Flaws in the subscription model?

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joden
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2015/01/29 14:25:03 (permalink)
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Flaws in the subscription model?

Yes indeed. I can see no justification (other than a money grab) for CW charging an extra $30 for those folks who cannot afford to pay the full amount up-front. It is equal to about 20% and in these days of low interest rates I believe it is excessive and yes, price gouging.
I have seen NO justification coming from CW in any of the FEW threads that have raised this issue. I can pretty safely surmise it does NOT cost CW $30 extra per licence for people to pay monthly instead of a lump sum.
I believe in fairness and this premium for monthly payments is not fair at all. If and I say IF there is some sort of administration overhead (and with computer accounting, I can not understand where this would be) then a small surcharge of a couple of dollars once, say in the first months premium, would cover it I would imagine.
 
For the record, I paid for mine upfront in total.
 
So open question to CW - What is your justification for the additional exorbitant (IMO)  charge?
 
PS: I wonder how long it will be before this is locked?  Or booted to some obscure forum. Seems any  dissent (particularly over the subscription model - minor or otherwise) is being hammered by admins. 
 
post edited by joden - 2015/01/29 14:44:00
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    smallstonefan
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    Re: Flaws in the subscription model? 2015/01/29 14:47:00 (permalink)
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    I'm not sure they need a justification. I can tell you that when you take payments, it alters your cash flow. Strategy (partnerships, hiring, product dev, etc.) is wrapped around cash flow... To my knowledge, they never offered payments in the past, o they have added a new payment method for folks that want it. They decided how much of a premium they wanted to get in order to feel comfortable adjusting their cash flow. Too much, and no one takes advantage of it. Too low, and everyone goes payments and they lose the big bump from up-front revenue.
     
    I suspect part of the decision was based on controlling the amount of purchases vs. the subscriptions so they get a mix they can budget and plan around.
    #2
    Karyn
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    Re: Flaws in the subscription model? 2015/01/29 14:51:35 (permalink)
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    Disent is no problem, but we will jump on incorrect facts.
     
    Btw, as you guessed this is being moved, but only to the correct place for questions about purchasing.

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    dubdisciple
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    Re: Flaws in the subscription model? 2015/01/29 14:52:35 (permalink)
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    There are not many industries that offer a paymment plan that do so completely interest or fee free. Do you go to car forums and complain about the interest you pay for a car that deprecates in value the moment it leaves the lot?  It goes without saying that just about any company that allows you to walk off with 100% of the product at a fraction of the full price up front is going to take a little extra for their trouble.  If they lock this thread, I don't  blame them because this is one of the most unreasonable rants I have seen yet.
    #4
    Splat
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    Re: Flaws in the subscription model? 2015/01/29 14:57:16 (permalink)
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    $30 for collecting 12 payments and cost of interest seems reasonable enough to me. If it's too expensive get a bank loan maybe that will be more reasonable....
     
    Remember last month this option didn't even exist. Are you suggesting that Cakewalk should withdraw the monthly payment scheme and just make people pay 12 months, so that people who can afford to pay monthly (but not yearly) can't pay for it?
     
    Screwy logic... As far as I'm aware Cakewalk is not a registered charity.

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    joden
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    Re: Flaws in the subscription model? 2015/01/29 15:04:33 (permalink)
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    dubdisciple
    There are not many industries that offer a paymment plan that do so completely interest or fee free. Do you go to car forums and complain about the interest you pay for a car that deprecates in value the moment it leaves the lot?  It goes without saying that just about any company that allows you to walk off with 100% of the product at a fraction of the full price up front is going to take a little extra for their trouble.  If they lock this thread, I don't  blame them because this is one of the most unreasonable rants I have seen yet.




    Well it is not a rant at all, a simple question. And yes 20% is exorbitant - where did I say there should be NO charge?
     
    Most accounting these days is automatic via computer software and monthly/annual would see no real difference in these costs, however it is understandable that the vendor would see a drop in lump sum cash and perhaps a small premium is justified for the  "privilege" of monthly payments. All I am saying is it is rather high.
     
