Why 'free updates for life' is bad for the customer...

Sunday, March 19, 2006 by JcRabbit | Discussion: Personal Computing

People sometimes forget that making software is a business. Inexperienced shareware authors seem to forget this sometimes too, and offer life-time free upgrades. Business-wise this makes no sense and, in the long run, they are shooting themselves (and indirectly their customers) in the foot. This is why and what usually happens:

A successful business has to rely not only on new customers but also on repeated buys from their existing customer base in order to remain viable. This is because while a new business's customer base may expand rapidly in the beginning, at some point this expansion will eventually stop or dwindle to a fraction of what it once was when the novelty wears off or the market becomes saturated.

As long as a shareware author can derive his livelihood from what he does, he will keep at it. But once cash flow trickles to a fraction of what it once was - and it will with a life-time of free upgrades policy - and the shareware author begins struggling just to put food on his table, he will finally realize that all he managed to do was to put himself into a corner. He will then do one of three things:

1) Get a real job and abandon the project altogether.

2) Rename his current project, declare the old one dead, add a few new features, and sell it off as if it was a brand new application (so users of his old project have to pay again).

3) Start a new, completely different, project.

In the first case, everybody loses. Your 'lifetime' free upgrade license is now useless simply because the product is dead and no more upgrades will be issued.

While the second case seems a bit far fetched, I've seen it happen quite often. Not willing to discuss the ethics of such a move (the alternative is worse), I can safely say that your 'lifetime' of free upgrades license is also useless in this case.

The third case is just a delay of the inevitable, because, unless the shareware author changes his business model, the same thing will happen again further down the line. Plus, his focus will now be on the new application - the one that is bringing him the real money - instead of the old one. Updates will now dwindle to a trickle of what they once were. The product is not dead but it is in 'limbo'.

Note that I've been talking about 'professional' shareware authors (those who manage to make a living out of what they do), I'm not even referring to those who do it simply because they like it, or because it gives them pocket money. Their story is a lot simpler: one day (sooner than you think) they will lose interest and, unless someone is there for them to pass the torch, their project is dead too.

I hope you now understand better the real value of 'life time of free upgrades'. What do you prefer? A product that offers you free upgrades for life but is only around for a couple of years, or one where you have to pay from time to time to support development - and only when and if you think the new features are worth it! - but which will keep you happy for many years to come (Winstep Link has been around since 1998, by the way) ? That's a question only you can answer.

So, what is the best solution for both the user and the shareware company? Something called the 'subscription based' model. This, by the way, is also Stardock's main business model.

When a person hears the word 'subscription', their first reaction is to cringe and think they are renting the software rather than buying it. Nothing could be further from the truth:

When you purchase an application, subscription or not, the version you bought is yours FOR LIFE. It will not time out on you or suddenly stop working if you don't renew your subscription. It's like when you purchased Windows 98, for instance. It's yours to keep. That, however, does not mean that you are entitled to upgrade to Windows XP for free. When the time comes, you can choose either to upgrade (and pay for the privilege) or keep on using the Windows version you bought. If you accept this from Microsoft, why shouldn't you from shareware companies?

Now, the subscription method has, for the user, a HUGE advantage over this way of doing things. Keep with me:

Still using Microsoft's example, between Windows 2000 and XP, all you got for free were service packs and bug fixes. No real new features. In fact, Microsoft saved the real BIG changes for XP.

In the shareware world, when a company is offering minor upgrades for free and only charges for major upgrades (Winstep's former business model), in order to justify a major upgrade most companies will sit on top of the real big changes/new features until they can round up enough of them to justify a major upgrade. In practice this means that your free minor version releases will not contain much more than bug fixes and minor enhancements. The really juicy stuff is saved up for later.

Why is it like this? Because otherwise the difference between the last free minor upgrade and the major version release would be so relativelly minor that few users would feel compelled to upgrade. The price the user pays is that the introduction of really cool features X and Y is deliberately delayed by a few months or longer, so that those features can be part of a major version release which you will have to pay for anyway. I'm aware this might shatter the ilusions some of you have on how the shareware business operates, but the fact is that this *is* a business. And, business wise, what I described above makes sense.

