The Rise of Subscription Services: A Shift in Business Models and Consumer Behavior

In 2011, Adobe Creative Cloud was introduced, marking a significant shift in business models for software companies. The new model offered four pricing tiers ranging from $9.99 a month to $82.98 a month, providing customers with flexible options to access Adobe's creative applications. While this change was intended to offer more convenience and affordability, it also sparked concerns among customers who feared being locked into perpetual monthly payments for the rest of their creative careers.

The concept of subscription services is essentially equivalent to renting, where customers pay a monthly fee to use a product or service without owning it outright. This model can be beneficial, as software companies can update their products more frequently and offer more affordable options to customers who may not have been able to afford the upfront cost of individual licenses. However, this model also raises concerns about long-term commitment and the potential for customers to feel trapped in a cycle of monthly payments.

One of the most notable examples of a company adopting the subscription business model is Microsoft with Office 365. Introduced in 2011, Office 365 offers access to popular applications such as Word, Excel, and PowerPoint for $69.99 a year. This service provides customers with flexible options to use these applications across devices, with their work automatically backed up on Microsoft's cloud. In contrast to Adobe's Creative Cloud, Microsoft continued to offer individual licenses for the latest versions of its applications, providing customers with more flexibility and control over their software.

The adoption of subscription services has had a significant impact on consumer behavior and perceptions. While services like Spotify and Apple Music have been widely adopted due to their convenience and affordability, other consumers may not benefit from these options. For instance, someone who already owns a large music library that is available locally on their devices may not see the value in subscribing to streaming services. Similarly, individuals who do not upgrade their devices or software annually may find that subscription-based models do not provide them with the best value.

The shift to subscription services has also raised questions about ownership and control. When customers subscribe to a service, they are essentially renting access to a product or application without having any say in its development or direction. This can be frustrating for consumers who feel that their preferences and needs are not being taken into account. Furthermore, the lack of transparency around subscription services has led to concerns about data collection and usage.

The value of subscription services ultimately depends on the behavior of each individual user. While some customers may reap significant benefits from these services, others may not see the value or may be better off with alternative options. It is essential for consumers to weigh the pros and cons of each service and consider their own needs and preferences before making a decision.

In conclusion, the rise of subscription services has marked a significant shift in business models and consumer behavior. While these services offer convenience and affordability, they also raise concerns about long-term commitment, ownership, and control. As consumers, it is essential to be aware of these factors and make informed decisions about which services align with our needs and preferences.

