Pricing is hard to judge because everyone values software differently. By the same token, TextExpander is not a new app – it has been around for many years as a paid-up-front utility, which is what this new pricing model will be measured against by existing customers. I can’t help but feel that those customers will be unhappy, perhaps very unhappy.
I’ve been quietly observing the shift from “pay once” to “pay ongoing” in the world of software but haven’t said much about it. There is, however, so much to say, and I think for me it fits messily into two overlapping psychological circles, which I discuss below.
We use software, but we haven’t figured out what the hell it is
People usually talk about “software as a product versus software as a service.” The conversation, however, should be about “software as a perception.”
What is software?
I can’t touch software (only hardware). I can’t smell software. I can’t taste software.
But I can look at software. I can use software. I know software when I see it. I can sense the benefits and experience of using software. I know that software exists—at least in my mind.
Even though anyone can plainly understand that software isn’t a durable good or a product in the physical sense, that’s how it was priced in its first era in consumer markets. Like cereal, we used to buy software in boxes off the shelves of physical stores. Such silliness was never going to last, nor will the silliness of paying once to download a
The reality is that software is knowledge: words and bits and instructions conceived by humans and experienced by humans. Software obviously requires a hardware infrastructure (both locally and networked) to exist, but software is fundamentally an abstract knowledge layer on top of a physical infrastructure. We need both the hardware and the knowledge layer to get the full benefits of software, but understanding the difference in these two layers is crucial, I think.
Is knowledge a service? Most of the time—probably. But certainly not always.
If we think of software as a knowledge service, then charging an ongoing fee seems to be a market consistent approach. In other words, it boils software down to its elements (knowledge), and we can observe how knowledge is priced and bought in other areas of the economy. For example, consultant fees, retainers, etc. No one would expect to pay a lawyer a one-time fee for unlimited support until the lawyer died or became replaced by a newer, faster lawyer with a flatter and less skeuomorphic face.
But that’s what we expect of software developers, right? Pay them the cost of a counter service meal once for the right to email them and require support indefinitely? At best, this kind of business model scales to masochism. At worst, it drives software into either abandonment or acquisition by tech giants that shit it out in unrecognizable pieces and privacy violations.
Software is infinite. Disposable income is not.
Back in January, I randomly tweeted:
$5/month is a reasonable charge for your service. Problem: your customers also need 100 other non-competitive subscription services.
I think this resonated with a lot of people who hopefully got what I was trying to say, which is that the software economy is out of sync with consumers’ disposable income. This is not the fault of developers or people who buy software. We’re just living in a REALLY different world than I think humanity has ever experienced, and we won’t even fully understand how fundamentally different the world is today than it was even twenty years ago for probably another hundred years. In other words, we’ll probably never get it. We’re just living it.
Fact: I can’t work without apps like TextExpander, and from a purely rational economic perspective, there’s no reason not to pay Smile $50 a year. It hurts me more not to continue using TextExpander.
There are many other pieces of software for which I feel the same. And there will undoubtedly be many more in the future. This highly heterogenous set of services will not compete with each other so much in quality as they will compete for access to a homogenous resource of dollars—my finite income.
How will we align consumer incomes with the Age of Services? Can we really afford all the services we want with income alone?
Of course not.
Maybe future software markets will paradoxically revert to more traditional economic structures where we trade services for services instead of income for services. Maybe coding will become as fundamental a skill as building your own home was a few hundred years ago so that we can build our own services more easily. Maybe future generations will shift more disposable income away from materialistic goods to services. Who knows—I don’t write the future.
For now, we’re living in transition, and we’re arguably just now repaying a knowledge debt we’ve been accruing. We’ve been living on borrowed knowledge. The bubble is bursting. It’s time to either pay or default and live with the consequences.