    TBH a lot of businesses prefer a regular supply of cash, rather than a once a year amount. Further, it enhances the prospect of keeping a customer, who could "fall by the wayside" over the course of a year. 
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    AT
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    Re: Flaws in the subscription model? 2015/01/29 15:10:21 (permalink)
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    Joden,
     
    Great thing about free enterprise, if you can build a better mousetrap, they will come. Start your own bank and lend at only 18% and you can advertise to SONAR users "save 10%."  But of course that is about the average rate of a high-interest credit card.  At Bank of America and others, you can pay the minimum for the next 10 years and 10 X the interest.  At least the Bank of SONAR makes you pay the principal in 12 installments, so you own the software. They'll even let you stop and pick back up.  Some other guys, you miss the payment and you break a knee.
     
    The best thing is to have good credit, and you can get a card at 0% for 18 months w/ a 3% "transfer" fee.  It is what all the smart people are doing.  Then you don't have to worry about Cakewalk's usurious rate or broken knees.
     
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    dubdisciple
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    Re: Flaws in the subscription model? 2015/01/29 15:45:58 (permalink)
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    joden
    dubdisciple
    There are not many industries that offer a paymment plan that do so completely interest or fee free. Do you go to car forums and complain about the interest you pay for a car that deprecates in value the moment it leaves the lot?  It goes without saying that just about any company that allows you to walk off with 100% of the product at a fraction of the full price up front is going to take a little extra for their trouble.  If they lock this thread, I don't  blame them because this is one of the most unreasonable rants I have seen yet.




    Well it is not a rant at all, a simple question. And yes 20% is exorbitant - where did I say there should be NO charge?
     
    Most accounting these days is automatic via computer software and monthly/annual would see no real difference in these costs, however it is understandable that the vendor would see a drop in lump sum cash and perhaps a small premium is justified for the  "privilege" of monthly payments. All I am saying is it is rather high.
     
    TBH a lot of businesses prefer a regular supply of cash, rather than a once a year amount. Further, it enhances the prospect of keeping a customer, who could "fall by the wayside" over the course of a year. 


    One , preceding  your loaded question with questionable statements is hardly a "simple question".  The fact that you suspected your original "simple question" was inflammatory enough to be locked speaks volumes to the fact that it was anything but simple. 
     
    Two, your premkse is still deeply flawed and boils down to nothing more than "I don't  like the model". You claim 20% is exorbitant,  but give nothing to support such a claim. If we are to look at similar scenarios where people pay as they go with no credit check, you will 20% is on the low end. Take a look at places like rent-a-center or the now revived fingerhut and you will rates that end up well over 30%. Getting a full product in your hands whioe payimg monthly fees is rarely done without high interest rates. I can think of few exceptions, with Musicians Friend's old interest free policy (abandoned after being acquired by guitar center ) being the last major one I can recall. Show me where it is normal to pay off in 12 months for less than 20% without a credit check and I will gladly concede. Otherwise, yes, your post was a rant and completely unreasonable.
    #8
    rontarrant
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    Re: Flaws in the subscription model? 2015/01/29 15:58:54 (permalink)
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    joden
    Yes indeed. I can see no justification (other than a money grab) for CW charging an extra $30 for those folks who cannot afford to pay the full amount up-front.

    They're taking a risk. Some won't stay the whole year for whatever reason.
     
    I think they're quite justified. Take a look at the interest charged by your credit card company and make a comparison.

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    Jimbo 88
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    Re: Flaws in the subscription model? 2015/01/29 16:04:33 (permalink)
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    I'm not totally against what the OP is saying, but.....there are ways to get free financing.  Sweetwater and Paypal both have deals and I have not even looked so I'm betting there are more at other places.
     
    To be honest, ...yes... you are silly to pay the monthly fee to cake when you could pay the whole up front and finance the purchase much cheaper elsewhere.
     
     

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    #10
    paulo
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    Re: Flaws in the subscription model? 2015/01/29 16:46:43 (permalink)
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    Those that cant afford to pay up front are always penalised as has been said so CW is not unique in this and at the end of the day everyone has the choice to take the sting or not. What does annoy me is the attempts by some here  to say that it isn't a premium for monthly, but a discount for those paying up front. Erm no, the up front is the same as last year for now and about to increase again following a hefty increase last time too. FWIW I thought the increase last year was good value and was happy to pay it for what I got in return. This time I don't see enough to make me want it.
    #11
    KPerry
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    Re: Flaws in the subscription model? 2015/01/29 16:48:47 (permalink)
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    Building or buying and integrating a subscription management system isn't free: considering it has to tie in with the Command Center, it could be quite expensive.