"WEBVTTKind: captionsLanguage: enHey guys, it’s Greg with Apple Explained.And in this video we’re going to explorewhy subscription services have become so popularin recent years and what that means for customerslike you and me.Now this topic was the second place winnerof last week’s voting poll, and if you didn’tget to vote, make sure you’re subscribed.That way the voting polls will show up rightin your mobile activity feed and you can letme know which video you’d like to see next.So if you were around when the iPod was popularyou probably remember using the iTunes MusicStore to buy songs for ninety-nine cents eachand then loading them onto your iPod for listening.But things have come a long way since then.Because today we use subscription serviceslike Apple Music or Spotify to stream an unlimitednumber of songs from almost any device.And because streaming music is much more convenientand cost-efficient than buying music, streamingservices have exploded in popularity.And when any market begins to grow, it attractsother companies who want a piece of the pie.So the subscription model started to be usedfor services other than streaming music.Now I do want to mention that the subscriptionmodel is nothing new.I mean, World of Warcraft has been using itsince its release in 2004.And if you think about it, traditional newspapershave been using the subscription model fordecades.So while the concept is nothing new, it hasbecome a rapidly growing industry, triplingin size each year since 2011.Now this channel is called Apple Explained,so let’s begin by taking a closer look atthe different ways Apple has adopted subscriptionservices.And one of their earliest implementationswas called .mac in 2002.Now .mac was a web-based service that cost$99.95 a year.And for that amount, users were offered anemail account, 100MB of internet storage,a website builder called HomePage, McAffeeantivirus, and a backup tool that allowedusers to archive data to their iDisk, CD orDVD.But many users felt like .mac was a bit ofa ripoff.Especially considering Apple had previouslyoffered almost all of these internet servicesfor free through iTools, which was replacedby .mac.And the reason why Apple had to begin chargingfor their internet service with .mac was becausedemand for online storage and email accountshad risen since iTools was initially release.But as you can imagine, many users weren’thappy to be paying for a service that usedto be free.Now .mac enjoyed its fair share of successuntil 2008 when it was replaced by somethingcalled MobileMe, another subscription servicethat cost $99 a year.And if you were around for the launch of MobileMe,you probably remember that it didn’t goso well.In fact, when the service officially wentlive, it was only available for a few hours.And during that time, users experienced alot of difficultly signing in and establishinga reliable connection with the website.So just three hours after going live, MobileMewas taken offline.And it didn’t return until two days later.But that was only the beginning of MobileMe’sproblems.Because when it was finally live, users hadtrouble syncing data and accessing certainmail functions.Steve Jobs eventually sent an internal emailto employees admitting MobileMe’s developmentwas rushed and wasn’t up to Apple’s standards.And this resulted in a 60-day extension ofthe free trial period on top of a previous30-day extension they granted shortly afterMobileMe was released.So it was clear that MobileMe needed to bereplaced by a more reliable internet serviceas soon as possible.And that’s exactly what Apple did in 2011with iCloud, which offered 5GB of cloud storagefor free, and options for higher amounts ofstorage for a monthly fee that was significantlylower than the previous $99 price tag of MobileMe.And if you own an iPhone today, you’re probablyfamiliar with iCloud and how successful ithas become for Apple.But this is just one subscription serviceApple offers.They added a second in 2015 called Apple Musicwhich I’m sure most of you are familiarwith.And I should mention that the iTunes MusicStore is still around, and you can still purchasemusic through it.But it has become a much less popular wayto access music than previously.So iCloud and Apple Music are two of Apple’slargest subscription services, but there isone more program Apple offers that prettymuch functions exactly like a subscriptionservice, and that is the iPhone Upgrade Program.With it, users pay a monthly fee for an iPhoneof their choice for twelve months.Today, the cheapest iPhone XR costs $37.41a month, while the most expensive iPhone XSmax costs $68.66 a month.And this can actually add up to a pretty gooddeal since the twelve-month cost of ownershipof an iPhone XS Max would come out to $823.92instead of the retail price of $1449.Saving you about $625.But this program is only a good deal for thosecustomers who upgrade to the newest iPhoneevery year.Because if you purchase the most expensiveiPhone XS Max and kept it for two years insteadof just one, you’d be saving about $200in monthly payments.And the savings only grow from there if youwere to keep the device for three or evenfour years.And this upgrade program is a great deal forApple too, because it keeps customers lockedinto the iPhone, preventing them from switchingto Android or Windows.So it’s clear Apple is using subscriptionservices to their advantage while also providingcost savings to certain types of customers.But how are other companies in the tech industryintegrating subscriptions into their businessmodel?Well, Adobe, creator of some the most popularcreative applications like Photoshop and Illustrator,introduced a subscription service in 2011called Adobe Creative Cloud.It included four pricing tiers ranging from$9.99 a month to $82.98 a month.And while Adobe was able to add helpful featuresto their software like cloud syncing, therewere many angry customers who feared beinglocked into perpetual monthly payments toAdobe for the rest of their creative careers.Because if you think about it, subscriptionservices like Apple Music and Adobe CreativeCloud is essentially the same as renting.You never own your music and you never ownyour copy of Photoshop.You’re obligated to continue paying forthe service in perpetuity, and if you don’t,you lose everything.Your music collection disappears and all ofthe Photoshop files you created can’t evenbe opened anymore.And this is one of the biggest problems withsubscription services, and the biggest reasonwhy so many customers were opposed to Adobechanging their business model from sellingindividual licenses of their software, toselling temporary access to their software.But as I said before, there are benefits tothis model, since Adobe can update their softwaremore frequently and more customers can affordto use the software since they’re payinga low monthly fee instead of a large upfrontcost.But Adobe isn’t the only large softwarecompany to adopt the subscription businessmodel.Microsoft did the same thing in 2011 withOffice 365.As you probably know, Word, Excel, and PowerPointare the most widely used applications forword processing, creating spreadsheet, andbuilding slideshows.And those applications used to only be availablein Microsoft’s Office Suite that users couldpurchase for $149.But Office 365 offers access to those applicationsand more from just $69.99 a year.And because the service is web-based, userscan access and edit their documents acrossdevices and rest assured that their work isalways backed up on Microsoft’s cloud.Now reception to Office 365 was much morepositive than Adobe’s Creative Cloud, anda major reason why is Microsoft continuedto offer the latest versions of Word, Excel,and PowerPoint for purchase as individuallicenses.Instead of forcing users to use their Office365 cloud service.Something Adobe failed to do.Now let’s reflect on whether or not thewide adoption of subscription services isa positive or negative thing for us consumers.Because on one hand, services like Spotifyand Apple Music are extremely convenient sincethey allows us to listen to all the musicwe want, wherever we want, for a reasonablemonthly price.Compare this to purchasing music.Buying just one album from the iTunes MusicStore could cost ten dollars or more, andconsidering most people own hundreds of albums,the cost of owning music could easily reachthousands of dollars.And not many people could afford to spendthat much on songs, so music piracy becamea widespread issue.And if you did pirate songs, the process waspretty long and arduous.You had to have a BitTorrent client, locatethe correct torrent, download it, and managethe downloaded songs inside iTunes or someother digital music application.And a lot of the time, the music you pirateddidn’t include any metadata like the theartist, release year, or album artwork.So if you wanted the best listening experiencepossible, you had to manually input that datayourself.Which took even more time.So you can imagine that when Spotify hit theUS market in 2011, it totally changed theway everyone not only listened to music, butaccessed and managed music.And I think having temporary access to musicthrough a streaming service is actually abetter deal than owning and managing yourown music library.Mainly because streaming services like Spotifyand Apple Music save you so much time whenit comes to accessing, managing, and evendiscovering new music.But I should add that the value of any subscriptionservice depends heavily on the behavior ofeach specific user.If you already own a huge music library that’savailable locally on your devices and youdiscover new music through radio, then maybeApple Music or Spotify isn’t a good dealfor you.If you already own the Adobe applicationsyou need and you aren’t concerned aboutnew features or updates, then maybe Adobe’sCreative Cloud would just be a waste of money.And if you don’t already buy a new iPhoneevery year then the iPhone Upgrade Programprobably isn’t the best choice either.So it’s hard to say whether or not thishuge shift to subscription services is a goodor bad thing for customers, although I thinkin the long run it’ll end up being moreof a positive thing for the majority of people.But its up to you to realistically weightthe pros and cons of each service and decidefor yourself if it’s a good investment orjust money down the drain.So that was a closer look at the rise of subscriptionservices, and if you want to vote for thenext video topic, don’t forget to subscribe.Thanks for watching, and I’ll see you nexttime.\n"