The Cost of Software

The first piece of software I ever remember wanting was Fifa 98. I was in primary school and into gaming. I asked my parents to buy me a copy, and they eventually did. It was a magical experience. The unboxing. Inserting the CD into the CD drive, and watching the progress bar while waiting for the installation to finish on our Windows 98 computer at home. I think it may have cost R300 or so at the time. Later on, I got bored of it. So I swapped it for Sim City with my neighbour. The folly was only realised later.

When we got our first computer at home in the early 1990s, software was distributed using these large 5 and a quarter inch floppy disks. It took several disks to install one application, with prompts on the screen such as “Please insert disk 3 of 5”. Later, there was the smaller 3.5 inch “stiffy” disk as we called them. CDs and DVDs took over from them until fast internet speeds and connectivity were ubiquitous enough that software could be installed online.

The nature of each of these methods of distributions lent themselves to different pricing models. The physical devices from which one installed new software lent itself to a once-off purchase with lifetime ownership of the software. You would buy your copy of Microsoft Office 2000, and keep it forever (or until you need to save new docx files). On the other hand, the internet allowed for continuous updates of software, which lent itself to a subscription model. You pay as you use the latest features. And you don’t pay, then you don’t use any features.

This works well, as the marginal cost of an additional piece of software is much smaller compared to when one had to fork out a truck-load of money for something they may not eventually want, like was the case of Fifa 98 for me. Currently, I’m paying for the following software subscription services:

  • Spotify
  • Youtube Premium
  • Office 365 Home
  • WordPress
  • Proton Mail
  • Netflix
  • Showmax
  • News24
  • Business Live
  • and probably more which I can’t think of right now.

Each of these was a marginal cost decision without much thought on my total cost of software. But when adding up, it adds up to quite a bit. Questions start arising like “when last did I even watch something on that streaming service?”

Software is then no longer an “investment” from which I’ll continue to get value long after the cost has been made. It has now become a consumption expense for which I continually spend, and when I spend no more, I gain no more. When there are periods of financial hardship like losing a job, or large unexpected expenses and I have to scale back expenses, I then too have to scale back what I’m able to do as I no longer have access to the tools I had before. To quote Dido’s 2003 hit “Life For Rent”:

"But if my life is for rent and I don't learn to buy
Well I deserve nothing more than I get
Cause nothing I have is truly mine"

If the forecasted financial downturn and rising cost of living is realised, many consumer software products that are distributed using subscriptions will also suffer. But maybe this too will be an opportunity for a new and innovating pricing and ownership regime in modern software distribution.

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