    And it is a risk, as this is a new model in DAW software, so it's not unreasonable for there to be a modest extra cost. And it is pretty modest at only a couple of dollars per month!
    #12
    slartabartfast
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    Re: Flaws in the subscription model? 2015/01/29 16:57:15 (permalink)
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    Well if you have good credit, and a credit card, then you are probably better off buying it lump sum on your card, and sending the interest to your lender, instead of the higher price to Cakewalk. That is the risk Cakewalk takes by offering a two tier pricing plan with a significant difference in the prices. The risk your rant misses is that if you cannot keep up the payments on the time payment plan for 12 months, you end up with nothing.
     
    Has it ever been clearly stated that it is 12 consecutive payments to a full perpetual license/permanent activation? If you miss a few payments but total 12 eventually, do you get a permanent Sonar?
    #13
    Sanderxpander
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    Re: Flaws in the subscription model? 2015/01/29 17:01:27 (permalink)
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    Rather than "extra money" for the monthly, I see it as a discount for those willing to commit to twelve months in one go. It gives CW more financial security so they have to make it attractive.

    Regardless, just don't get the monthly if you don't think it's a good deal.
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    BobF
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    Re: Flaws in the subscription model? 2015/01/29 17:17:37 (permalink)
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    joden
    dubdisciple
    There are not many industries that offer a paymment plan that do so completely interest or fee free. Do you go to car forums and complain about the interest you pay for a car that deprecates in value the moment it leaves the lot?  It goes without saying that just about any company that allows you to walk off with 100% of the product at a fraction of the full price up front is going to take a little extra for their trouble.  If they lock this thread, I don't  blame them because this is one of the most unreasonable rants I have seen yet.




    Well it is not a rant at all, a simple question. And yes 20% is exorbitant - where did I say there should be NO charge?
     
    Most accounting these days is automatic via computer software and monthly/annual would see no real difference in these costs, however it is understandable that the vendor would see a drop in lump sum cash and perhaps a small premium is justified for the  "privilege" of monthly payments. All I am saying is it is rather high.
     
    TBH a lot of businesses prefer a regular supply of cash, rather than a once a year amount. Further, it enhances the prospect of keeping a customer, who could "fall by the wayside" over the course of a year. 




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    BlixYZ
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    Re: Flaws in the subscription model? 2015/01/29 17:33:27 (permalink)
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    It's a bargain either way.  Sonar is a bargain.  It's too cheap in my opinion.  That's why they offer the lower tiers of products.  The full product does everything a million dollar studio did 20 years ago (plus alot more).  
     
    I don't think these are all trolls, I just think they are unreasonable, and spoiled.  
    One good mic can cost $2k easily, but the software that makes it all happen is too much at $150?  (upgrade)
    In conclusion, no one is forced to buy Sonar.  If you think it's too much, you're entitled to your opinion.  Don't buy it.  But don't expect to say it's a ripoff without some healthy push-back.  
    other things you can buy for $150:
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    OR a full featured recording studio for your computer, complete with processing and instruments.

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    #16
    Splat
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    Re: Flaws in the subscription model? 2015/01/29 20:00:49 (permalink)
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    joden
     
    Well it is not a rant at all, a simple question. And yes 20% is exorbitant - where did I say there should be NO charge?
     
    Most accounting these days is automatic via computer software and monthly/annual would see no real difference in these costs, however it is understandable that the vendor would see a drop in lump sum cash and perhaps a small premium is justified for the  "privilege" of monthly payments. All I am saying is it is rather high.
     
    TBH a lot of businesses prefer a regular supply of cash, rather than a once a year amount. Further, it enhances the prospect of keeping a customer, who could "fall by the wayside" over the course of a year. 



    I disagree it is high, it's the going rate...
    Regardless, this is wrong because?
     
    If it's too expensive don't buy it. Spend money feeding you multiple wives and children instead on the breadline.. Buy an old cassette recorder.

