Good Will Blogging
How do you like them apples...

I’ve let this subscription stuff swirl around in my brain for a week or so while reading the arguments on various sites. There have been a few really well-thought-out articles, but I feel there is an important point that’s either missing or way under-represented.

All of the opinions I’ve read seem to focus on what it does to existing business models. But there has been very little focus on what new business models are now possible, that were impossible (or at least difficult) before.

For example, until now, a feature writer had I guess two options to make a living: an ad-supported weblog, and/or syndicated writing for a magazine, newspaper or website. But now there’s a third option: make an app that delivers your writing to paying subscribers.

I, for one, would happily pay for a subscription in a Daring Fireball app.

Of course, it’s not only writing that could take advantage of this business model. Imagine, a photographer delivering her work to paying subscribers, a language-learning app that delivers lessons, even a special-interest club that uses the subscription payments system to collect membership fees.

And the important thing is, this model is now available to anyone at any scale. The size of Apple’s 30% cut is largely irrelevant for people who didn’t have a viable business model before this. Getting 70% of something is better than getting 100% of nothing.

The App Store did this first. How many iOS developers out there now find themselves in a new career, being their own boss, having fun and making their own money? Mobile wasn’t new, software wasn’t new—and yet the App Store created something new that has changed the course of many, many people’s lives. A similar revolution is now possible for new businesses to sell their content/service on a continuous basis as micro-subscriptions.

One of the really surprising things that emerged naturally in the App Store was the extremely low prices. Of Apple’s own strategy to sell devices, Steve Jobs said at the D8 conference:

“Price aggressively and go for volume. That worked for us.”

What’s amazing is, that strategy is now available not just to big corporations, but to individuals working in their underpants at home. Many, many developers are earning steady income from sales of their $0.99 apps.

But one thing about this phenomenon had troubled me: iOS apps are a one-time sale. Because of the lack of upgrade pricing in the App Store, developers face a market saturation problem. All their revenue comes from new customers only, who find their app through word-of-mouth, reviews, and search results. But if you have sold your app already to everyone in your target demographic, the revenue stream would theoretically stop. You have to either do the Tweetie 2 thing and release a new app (and deal with all the consequences of that), or expand your product line by developing other apps.

In-app purchases may have helped a little to improve the situation, but there’s a psychological barrier that must be overcome every time the user is presented with a “Buy now” button. With both IAP and App Store purchases, the developer must overcome that barrier every time to get paid. But with subscriptions, they only need to overcome it once to produce a steady stream of income. That’s huge.

Think of it this way: when a person buys a mobile phone, they see two prices - the price of the phone, and the monthly plan price. But how many people multiply the monthly plan price by the length of the contract, as part of their purchase decision? There is a very low psychological barrier to recurring payments. So, if you have valuable content to deliver to your users via an iOS subscription app, you could price it at $0.99/month or even $0.09/month and build your business based on a steady, predictable income flow.

For some, that may turn out to be the last incentive they need to quit a job they hate and strike out on their own.