App subscriptions were always inevitable

Apple is one of those rare few companies that can take an ongoing evolution and focus and distill it into a revolutionary change. That’s the immodest thinking behind the company’s ambitious "Subscriptions 2.0" plan for the App Store, which aims to convert iOS users from one-off app purchasers into loyal subscribers. It’s nothing new in and of itself, but Apple’s wholehearted embrace validates and underlines it: subscriptions are going to play a huge role in the future of software.

In today’s world, big one-off purchases are increasingly dying away and being replaced by incremental payments. We pay in privacy and data to Google and Facebook, and in tiny in-app purchases to LINE and Valve. Instead of buying a car, we now take an Uber, and instead of building up CD and DVD collections, we subscribe to Spotify and Netflix. Owning things isn’t any less appealing to us as consumers, however businesses have made renting more convenient and artfully induced us into a habit of recurring micropayments and subscription fees.

Apple is following in the footsteps of Adobe and Microsoft

Much of the transformation in the way we acquire and pay for software is already underway. Adobe’s Photoshop cash cow has moved from costing hundreds of dollars per new version to the centerpiece of a new Creative Cloud online subscription. Microsoft is working to turn Windows into a service, and its Office suite is now also paid for via subscription on the desktop and free on mobile devices. The App Store’s basic precept of buying and owning apps is at odds with these new ways of developing and distributing software.

The improving accessibility and speed of the internet have made it possible for software developers to update, refine, and repair their products on an almost constant basis. Google was one of the early pioneers of this approach with its automatic updates for the Chrome browser. Similar updates rain down on Apple’s own App Store every time the company changes anything in the iOS developer toolkit, and users have grown to expect the after-sales care of upgrades and additions. And that’s the core of the problem Apple is trying to tackle and subscriptions offer an answer to: how do you compensate and incent developers to keep supporting and improving their apps?

For a long time, iOS developers could rely on the booming growth of iPhone sales to secure their future revenues. Sure, you might be giving older customers free upgrades, but you were still very much enticed to improve your software in order to capture the flood of potential new users streaming in. Such a pyramid scheme of constantly recruiting new users in order to support the old ones could only work so long as Apple kept bringing in masses of iOS neophytes. But that growth has slowed markedly this year, as both the iPhone and smartphones in general approach their global saturation point, and the problem of reconciling one-off purchases with an ongoing support service is growing into a starker issue.

Paying for software has always been a tricky issue

Most iOS app revenue today comes from games, and among them, the highest grossing ones are all free-to-play, charging for items and perks inside the game. People are unwilling to spend $20 upfront for a game, however they’ll often spend much more than that once they’re sucked into the vortex of extra upgrades and enhancements. This is one of the alternatives to a subscription model, and it’s proven successful for a number of companies, but it isn’t really serving consumers’ long-term interests. The lists of the best iOS games and the ones making the most money from IAPs are pretty much mutually exclusive. Turning games and apps into nickel-and-dime storefronts doesn’t improve anything other than the developer’s profitability.

The other alternative method for sustaining long-term app development has been to ask people to pay for new versions. That has two big downsides: one is delaying feature rollouts in order to have a justifiably large bundle of them for a new version, and the other is a userbase hostile to having to pay again for software that’s already owned. Paid upgrades might have made sense in the era of big discrete pieces of software like Windows XP, but they are just a hurdle to innovation in the age of the constantly evolving Windows 10, which Microsoft has designated "the last version" of its OS.

Apple is, at once, both behind the curve and getting out ahead of the problem. On the one hand, subscriptions have proliferated and prospered for many years outside of the Cupertino bubble. All the major US sports leagues offer some form of audio or video subscription service, HBO and Netflix enjoy big enough revenues to produce their own original content, and then there’s the ultimate subscription service of them all: Amazon’s Prime. People are already habituated to paying for services and entertainment, and a chunk of Apple’s App Store changes is dedicated to just adding the necessary flexibility to make those familiar subscription services easier to operate on iOS.

The App Store has to grow up if it wants grown-up apps

The iOS App Store has thrived up to this point in spite of its inherent dissonance between the continuous process of creating and maintaining an app and the one-off act of paying for it. Apple’s move to alter that economic relationship comes just in time to placate grumbling developers while also making the App Store more resilient to dealing with a fixed, rather than constantly growing, number of customers.

Will users be pissed off by it? Of course.

Paid mobile apps struggle to find a wide audience if their price inches past the $0.99 mark. We don’t like obvious upfront costs, and the immediate suspicion is that subscriptions will significantly increase the amount we have to spend to enjoy the same level of quality that we presently do. To compound that new burden, we won’t get to own anything on the other side of the transaction. In fact, the moment we choose to stop transacting with an app maker is the moment we’re left with nothing. The exact same concerns were raised when music streaming subscriptions were first introduced, and the only thing that's changed since then is our attitude toward them.

There's a basic injustice in the present situation with apps, where we impose after-sales expectations — ballasted by the threat of negative reviews — on developers who get no corresponding benefit from us. The way most of us treat app purchases today is akin to buying a pair of shoes and expecting the manufacturer to provide free polishing and repairs. Forever.

The truth is that the economics of the App Store have never really made sense. We are paying negligible amounts once while expecting continuous development and improvement way off into the future. As iOS matures into Apple’s foremost and best operating system — spanning larger, more capable computers like the iPad Pro — it’s spurring the development of correspondingly more sophisticated apps. It’s that new software, most of which doesn’t even exist yet, that stands to benefit most from being able to charge for its ongoing development via subscriptions.

You don't have to like app subscriptions to appreciate their advantages

Adobe and Microsoft have shown the way forward, and Apple has now voiced its agreement loudly. Instead of turning everything useful into an annoying in-app purchase, iOS developers can be candid about the cost of sustaining their work. They’ll have to demonstrate ongoing value, just as Photoshop and Office do, but that’s just more incentive to build better apps.

App subscriptions offer a more sustainable business model for the people building the things that make our mobile devices so useful, productive, and entertaining. You needn’t worry about anyone trying to sell you a fart app subscription, and in-app purchases are likely to remain as they are for the time being, but subscriptions raise the ceiling for the sorts of apps and games that might be feasible to make on iOS.

As users, we’re often too focused on our immediate desires and tend to neglect the structural improvements that can be made to foster a better environment for app development in the future. It’s difficult to predict exactly how subscriptions in the iOS App Store will play out, but it’s clear that they’ll be a major part of Apple’s future, and by extension, the entire tech industry.

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