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    #17
    Anderton
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    Re: Flaws in the subscription model? 2015/01/29 20:18:40 (permalink)
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    joden
    All I am saying is it is rather high.



    Today's rate for balance transfer cards: 15.90%
    Today's rate for cash back cards: 16.43%
    Today's rate for low interest cards: 11.16%
    Today's rate for all variable rate cards: 15.70%
    Instant approval cards: about 28%
    Bad credit: >22%
     
    Interest rates are rising compared to last week. Cakewalk lets you lock in to a fixed rate regardless of what happens in the real world. That could be good, or could be bad. No one knows. Cakewalk doesn't know.
     
    The rates listed above are from financial institutions, who presumably have the expertise, computer power, and staffing to handle these kinds of issues expeditiously. Compared to them, especially cards with instant approval (isn't that Cakewalk's model?) 20% seems far from exorbitant. Also, you're overlooking that users get to use software without functional limitations without having paid for all of it.
     
    People have a choice. If they don't like 20%, they can pay with a credit card that has a lower interest rate, borrow the money from a relative, etc. Or they can pay upfront.  
     

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    Drone7
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    Re: Flaws in the subscription model? 2015/01/29 22:34:01 (permalink)
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    Anderton
    joden
    All I am saying is it is rather high.



    Today's rate for balance transfer cards: 15.90%
    Today's rate for cash back cards: 16.43%
    Today's rate for low interest cards: 11.16%
    Today's rate for all variable rate cards: 15.70%
    Instant approval cards: about 28%
    Bad credit: >22%
     
    Interest rates are rising compared to last week. Cakewalk lets you lock in to a fixed rate regardless of what happens in the real world. That could be good, or could be bad. No one knows. Cakewalk doesn't know.
     
    The rates listed above are from financial institutions, who presumably have the expertise, computer power, and staffing to handle these kinds of issues expeditiously. Compared to them, especially cards with instant approval (isn't that Cakewalk's model?) 20% seems far from exorbitant. Also, you're overlooking that users get to use software without functional limitations without having paid for all of it.
     
    People have a choice. If they don't like 20%, they can pay with a credit card that has a lower interest rate, borrow the money from a relative, etc. Or they can pay upfront.  
     




    I was onboard with the OP until reading Craig's post, and now i agree with Craig, he has revealed another whole angle on the matter that i simply have to agree with. 
    #19
    joden
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    Re: Flaws in the subscription model? 2015/01/30 00:46:59 (permalink)
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    Sanderxpander
    Rather than "extra money" for the monthly, I see it as a discount for those willing to commit to twelve months in one go. It gives CW more financial security so they have to make it attractive.

    Regardless, just don't get the monthly if you don't think it's a good deal.



    As I wrote way back in the OP, I did buy using the full upfront payment.
     
    I am about fairness in thing s and I still think $30 for for someone to buy the same product is too much. As I have also said I am not against CW adding a surcharge for such a service (contrary to what other people try and insinuate -falsely), just the amount.
     
    That others call it a rant is just a lack of arguing skills. It was a simple enough question at the start, and it's a simple enough question now. And no, comparing what CW is doing to credit cards and market interest rates is just silly. I mean no-one is actually borrowing money, and they are paying for the software upfront, not in arrears! So how there is any REAL world cost to CW is still unclear to me.
     
    FWIW I am involved with a few things out here that do have a monthly option, and the premium? 2-5%. for others it is a flat fee charged with the first months payment.
    #20
    dubdisciple
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    Re: Flaws in the subscription model? 2015/01/30 02:25:25 (permalink)
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    They are not paying for the software upfront. being that it has already been established that upfront is full price. Even if you found the comparison to credit cards and market rates "silly", you conveniently ignored the examples that were more analogous like various "rent to own" models that typically charge a higher rate.  You made the claim that the prices were unfair, but you have not shown any reason why except simply restating your position. You will not find many business models that bill the same total upfront as they do monthly payments.
    #21
    smallstonefan
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    Re: Flaws in the subscription model? 2015/01/30 13:02:57 (permalink)
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    Sorry if this is slightly OT, but I've seen so many posts where people are ranting about monthly models without really understanding the reason why companies are moving to them, and why they HAVE to move to them if they are run properly.
     