Now, my problem is that I never liked to hold back on implementing new features. The result, for instance, is that nearly 5 years have elapsed since the first WorkShelf release and we are still at version 1.x. Five years of free upgrades with lots of really cool new features being added all the time. Same thing happened with NextSTART, it took 3 years for it to go from version 2.0 to 3.0. It's a bad business decision that is sustainable as long as you have a large continuous flow of new users, but which will bite you back once the market becomes saturated (and it always does).

Now lets compare this mess with the advantages of a subscription-based business model (and, again, keep in mind that the subscription is ONLY for the updates. You get to keep what you paid for and all the free updates you might get until your subscription period runs out):

Advantages for the user:

a) Really cool features X and Y are now added all the time, as soon as they are thought of/requested. This is because the shareware company no longer has to worry about saving them for a major upgrade.

b) You know and see your money being put to good use, plus you know you are keeping the company from going belly up, thus ensuring many years of continuous improvement on your favorite applications. You also know that, if you don't like the direction things are going, you always have the choice NOT to renew your subscription. You get to keep everything you got until that moment.

c) You know the company MUST keep a constant flow of updates, otherwise users will not renew their subscriptions. In other words, you keep the shareware company on their toes, to your advantage.

Advantages for the Shareware company:

a) You no longer have to hold back on implementing cool new features. You can add them as you think of them. Constant developement is not only encouraged as it becomes a necessity.

b) Your company is now supported not only by the flow of new users as well as by your current user base. As long as you keep your current user base happy, you know your company won't suddenly go belly up because your market has become saturated and you can no longer afford to put food on the table.

From my point of view, the subscription model for updates is a win-win situation.

Even the major anti-virus companies, like Symantec and McAffee are going for it: you purchase their AV applications and you get a one year period of free virus database updates. After that you can renew your yearly subscription in order to keep your Virus database current. This not only supports the company (what good is a dead AV company with a stale virus database?) as it keeps them on their toes regarding new viruses that suddenly pop up on the wild.

Jorge Coelho
Winstep Xtreme - Xtreme Power!
http://www.winstep.net - Winstep Software Technologies
First Previous Page 1 of 2 Next Last
Jafo
Reply #1 Sunday, March 19, 2006 8:09 PM
Well thunk-out article, Jorge....
JcRabbit
Reply #2 Sunday, March 19, 2006 8:18 PM
Thanks Jafo!

It first appeared on the Winstep forums, but I felt it was interesting enough to post here. It kind of explains 'the other side'.
teddybearcholla
Reply #3 Sunday, March 19, 2006 8:43 PM
Excellent read!! Thank you for posting it here!!
starkers
Reply #4 Sunday, March 19, 2006 11:45 PM
Very well said, Jorge. It really puts things into perspective and explains how the relationship between developers/owners and end users is best suited to the subscription method to remain ongoing and viable......to the benifit of both parties.
I did not fully appreciate the value of this until I became a member here and began purchasing Stardock products, but your article has aptly put it all in a nut shell and highlights the importance of both give and take to sustain a project.
Hopefully there will some who read this and seriously consider subscribing to WC to help prevent it going 'belly up'.
thomassen
Reply #5 Monday, March 20, 2006 4:02 AM
This is a very interesting article.
HG_Eliminator
Reply #6 Friday, March 24, 2006 11:30 PM
excellent article... it is suprising how few actually know the differences in the different "software" buisness models..
RadialFX
Reply #7 Wednesday, March 29, 2006 2:45 PM
VERY GOOD ARTICLE!
Drop125
Reply #8 Wednesday, March 29, 2006 5:00 PM
I have had one bad experience with "Subscription" based. I bought a pop up blocker called "Stopzilla", when you buy it it promises one free year of updates...But what they do not tell you anywere on the package is that once the 1 year is over, the software automatically locks itself and will not work when the year is up.....They informed me that is how subscriptions work...I told them well I use a lot of subscription software, and that they were the first ones I had any type of experience like this..I told them that every other one I use still works, just no updates....They asked me for "examples" I gave them a few including Stardock..To which they replied...Must be a bunch of no namers who dont know what they were doing....I laughed and told them if that they thought Symantic and Stardock were 'NO Names" they must be living under a rock...2 weeks later they added a pop up blocker in IE that works perfect...To bad, I wonder what they are doing now.....
JcRabbit
Reply #9 Thursday, March 30, 2006 9:26 AM
Probably out of business.
Air...
Reply #10 Sunday, April 02, 2006 8:37 AM
I am a idiot in business. After reading ur article, I am wondering one thing.. Its true that subscription is good for long term but the problem is, do we really hope that the software lasts long? Why windows keep on changing their name instead of using the same name? My opinion is that what ppls really want is "FRESHNESS". A new windows.. sounds good.. A new software with a cool brand new name.. Juz like me, don't ask me to use the same WB skin for 1 year. I will commit suicide. Human needs changing..

