Subscription Based Services are Like Pensions

Why I don't care for some subscription-based services.

You have likely noticed how more and more things are "subscription-based" nowadays. That is, you don't necessarily buy things; you rent things. Some examples:

Rather than buying an "Office" suite and keeping it for years, you lease one for a monthly fee.

Rather than buying a smartphone and owning the device, you lease it for a monthly fee with "upgrades" every so often.

Buying and owning music MP3 albums has been replaced by music subscription services.

Even authors have gotten into the act. Some authors are milking a story for 5 or 6 books by having each installment portray only one character's experiences.

For whatever reason, this morning I was thinking that all this is increasing the profits of business at the expense of the consumer.
 For example, I use Microsoft Office 2013. I bought it somewhere around 2013 and haven't paid a dime for it since then. On the other hand, the current offering is "Office 365", which is $10 per month, more for additional computers. Had I done that in 2013, I would have paid $600 to date rather than about $240.
 I do remember from my working days that we all used the 1997 version of Office for years, and our IT group never upgraded to newer versions throughout all that time. In response to this sort of thing, the big software companies saw the light and began to offer "Software as a Service". They wanted customers to pay an ongoing annual fee for software. The stock sites described "SAAS" as a big deal, since it provided "recurring income".
 Recurring income.
 That is the key to all this subscription-based business. This is an ideal way for a company to grow its revenue each year, because the recurring fees accumulate with each new customer added. So if company A has $1 million in new sales for a quarter, but $3 million in recurring income, then their revenue for the quarter is an impressive $4 million. And, the "Cost of Goods Sold" for the recurring income is very small. Thus company A's "Net Income" is much higher.
 While pondering these things it ocurred to me to say "Wait a minute. This is just like a pension!.
 During the market crash of 2008, it became painfully apparent to the big auto companies that they could no longer afford paying pension for retired employees. Paying current staff and at the same time paying people who worked 5, 10, 15 years ago is simply not sustainable. So "defined pensions" became "defined contributions", a clever way to say that workers all became responsible for our own retirement. And somewhere in there companies must have said "Wait. That can work both ways! If we can get our customers to give money to us on a regular basis, we get to be on the receiving side of that income."
 So all these subscription-based services are just like pension, only you are the provider rather than the recipient!

So what might some of this add up to, just out of curiosity. Here's a sample of an average set of subscription-based services:

Subscription-based service Cost per month Notes
Office 365 $10  
iPhone with upgrades $50 (Not including carrier charge)
Amazon Prime $10  
Spotify or Apple music service $10  
Netflix $14 (premium)
Hulu $40 (with "Live TV")
Backblaze computer backup $  5  

So if you have these services, you are paying $1,668 per year. That's your annual "negative pension" that you are paying out each and every year to these corporations.
 I should add, however. that there can be some decent value for some of these services. Amazon Prime, for example, provides free 2-day shipping on "most" items purchased, along with free streaming music, books, and movies. On closer inspection, however, these freebies are a bit limited. Most of the quiet "New Age" music that I like is only partially supported, and If I want to stream this music, there is a "Music Unlimited" service available for an additonal $8 per month!
 I suppose that I simply wish to point out that this increasing shift to subscription-based services strikes me as a permanent and growing "negative pension".

 Along these lines, there are two more recurring expenditures that are even bigger:

If you are leasing a car for $400 per month, your negative pension is $4,800 more, for a total of $6,468 annually.

And if you are renting a house for $1200 per month, your negative pension is $14,400 more, for a total of $20,868 annually.

Copyright © 2018 J.A.