    So, in a <pure> environment, Cakewalk would want EVERYONE on subscription with a high renewal rate as opposed to paying up front. Why you ask? Let me tell you... :)
     
    Whether anyone likes it or not, the ultimate purpose of a business is to provide value to shareholders. In fact, the job description of a CEO could be written simply as "Increase shareholder value". That said, how does a software company become more valuable? There are a number of different ways to value a software company. With Cakewalk's old model where everyone pays up front, it's not uncommon to see valuation as a small multiple of EBITA (earnings before interest and taxes). A company doing $6.5MM in revenue, for example, might only turn a profit of $500k (or might not turn any profit). In the case of a $500k profit, a 3x multiple yields a value of $1.5MM for the company. This is true because the new owners don't really care about past purchases - there is no guarantee of future purchases so the past is nulled out.
     
    The way a software company gets a big valuation is to have a recurring revenue stream. The monthly payments that members are paying on this new plan count as (type of) recurring revenue stream (renewal rates will play a factor, but let's leave those out at the moment). So the same software company doing $6.5MM in revenue but that has a recurring model is worth more. The way recurring works (typically) is that you see a multiple based off run rate. Run rate is simply the current month's recurring revenue times 12 months. It doesn't matter if you were only pulling in $100k a month every month before this current month, if this month you managed to have $200k in recurring you take that $200k times twelve, and THEN you apply the multiple. That multiple will often be 3 to 6 times revenue, depending on a number of factors. So, the same software company having the same $6.5MM in top live revenue, but doing $200k a month of that in recurring is worth $7.2MM at a 3x multiple of the recurring run rate. Big big big difference.
     
    I suspect that if Cakewalk could have EVERYONE on monthly payments tomorrow they would like that - I know I would if I were them. :) That said, you still have the cash flow issue I talked about earlier. Imagine running a business where this month you now bring in 1/12th of the cash you usually bring in because everyone signs up monthly instead of paying up front - you have a problem. Again, this is part of the reason for the additional cost to go monthly - Cakewalk would really struggle if EVERYONE chose this option.
     
    Now, Cakewalk's subscription plan is not true SaaS (Software as a Service) - in other words it's not a rental program. That does change the equation and makes the renewal rate very important. Programs where you pay a monthly fee and the software shuts off if you stop (I believe that's Adobe's new model from what I've heard) are pure SaaS  and that's the way to get the big multiples, and that's why everyone wants to move there. Recurring revenue = bigger company valuation. Most start-ups are using SaaS, and older companies are trying to figure out how to get to Saas. This will not change. Sometimes it sucks, but it's something we have to adjust to.
     
    What I'm trying to say in essence, is this is far bigger than some seemingly arbitrary interest rate.
     
    Don't forget - you can always vote with your wallet! :)
     
     
     
    #22
    Anderton
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    Re: Flaws in the subscription model? 2015/01/30 17:18:18 (permalink)
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    joden
    And no, comparing what CW is doing to credit cards and market interest rates is just silly.

     
    Well, what would be a better comparison?
     
    If you buy Platinum from Cakewalk, you're essentially borrowing $499 from Cakewalk to get something now that you will pay off in the future.
     
    If you buy Platinum using a credit card, you're essentially borrowing $499 from the bank to get something now that you will pay off in the future.
     
    I mean no-one is actually borrowing money

     
    Money is a MEDIUM OF EXCHANGE. You exchange MONEY FOR GOODS. If you think that using the full version of SONAR without paying full price has no value, then Cakewalk should just give it away for free because it has no value. For example Cakewalk assigns SONAR Platinum a value of $499. Either you borrow that $499 from Cakewalk and pay them back, from a bank via credit card and pay them back, or from a friend and pay them back. Or you pay upfront if you don't want to borrow money.
     
    and they are paying for the software upfront, not in arrears! So how there is any REAL world cost to CW is still unclear to me.

     
    There are accounting and credit card servicing costs that come into play. For example suppose your credit card expires in the middle of the membership. Your payment gets returned. Someone has to get on the phone with you and get the new credit card number and enter that into the system. Or someone might skip a payment and try to ask not to be kicked out of the program because they were in the hospital. They'll take time from a paid human being on a phone or dealing with emails.
     
