The Trouble with Subscriptions

I'm considering establishing a new ground rule for myself and my company: "No Subscriptions". I feel uncomfortable about getting charged for something every month even though I hardly use it. It's not necessarily the amount that bothers me; it's the mindset of being okay with it that feels troublesome.

You start out with one or two seemingly harmless subscriptions, telling yourself, "Even if I use it 2-3 times a month, it'll justify the cost." It's hard to argue with that, because it's true. This line of argument then becomes a mental shortcut, so whenever you encounter a new product or service that requires a subscription, you justify it without much thought and sign up.

Soon enough, you end up with dozens of subscriptions, each for a seemingly insignificant amount compared to the value you can derive from it. Together, however, they add up to a significant portion of your monthly expenses. I've encountered this both in my personal life and as a business owner.

In the latter case, it's much worse because you're paying more per employee as you buy new subscriptions and more per product or service as the size of your team grows. You are locked into each product because of the data it holds, and you're forced to buy new seats because there's no other way for new employees to access that data. That's the reason enterprise SaaS (software-as-a-service) startups grow quickly and are able to raise lots of money. Once they acquire a customer, they essentially have them for life, and the revenue per customer generally increases over time.

So, what's wrong with subscriptions? It starts with the original line of reasoning: "Even if I use it 2-3 times a month, it'll justify the cost." Let's break that down. The first part, "if I use it 2-3 times a month...", assumes that the product will be used regularly. And while that's true when you're buying the subscription, it generally stops being true a few months later. As time passes, the nature of your work changes, your priorities shift, and you use different tools, but the original subscription remains.

As humans, we find it difficult to anticipate changes in the future. We assume that we will continue to do the same things that we're doing today in the future. Companies understand this, and they exploit it by offering discounts on annual subscriptions. That's how you end with dozens of subscriptions, many of which you hardly ever use. You can use only a limited number of tools meaningfully in a day, or even a month. Here's a question you can ask before buying a subscription: "If I could only use five tools in a week, would this be one of them?" If not, it's probably not worth subscribing to it.

The second part of the original line of reasoning, "'ll justify the cost," is also based on a false assumption. While using the product just a few times a month might offer more value than what it costs in that particular month, it doesn't account for the product's cost over the lifetime of the subscription. Subscriptions are easy to sign up for but notoriously difficult to cancel for various reasons.

The first reason, and probably the most important, is that you simply forget you're paying. Your credit card is charged automatically every month. You're busy and don't have the time to review every minor expense. You're not even using the tool, so it never strikes you that you're getting charged for it, and you should cancel the subscription.

If you had to pay for each subscription every month manually, you'd renew far fewer subscriptions. Defaults are powerful, and companies realize that. If you can get charged without your explicit approval, you probably will. On the contrary, if you can't get charged without your explicit approval, you probably won't.

Here's a trick I like to use: Whenever I buy a subscription, I also cancel it immediately. This way, I have access to it for a month, and at the end of the month, I can choose to renew it if it's still useful and cancel immediately again. It's a minor inconvenience, but isn't something you're paying for worth at least a few seconds of consideration every month?

Another reason subscriptions are difficult to cancel is because of the information and data stored within the product. You're afraid you might lose access to something important or valuable if you cancel, and products often call this out explicitly when you try to cancel.

The fear of losing something important is difficult to overcome because it's not unfounded. Every product you subscribe to almost certainly has something you wouldn't want to lose access to. Sometimes, you can export the data, but many times, you can't. And even when you can, sifting through the exported data and finding what you need is difficult.

Unfortunately, there's no good solution here. As humans, we experience a natural aversion to loss, even for things that are not all that important. If you want to cancel a subscription, you'll have to bite the bullet and risk losing some important information.

Here's an exercise that can make it easier: Set aside 30 minutes and try to find or recall everything you'd like to back up before cancellation. If you can't find or recall something, it's either unimportant or you won't be able to find it anyway, even if you stay subscribed.

When you consider how difficult it is to let go of a subscription, you realize that you're effectively paying 3-10 times the monthly cost for the period you're actively using the service. Besides, you are also paying the opportunity cost of not being able to use or evaluate other services that might solve the same problem more effectively or at a lower cost.

It's probably wise to rephrase the original reasoning, "Even if I use it 2-3 times a month, it'll justify the cost", to "I'm probably going to stop using this after a while, but I'll keep paying for a long time." A good rule of thumb is to assume that you will use the product for three months but pay for it for two years and ask yourself if it's still worth the cost. A $10 monthly subscription will cost you $240 for three months of actual usage.

All said and done, it's still highly unlikely that anyone (including me) can do without any subscriptions at all. There are some products and services you will use regularly, although not as many as you might believe. But if you're not careful (which is likely), your expenses can quickly spiral out of control, especially as more products move to subscription-based pricing.

So what's the solution? Here's an idea: use a dedicated credit card for subscriptions and set an overall monthly budget so you can't get charged beyond a certain amount. If you want to buy a new subscription that will cause you to exceed the budget, something else has to go. There's a limited number of tools you can use regularly, so the amount of money you spend on them should also be limited.

I want to reiterate that it's not about the actual amount you're paying but the mindset of getting charged without thinking about it, which I have a problem with. As a business, this also extends to cloud computing costs, which are often orders of magnitude higher than software costs and have become a significant source of worry for startups and large companies in recent years.

The solution for controlling cloud costs is the same: don't pay for what you don't use. Set a budget, and let go of everything that doesn't fit within that budget. Most companies can cut their cloud costs by at least 80%, and we've done so. Cutting software and cloud costs also improves unit economics, and companies can often pass on the gains to their customers.

In the spirit of experimentation, I will attempt to get rid of all subscriptions, both in my personal life and my business, and switch to products or modes of payment that require my explicit approval every month. Let's see how it goes!