Why Are Software Subscription Models Falling Flat? Customer Value Uncertainty Plays a Key Role
Because software can be used repeatedly without diminishing its value, standard economic theory treats it like a durable good. A conventional durable-goods vendor can optimize its profits by prioritizing subscription-based pricing. But software behaves differently than standard theory would suggest. Although durable-goods theory holds that software vendors should operate under a subscription model, in practice subscriptions have not shown clear advantages over the perpetual licensing model, even as its popularity continues to rise.