I do not know for sure the reasons for JetBrains to introduce subscriptions in the first place, but judging just by the price points, it does not look like an attempt to capture a new market segment to me. It is more likely that they have noticed a slowdown in recurring revenue growth, because of more and more customers taking longer and longer pauses between upgrades. As any vendor of a mature professional software product can attest, such behavior is quite natural when your product already does everything that all but its most advanced users need, and does it well enough. A switchover to a subscription model can definitely stabilize the cash flow in such a case, but a vendor offending its customer base in the process risks stabilizing well below the last few years average…
If my assumption above is correct, here is what I would have done.
Of all JetBrains desktop products, I am somewhat familiar only with IntelliJ IDEA in its Community Edition form, which I use for my Scala exercises. For simplicity, I will therefore only consider the pricing of IntelliJ IDEA Personal Licenses.
As I write this, you can still buy a new perpetual IntelliJ IDEA Personal License license with one year of free upgrades for $199, or upgrade an old one for $99, presumably getting one year of free upgrades as well.
Now, if I was tasked with price positioning the upcoming IntelliJ IDEA Personal Subscription Plan, and if that plan was what we wanted to sell the most to both new and existing customers, here is what my first proposal could have looked like:
- Perpetual licenses stay in place and come bundled with a year of upgrades, as before, but the price of a new perpetual license bumps up to $299.
- The upgrade price does not change, i.e. stays at $99.
- Subscription is priced at $8.90/month, or $89/year for new customers, and $69/year for anyone owning a perpetual license for any version released in pre-subscription times.
What does this accomplish? First, a new perpetual license now looks much less attractive price-wise compared to a subscription not only to those who plan to upgrade regularly, but even to those who plan to upgrade once every two years (prices rounded up for the sake of hiding the insignificant digits from view, time value of money not taken into account):
Total Costs Year Back-to-back Lagged Subscription 1 $300 $300 $90 2 $400 $300 $180 3 $500 $400 $270 4 $600 $400 $360 5 $700 $500 $450 6 $800 $500 $540 7 $900 $600 $630 8 $1,000 $600 $720 9 $1,100 $700 $810 10 $1,200 $700 $900
Second, no change whatsoever is enforced on the existing customers — they can keep upgrading their perpetual licenses whenever they want at the same price, or, if they always upgraded without lags and/or plan to do so in the future, switch over and start saving.
Third, as it is actually more important than you might think at first, the price of the (annual) subscription being less than the price of the annual upgrade reinforces the perception of the former as of the cheaper option, the perception originally created by the absence of a one-time upfront payment.
As for timing, I think it would be a good idea to introduce subscriptions when releasing a new major version, but only announce the future price hike for new licenses at that point, giving the existing prospects enough time to make a choice, along with an incentive to actually make that choice and act soon.
Does this plan appeal to you? What option would you choose? Let me know in the comments.
P.S. If you are interested in the topic of software pricing, check out the free e-book Don’t Just Roll The Dice by Neil Davidson.