It is unclear who first devised the classic software licence and upgrade model, but it was well established by the time that the Apple II and IBM PC were selling in droves in the early 1980s. It was probably derived from prevailing terms for mainframes, tweaked and packaged in an alluring box in the retailer’s display.
There seemed little point in trying to sell people something as intangible as software, even when it shipped on substantial physical media like a stack of floppy disks. In any case, software vendors don’t want you to feel that you own anything, lest you rip out their revenue-protective devices such as serialisation and phone-home authorisation, and sell on.
Instead corporate lawyers came up with the idea of licensing the use of their product, under complex and invariably incomprehensible terms. These inevitably left you wondering whether you could make backup copies, or use a single licence on both your desktop and laptop Macs. Meanwhile the real pirates had no angst over such niceties, leaving de-protected ‘warez’ for others to download and (ab)use.
Every year or two, vendors released major updates to their products, adding features that they felt we wanted, and fixing bugs that we had been battling against daily. In order to sweeten the idea of making us pay them to improve their product, upgrades have traditionally been discounted for existing licensees. The penalties for not upgrading promptly are pricing structured so that you will pay more next time, and following operating system updates, your outdated software will steadily degrade until it becomes incompatible with current hardware and system software.
So it had been until software vendors switched to selling everything online. We now have a choice of models: those that grip you by the short and curlies, such as Adobe’s Creative Cloud, or the App Store’s take-it-or-leave-it, in which you pay full price for every major release irrespective of existing licences.
Either way software licences cannot be resold, and in the absence of any value redeemable against an upgrade, they cannot be treated as capital expenditure for accounting purposes. I forlornly hope that one day HM Revenue & Customs accept this for the purposes of tax accounts too, but am glad not to have been holding my breath; if you know of a judgement or ruling over this, I would be delighted to hear of it, please.
For Apple’s inexpensive software, especially OS X which has become so inexpensive it has lately been free, there can be no problems with paying the standard price, particularly when you can install on each Mac associated with that App Store account. However neither Apple nor third parties selling through the App Store seem to have thought through the psychology of offering major upgrades at undiscounted prices, and I think that their market research is lacking.
Although its cost had been fairly daunting, I bought into Final Cut as far as the last Studio version. When Final Cut Pro X launched, despite costing the same as a major version upgrade, I did not buy the new version in the App Store for a good while; being concerned at the radical changes in version 10, Apple persuaded me to re-evaluate rather than luring me with a discount.
With its combination of accessibility and low prices, I am prone to buy on impulse in the App Store, but equally likely not to buy major upgrades: I loved Coda but when asked to pay full whack for Coda 2, I realised that I had used it too little to justify the cost; I nearly did the same with Hype 2, but relented.
Big players like Apple and Adobe seem to have abandoned the subtle psychology behind setting discounts on upgrades, and have gone for brute force instead. Given the sophistication and flexibility of online software delivery, this is puzzling; from a consumer viewpoint, it is also disappointing, and could still in the longer run prove mistaken.
All it takes is one worthy competitor at a better price, and the market can change almost overnight.
Updated from the original, which was first published in MacUser volume 29 issue 11, 2013.