Hey guys, it’s Greg with Apple Explained.
And in this video we’re going to explore why subscription services have become so popular
in recent years and what that means for customers like you and me.
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So if you were around when the iPod was popular you probably remember using the iTunes Music
Store to buy songs for ninety-nine cents each and then loading them onto your iPod for listening.
But things have come a long way since then.
Because today we use subscription services like Apple Music or Spotify to stream an unlimited
number of songs from almost any device.
And because streaming music is much more convenient and cost-efficient than buying music, streaming
services have exploded in popularity.
And when any market begins to grow, it attracts other companies who want a piece of the pie.
So the subscription model started to be used for services other than streaming music.
Now I do want to mention that the subscription model is nothing new.
I mean, World of Warcraft has been using it since its release in 2004.
And if you think about it, traditional newspapers have been using the subscription model for
decades.
So while the concept is nothing new, it has become a rapidly growing industry, tripling
in size each year since 2011.
Now this channel is called Apple Explained, so let’s begin by taking a closer look at
the different ways Apple has adopted subscription services.
And one of their earliest implementations was called .mac in 2002.
Now .mac was a web-based service that cost $99.95 a year.
And for that amount, users were offered an email account, 100MB of internet storage,
a website builder called HomePage, McAffee antivirus, and a backup tool that allowed
users to archive data to their iDisk, CD or DVD.
But many users felt like .mac was a bit of a ripoff.
Especially considering Apple had previously offered almost all of these internet services
for free through iTools, which was replaced by .mac.
And the reason why Apple had to begin charging for their internet service with .mac was because
demand for online storage and email accounts had risen since iTools was initially release.
But as you can imagine, many users weren’t happy to be paying for a service that used
to be free.
Now .mac enjoyed its fair share of success until 2008 when it was replaced by something
called MobileMe, another subscription service that cost $99 a year.
And if you were around for the launch of MobileMe, you probably remember that it didn’t go
so well.
In fact, when the service officially went live, it was only available for a few hours.
And during that time, users experienced a lot of difficultly signing in and establishing
a reliable connection with the website.
So just three hours after going live, MobileMe was taken offline.
And it didn’t return until two days later.
But that was only the beginning of MobileMe’s problems.
Because when it was finally live, users had trouble syncing data and accessing certain
mail functions.
Steve Jobs eventually sent an internal email to employees admitting MobileMe’s development
was rushed and wasn’t up to Apple’s standards.
And this resulted in a 60-day extension of the free trial period on top of a previous
30-day extension they granted shortly after MobileMe was released.
So it was clear that MobileMe needed to be replaced by a more reliable internet service
as soon as possible.
And that’s exactly what Apple did in 2011 with iCloud, which offered 5GB of cloud storage
for free, and options for higher amounts of storage for a monthly fee that was significantly
lower than the previous $99 price tag of MobileMe.
And if you own an iPhone today, you’re probably familiar with iCloud and how successful it
has become for Apple.
But this is just one subscription service Apple offers.
They added a second in 2015 called Apple Music which I’m sure most of you are familiar
with.
And I should mention that the iTunes Music Store is still around, and you can still purchase
music through it.
But it has become a much less popular way to access music than previously.
So iCloud and Apple Music are two of Apple’s largest subscription services, but there is
one more program Apple offers that pretty much functions exactly like a subscription
service, and that is the iPhone Upgrade Program.
With it, users pay a monthly fee for an iPhone of their choice for twelve months.
Today, the cheapest iPhone XR costs $37.41 a month, while the most expensive iPhone XS
max costs $68.66 a month.
And this can actually add up to a pretty good deal since the twelve-month cost of ownership
of an iPhone XS Max would come out to $823.92 instead of the retail price of $1449.
Saving you about $625.
But this program is only a good deal for those customers who upgrade to the newest iPhone
every year.
Because if you purchase the most expensive iPhone XS Max and kept it for two years instead
of just one, you’d be saving about $200 in monthly payments.
And the savings only grow from there if you were to keep the device for three or even
four years.
And this upgrade program is a great deal for Apple too, because it keeps customers locked
into the iPhone, preventing them from switching to Android or Windows.