There's actually no good point of having "subscription based" business for software company. In fact, the company will not be able to enlarge his business right from the start, especially for designing tools.. Packaging is the most important point.

Sorry again. These are juz my opinion. Pls guide me if I have anything wrong... Whatever it is, this post is fantastic.. i like it..!
JcRabbit
Reply #11 Thursday, April 06, 2006 2:30 AM
It's true that most of us like changing from time to time (we wouldn't be at a Windows Customization site otherwise, would we?). True, everybody likes to have the latest and greatest, but... just changing the name of something does NOT make it the latest and greatest. What matters is content. If the content is the same, you can come up with the coolest name in the world and whatever you are selling is still the same, old, stale product. Be it a skin, a program, a car, or whatever.

And then there is something called 'branding'. In branding we want people to associate a word with a product or a range of products. For example, you can call it 3.1, 98, ME, 2000, XP, Vista and whatever, but it is still WINDOWS something . It's not good to keep changing the name of your product, sacrificing it in the altar of 'freshness': you will lose that recognition that took you so long to gain.

Plus, think about what you said: 'don't ask me to use the same WB skin for 1 year, I will commit suicide'. True, you're not using the same skin, but you are using the same PRODUCT - and some people here have been doing so for over 5 years.

The advantages of a 'subscription based' model for UPDATES have been amply discussed above, and they are valid for any software company, be it a startup business or not. Again, don't confuse this with 'renting' software - that is something completely different that would, in my opinion, never work in the real world.
Jesse Ryan
Reply #12 Saturday, April 22, 2006 3:53 AM
Point is, either you are with us, or against us. No in between. Don't agree to disagree either. It won't work. We know better. Just copy and paste the following and you'll get along just fine.



bakerstreet
Reply #13 Saturday, April 29, 2006 11:37 PM
Not to be obtuse, but is this pinned, and if so, why? There are four headline articles in the personal computing section at Joe User, and this one has been sitting there at the top for days with no activity? Maybe it's time to let it slide down naturally?
Jafo
Reply #14 Saturday, April 29, 2006 11:56 PM

Baker...it's 'pinned' from Wincustomize.com as it has on-going relevance to those who deal with commercial product/software distribution via shareware, subscription, etc.

There's no harm in allowing a larger 'audience' to something of real merit.

It's not just yet another Blogger's rant on "what pisses me off most...today..."...

Jafo
Reply #15 Sunday, April 30, 2006 12:05 AM
To add....there may be few responses...but not every thread is asking for them.  If it's not a 'controversial' topic it may not be active as such...but even so, currently it's been viewed/read 760 times so someone is interested,,,
bakerstreet
Reply #16 Sunday, April 30, 2006 12:38 AM
I wish we could expand the number of headline articles over here, then. We only get three others. I'd like to see those that are still being discussed stay on top a little longer. People tend to forget them once they drop below view. (Kupe's article namely), it's a shame that keeping a discussion going is so reliant on people clicking that 'More' link.
Jafo
Reply #17 Sunday, April 30, 2006 1:48 AM
Baker...perhaps SD's sites would benefit from personal 'adjustability' so a User could apportion more 'space' to one section's display listing than another's...as personal taste dictates...
MasonM
Reply #18 Sunday, May 07, 2006 8:15 PM
Yeah, that's why Linux died out, all those free updates killed it.
JcRabbit
Reply #19 Monday, May 08, 2006 2:52 PM
Linux is run by a huge database of enthusiasts, but you can be 100% sure that the main people behind it are making tons of money from it - not by selling the OS directly, but through other related deals.

Everybody needs to feed themselves and their families, and nobody is willing to die of starvation so others can enjoy the fruits of their labor. Nor does anyone have the right to expect them to.

This is a fact: when you are giving something away, that will NEVER be your main priority.
messybuu
Reply #20 Saturday, May 13, 2006 2:30 PM
Great article! It gives me a new appreciation for developers who charge for upgrades. I personally would rather pay for an upgrade than have a favorite program die. Although it does irritate me when developers don't have an "upgrade" discount.

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