    That's not all. Credit card companies charge a percentage for each transaction, but they also charge an "inquiry fee" for every transaction in addition to the percentage. The fee varies depending on the type of transaction. Obviously, a 12-time payment system requires 12 inquiry fees as opposed to one fee. It's not much, certainly not $30 a year, but all the issues I've mentioned are real-world costs.
     
    Also, companies use pricing ALL THE TIME to accomplish specific goals. For example, cars go down in price just before the new model year is introduced. Sales occur to boost demand. When demand exceeded supply for ADATs, music stores sold ADATs above list price to tamp down demand that they couldn't fulfill. If people have an incentive to pay upfront, that gives Cakewalk more money to hire people to make the Membership program more awesomely awesome  in the year ahead
     
    Finally, it's a question of perspective. Suppose Cakewalk said the price of the update was $179, but if you pay upfront, you get a DISCOUNT of $30. Would it be proper to say that the discount is excessively generous to people who pay upfront?
     

    The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!
    #23
    Anderton
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    Re: Flaws in the subscription model? 2015/01/30 17:22:06 (permalink)
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    smallstonefan
    Sorry if this is slightly OT, but I've seen so many posts where people are ranting about monthly models without really understanding the reason why companies are moving to them, and why they HAVE to move to them if they are run properly...



     
    There's going to be an opening for Secretary of the Treasury soon. I'd take you over the others just because of the post you made 

    The first 3 books in "The Musician's Guide to Home Recording" series are available from Hal Leonard and http://www.reverb.com. Listen to my music on http://www.YouTube.com/thecraiganderton, and visit http://www.craiganderton.com. Thanks!
    #24
    smallstonefan
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    Re: Flaws in the subscription model? 2015/01/31 10:52:55 (permalink)
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    LOL thanks Craig! Too bad I'm allergic to politics! 
    #25
    rebel007
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    Re: Flaws in the subscription model? 2015/02/10 08:07:28 (permalink)
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    If you live in Australia, the upgrade will cost you $175.00 at the moment, even though the official exchange rate, according to the market, should make it closer to $165.00.
    If I pay by credit card I can save approximately $4.00 because my bank will give me a slightly better deal, but I don't use my credit card over the internet. So I'm using PayPal and they just make up their own version of the exchange rate. Is it Cakewalks fault that I'm being charged more by using PayPal. Who checks that stuff anyway.
    If Cakewalk had brought out Platinum last year when the exchange rate was the other way round, I would have paid closer to $145.00 up front for the upgrade. Should I berate Cakewalk for being so slow to bring their software to market, or consider myself lucky that X3 lasted 18 months before the next update came around and I got more than my money's worth before I was forced to upgrade (did I say forced, I mean I just had to have the latest version).
    Hang on, when I purchase monthly, does each payment follow the exchange rate, going up and down with the whims of banks, or do the 12 monthly payments stay the same as when I made the original purchase. The exchange rate is slowly going in favour of the US at the moment, so I could see myself paying closer to $250.00 if I went the 12 month payment option and my payments varied each month.
    In Australia's defence, the minimum wage is over $10 per hour more than the US at the moment, so the average US citizen should be lobbying their employers for a better wage deal and then they would be able to afford more software more often anyway. So I'm just going to suck it up and consider myself lucky that I really should be able to upgrade my DAW software at least 5 times a year more often than the average US musician.
    Actually, don't even get me started on the financial plights of the average musician, I could cite a case for free software for 99,8% of musicians without raising a sweat.
     

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    #26
    silbay
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    Re: Flaws in the subscription model? 2015/02/10 22:27:59 (permalink)
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    Have to laugh at the ignorant uninformed uneducated responses to the OP on here.
     
    CW is taking NO RISK with the 12 mo payment plan since if you don't pay the whole amount you own NOTHING that will work after 12 months!!
     
    Check out Microsoft and Adobe and get back to me on their markup...might surprise you what large companies actually do when they are NOT having to finance ANYTHING with any of their MONEY!!
     
    Love fawnboyz, they are what make the whole internet a hoot, reading their blind support for a company.
    #27
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