So it’s clear Apple is using subscription services to their advantage while also providing
cost savings to certain types of customers.
But how are other companies in the tech industry integrating subscriptions into their business
model?
Well, Adobe, creator of some the most popular creative applications like Photoshop and Illustrator,
introduced a subscription service in 2011 called 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 features to their software like cloud syncing, there
were many angry customers who feared being locked into perpetual monthly payments to
Adobe for the rest of their creative careers.
Because if you think about it, subscription services like Apple Music and Adobe Creative
Cloud is essentially the same as renting.
You never own your music and you never own your copy of Photoshop.
You’re obligated to continue paying for the service in perpetuity, and if you don’t,
you lose everything.
Your music collection disappears and all of the Photoshop files you created can’t even
be opened anymore.
And this is one of the biggest problems with subscription services, and the biggest reason
why so many customers were opposed to Adobe changing their business model from selling
individual licenses of their software, to selling temporary access to their software.
But as I said before, there are benefits to this model, since Adobe can update their software
more frequently and more customers can afford to use the software since they’re paying
a low monthly fee instead of a large upfront cost.
But Adobe isn’t the only large software company to adopt the subscription business
model.
Microsoft did the same thing in 2011 with Office 365.
As you probably know, Word, Excel, and PowerPoint are the most widely used applications for
word processing, creating spreadsheet, and building slideshows.
And those applications used to only be available in Microsoft’s Office Suite that users could
purchase for $149.
But Office 365 offers access to those applications and more from just $69.99 a year.
And because the service is web-based, users can access and edit their documents across
devices and rest assured that their work is always backed up on Microsoft’s cloud.
Now reception to Office 365 was much more positive than Adobe’s Creative Cloud, and
a major reason why is Microsoft continued to offer the latest versions of Word, Excel,
and PowerPoint for purchase as individual licenses.
Instead of forcing users to use their Office 365 cloud service.
Something Adobe failed to do.
Now let’s reflect on whether or not the wide adoption of subscription services is
a positive or negative thing for us consumers.
Because on one hand, services like Spotify and Apple Music are extremely convenient since
they allows us to listen to all the music we want, wherever we want, for a reasonable
monthly price.
Compare this to purchasing music.
Buying just one album from the iTunes Music Store could cost ten dollars or more, and
considering most people own hundreds of albums, the cost of owning music could easily reach
thousands of dollars.
And not many people could afford to spend that much on songs, so music piracy became
a widespread issue.
And if you did pirate songs, the process was pretty long and arduous.
You had to have a BitTorrent client, locate the correct torrent, download it, and manage
the downloaded songs inside iTunes or some other digital music application.
And a lot of the time, the music you pirated didn’t include any metadata like the the
artist, release year, or album artwork.
So if you wanted the best listening experience possible, you had to manually input that data
yourself.
Which took even more time.
So you can imagine that when Spotify hit the US market in 2011, it totally changed the
way everyone not only listened to music, but accessed and managed music.
And I think having temporary access to music through a streaming service is actually a
better deal than owning and managing your own music library.
Mainly because streaming services like Spotify and Apple Music save you so much time when
it comes to accessing, managing, and even discovering new music.
But I should add that the value of any subscription service depends heavily on the behavior of
each specific user.
If you already own a huge music library that’s available locally on your devices and you
discover new music through radio, then maybe Apple Music or Spotify isn’t a good deal
for you.
If you already own the Adobe applications you need and you aren’t concerned about
new features or updates, then maybe Adobe’s Creative Cloud would just be a waste of money.
And if you don’t already buy a new iPhone every year then the iPhone Upgrade Program
probably isn’t the best choice either.
So it’s hard to say whether or not this huge shift to subscription services is a good
or bad thing for customers, although I think in the long run it’ll end up being more
of a positive thing for the majority of people.
But its up to you to realistically weight the pros and cons of each service and decide
for yourself if it’s a good investment or just money down the drain.
So that was a closer look at the rise of subscription services, and if you want to vote for the
next video topic, don’t forget to subscribe.
Thanks for watching, and I’ll see you next time.