (not me) then you will have to play the long game. $20 is better than nothing right??

That’s my point or one of my points, adjust your pricing along with the times. Housing can trend up over the long term, but a bike app is different.

Ok I beat up Peloton enough, let’s move on to Adobe. I have been a long time user but I stopped for years and then had to come back. Their sub is quite high as well, averaging around 45+ a month…my numbers are averages, let’s just go with these for now.

The point is that while Adobe has added new features and enhancements, Photoshop is still Photoshop. For the most part I can get away with doing what I need with the older CS versions that you paid one-time for.

Now Adobe is clearly struggling to find a middle ground here as they will quote and haggle wildly different rates…and that’s fine because it keeps people like me using their product and paying monthly because it’s right on that value proposed ledge. But it can’t keep going forever. If I don’t use the product frequently, then paying 60 or even 40 a month is going to make me reconsider. And haggling gets exhausting, remember Comcast? I use Verizon Fios and the first thing I loved is that they had a fixed price, it was decent and we were on our way. Now the later price hikes they did with mobile for no real good reason are strikes against them and they are suffering backlash and customer cancellations as we speak.

The point here is VALUE ADD…something I build into all my work projects, process improvements and relationships with people. Is the value worth it? Is it worth it in the context of the rest of my life and finances?

In other articles I argued for the increased value we should place on our own Time. And let’s go back to that word Saturation. Because these two are colliding, and people are choosing what to spend more time and money on. I have insights on these things because I used to be in a market where I produced my own products that got saturated and overrun by greed. The music industry. I didn’t get a chance to help others back then, but now I’m going for it starting with the top-level down beyond music (which I myself have less energy and motivation for like many others that had to resort to other things to survive).

Thank you for reading if you made it this far.

I will get better at being organized in my thoughts and add visuals eventually. I did not write this with ChatGPT AI.?

This is part 1, I will be writing more about all these industries including VR, as we live between the blurred lines of reality and virtual reality. I’m ok with both, as long as we move forward as a society and humanity in general. But right now, I see the world is on fire, and I’m trying to fight through.

Stay tuned for another article I am writing now: Process Modeling with AI to be inclusive of Humanity

Bye for now.