To Rent or not To Rent
Today, I got an email from the company announcing massive price rises for the renewal of 3ds Max permanent license maintenance plans and steep discounts if I agreed to move to subscription (also known as the rental model). This sparked a bit of a discussion on the Autodesk forum. I wrote a comment there, which I’m now publishing below as food for thoughts for anyone who’s now wondering what to do.
Those who have followed this blog for some time know what I think of rental models (see older posts here and here). But what works for me may not work for you. This is not advice on what other Autodesk customers should do but a description of what makes sense for me given my personal circumstances and the price of Autodesk products in my territory. You may well come to a different conclusion. Also, this post is not meant to denigrate or criticize Autodesk and its products. I’ve used Max for many years and I think Max 2016 is an amazing piece of software (unlike 2017, which I could never use because it keeps crashing on me all the time) and I firmly plan on using it for many years to come.
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First off, to make things clear from the outset, from my point-of-view there is zero advantage in moving from maintenance to subscription.
Prices for maintenance, new licences and subscriptions vary from territory to territory, so it’s hard to do the maths for everyone. But for me, the price of a yearly new subscription would be €1,600, which is more than twice what I will be paying to renew my maintenance plan for a year.
What do I get in both situations?
Maintenance plan: Permanent license of 3ds Max 2018; basic support; all updates and patches for a year.
Subscription: The right to use 3ds Max 2018 for a year, after which it will become non-functional; basic support; all updates and patches for a year.
So here’s the proposition: You can either buy a new car, use it for as long as you want, and even resell it on the second-hand market when you no longer need it.
For twice the money, you can rent the same car and use it for a year, after which you can either give it back or pay the same amount again to rent it for another year.
Even Autodesk doesn’t deny this. In today’s email, it lists the advantages of subscriptions as follows: 1. Latest and greatest product capabilities; 2. Access to new industry collections; 3. New and improved support; 4. Simplified administration. Number 1 is not an advantage since it’s also provided by the maintenance plan (despite the wide-spread misunderstanding among financial analysts that it isn’t). Number 2 is hardly an advantage (you can spend even more money to get more products); I’ll leave number 3 to your consideration as all of us have had our experiences with Autodesk support (3ds Max 2017 never worked for me); and number 4 means nothing to me since my administration of 3ds Max is extremely simple: Remember to contact your reseller once year to renew.
Of course, the economics will vary slightly, especially considering the steep announced price hikes for maintenance and the deep discounts for subscription. But even if maintenance and subscription were to cost the same, subscriptions would always remain an inferior proposition by virtue of the fact that you no longer have the possibility to use the software if you stop paying.
Even if you were to consider switching from maintenance to subscription because of the substantial short-term discounts, you may want to reconsider after realizing that these discounts are only available if you agree to give Autodesk the car back that you bought from them a while back. This is from the FAQ that came with today’s email:
2.6 Can I continue to use my perpetual license software after switching my maintenance plan to a subscription?
Upon the commencement of your subscription date, you will no longer be able to continue using your perpetual license as the option to switch to subscription at this significant discount is conditional upon trading in your perpetual license/s on a maintenance plan for a new subscription.
This is called burning your bridges. It basically guarantees that anyone who moves from maintenance to subscription can never go back. From an economic point of view, this is of course nonsensical: Why would anyone give away a very valuable, gold-plated permanent license for a more expensive, vastly inferior rental car?
Of course, if you’re an investor in Autodesk, things look very different. The reason the move is a terrible deal for customers is the same reason why it’s a terrific one for investors, at least on paper.
With the move to subscription, you get: 1. A captive user base; 2. The guarantee that this user base will keep paying in the future whatever the product you offer them because not doing so would destroy their past investment (in economics term, this is what is called a “rent”–behavior that is normally frowned upon); 3. Vastly increased pricing power since you can jack up the price of subscription knowing that users will find it impossible to leave.
In practice, however, the move from permanent licenses to subscription has been pretty painful for Autodesk. In retrospect, this is not surprising given the economics of the options offered to customers. The company has not only seen revenues fall almost every quarter since it scrapped new permanent licences, it has also made losses every single quarter since (the latest quarterly results are actually due today, which probably explains the timing of the email). Still, Autodesk’s share price has been on fire for about a year as investors remain hopeful that Autodesk will eventually manage to coerce or entice all recalcitrant users into switching to subscriptions.
Illustrating this hope, an analyst was recently quoted as follows in a Barron’s article:
“The company has indicated it will raise maintenance prices in tranches over the next few years in an effort to entice customers to move to subscription (1.25-1.50x increase in LTV). At the analyst day in December, management put a finer point on this, announcing virtually all Maintenance customers are expected to be converted to Subscription by FY20. Any acceleration of that timeframe would be a positive for shares.”
For the company, the question is therefore: Is Autodesk’s market position dominant enough that it can persuade users to switch from a model to a financially and functionally inferior one? Maybe it is, maybe it isn’t. The fact that so many users have switched to subscriptions despite there being no good economic incentive to do so suggests Autodesk’s hold on its key markets may be sufficiently dominant. The sheer discontent with Autodesk’s products that is vented everyday on this forum and the fact that most of these irate users (me included) still choose to stick to the company nonetheless is another suggestion that many don’t have a choice or are just not ready to disrupt their workflows or business models.
In any case, Autodesk doesn’t need to move its entire user base. It just needs a critical mass, after which it can use its beefed-up pricing power to squeeze more profits out of its captive subscription customers.
Not every company in every market can do that, of course. If Nvidia could switch from selling graphic cards to renting them out for a year (at twice the price of a new card), it would certainly do so. But it can’t because it is locked into fierce competition with AMD. So instead, it decided to price its latest gaming card at a fraction of the expected price this week in a bid to pull the rug from under AMD’s feet. This is why competition is such a great thing for us users.
Now, I can’t tell you what you should do because individual circumstances will vary, but here’s what I did in the past: When Adobe switched from permanent licenses to subscriptions, I considered my options and decided to purchase the last available permanent license (the entire Creative Suite 6.0). As I expected, I’m still using it today and it’s great. None of the innovations brought by Adobe’s updates since then would be of any use to me. I figured that owning CS6.0 would buy me enough time to see either Adobe change its mind on permanent licenses or for a better alternative to emerge. The first hasn’t happened, but the second has. Recently, I bought a permanent license of Affinity Photo that does everything Photoshop does and a lot more, and gives me access to all these third-party plugins that are no longer being developed for CS6.0. I couldn’t be happier.
As for now, I will renew my Autodesk maintenance plan before the price increase kicks in. Hell, I may even renew it for several years to lock in the lower price. After that, I will wait for Autodesk to change its mind or for a better alternative to emerge. And even if none of this happens and I still find myself wedded to 3ds Max three or four years from now, I can always switch to subscriptions then and I will still have saved a big bundle of cash. It’s what you call a no-brainer.