Adam Rice

My life and the world around me

Tag: economics

Economics of software and website subscriptions

It’s a truism that people won’t pay for online media, except for porn. That’s a little unfair. I’m one of many people who has long had a pro account on flickr, which costs $25/year. Despite flickr’s ups and downs, I’ve always been happy to pay that. It also set the bar for what I think of as a reasonable amount to pay for a digital subscription: I give them $25, they host all photos that I want to upload, at full resolution. Back when people still used, they offered “gold star” accounts for $6/month, which removed the ads and gave you access to a few minor perks, but mostly it was a way to support the website. The value-for-money equation there wasn’t quite as good as with flickr, in my opinion, but I did have a gold-star account for a while.

Looking around at the online services I use, I see there are a few that are offering some variation on premium accounts. Instapaper offers subscriptions at $12/year, or about half of my flickr benchmark. The value for money equation there isn’t great—the only benefit I would get is the ability to search saved articles—but it’s a service I use constantly, and it’s worth supporting. Pinboard (which has a modest fee just to join in the first place) is a bookmarking service that offers an upgraded account for $25/year; here, the benefit is in archiving copies of web pages that you bookmark. I can see how this would be extremely valuable for some people, but it’s not a high priority for me. I use a grocery-list app on my phone called Anylist that offers a premium account for $10/year; again, the free app is good enough for me, and benefits of subscribing don’t seem all that relevant.

In terms of value for money, none of these feel like great deals to me. Perhaps because the free versions are as good as they are, or perhaps because the premium versions don’t offer that much more, or some combination of the two. But I use and appreciate all these services, and maybe that’s reason enough that I should subscribe.

At the other end of the scale, there’s Adobe, which has created quite a lot of resentment by converting its Creative Suite to a subscription model, for the low, low price of $50/month. This offends designers on a primal level. It’s like carpenters being required to rent their hammers and saws. The thing is that $50/month is a good deal compared to their old packaged product pricing, assuming that you would upgrade roughly every two years. The problem is that the economic incentives are completely upside down.

Once upon a time, Quark XPress was the only game in town for page layout, and then Adobe InDesign came along and ate their lunch. Quark thought they had no competition, and the product stagnated. Now Adobe Creative Cloud is pretty much the only game in town for vector drawing, photo manipulation, and page layout.

With packaged software, the software company needs to offer updates that are meaningful improvements in order to get people to keep buying them. Quark was slow about doing that, which is a big part of the reason that people jumped ship. With the subscription model, Adobe uses the subscription as a ransom: when customers stop subscribing, they lose the ability to even access their existing files. Between the ransom effect and the lack of meaningful competition, Adobe has no short-term incentive to keep improving their product. In the long term, a stagnant product and unhappy customers will eventually encourage new market entrants, but big American companies are not noted for their long-term perspective.

I think that’s the real difference here, both psychologically and economically: I can choose to subscribe to those smaller services, or choose not to. They all have free versions that are pretty good, and if any of them wound up disappearing, they all have alternatives I could move to. With Adobe, there are no alternatives, and once you’re in, the cost of leaving is very high.

Bike-share systems and the poor

This morning there was a story on NPR about bike sharing, specifically how it doesn’t do a good job of serving the poor. There are basically three reasons for this:

  1. The bike stations are not located in areas most useful to poor people;
  2. You need a debit card or credit card to use the system;
  3. Bike-share programs are expensive.

The story got me thinking about all the ways it’s expensive to be poor, and they’re certainly illustrated in this example.

To get a debit card, you need a bank account. To get a bank account, you usually need to scrape together $100 for an opening balance. This is not a huge hurdle to overcome, but if you never have $100 left at the end of your pay period, it’s going to take planning, and if life throws you a curveball before you’ve got that $100 saved up, you’re back to square one.

I looked at the prices for bike-share programs. Chicago’s Divvy has two price structures: yearly memberships and day rates. $70/year or $7/day, plus usage: in both cases you get 30-minute trips for free, but if you’ve got a longer bike trip than that, you get dinged $1.50 or $2.00 per 30 minutes. Austin’s nascent bike-share system has a similar breakdown, but is slightly more expensive.

So if you’re poor, the annual plans are probably out just because of the upfront costs, even though on a per-day basis, they’re a much better deal. If anything, you’re on the daily plan (Austin also has a weekly plan), although again, this presupposes you’ve got a bank account.

What about getting your own bike? You can get a beater bike on Craigslist. There are bikes listed there right now in the $20–50 range, so if you’re poor, the break-even point for rent vs own comes quickly—within one pay period. If you could afford the daily bike rental, you could afford to buy a bike. If you’re going to use a bike for commuting to and from work, it would be a no-brainer. It would also be a no-brainer for someone with more discretionary income who wants to commute by bike.

So given that anybody with even marginal math skills could figure out that ownership beats rental for routine, day-to-day bike usage, what’s the use-case for rental? It’s for when you’re out of your routine. Non-routine uses are hard to predict—it seems redundant to point that out. That makes the best placement of bike stations problematic.

Another obvious use case is tourism, and from what I’ve seen in Chicago and San Antonio, the placement of bike stations clearly targets tourists.

I don’t think it would be a bad idea for bike-sharing systems to be more accessible to the poor, but as long as those systems are run by private companies trying to turn a profit, it’s going to be difficult to balance that equation. Organizations like the Yellow Bike Project can do more to improve bike mobility for the poor right now, by providing them with their own bikes, teaching them how to maintain bikes, and giving them access to shop space.

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