Microtransactions In cars: An imaginative look into the future

JG Pasterjak said:

93EXCivic said:

WonkoTheSane said:

Tom1200 said:

Most of us view these companies as predatory. For software; nearly 100% of the industry is using this model.......I can't wait until some clever person figures out a business model centered around the customer.

As someone that was on the manufacturing software side of things, I can tell you that's REALLY hard to compete against the subscription model.   The break even point of our software was 2.2 years vs. the competitors' subscription pricing.  As in, every month the customer uses their software 2.2 years after purchasing was straight up profit to the competitor.  And there's enough people out there that are only focussed on this quarters' profits that having the subscription kept their C-levels happier since there was no large up-front bill.

It sucks. 

That is why I don't use Adobe Lightroom because I am not about to pay a monthly subscription to a software. I would have bought it if it was a one time fee.

Our monthly Adobe bill would actually buy a fairly nice BMW (without heated seats, though).

When we buy software it's often a multi million purchase. As the 5th largest school District in the country we do have some clout.

I recently did a negotiation on a 7 figure purchase; it was a subscription model but the company was excellent to work with. Both sides explained why each side needed the terms we needed and we simply worked through the process as partners. The suppliers lead counsel was on the mix and aided in the process (often the legal folks are known as the sales prevention team) which moved things along quickly.

Sadly some companies have it in their head that the world cannot function without their product and they're dicks about it (hello BMW).

I doubt it will and I know it's petty & small, but I hope this backfires on them.

The good thing is BMW is getting nothing but bad press over this, so while less people buying may be excusable by saying its a bad sales year, if they go looking there are a ton of articles online about how what they are doing is seen by the public.  The manufacturers do love the subscription service idea though, tesla has been doing it for years, GM is doing it with on star to make all the infotainment systems work.

As a BMW tech I can understand symplfing the wiring, we have a car in the shop now with a damaged body harness.  BMW has been unable to determine the correct options on the car to send the correct replacement harness.  So if every car has every option you may end up with just a LHD & RHD harness.  Most European body harnesses seam to be made in Ukraine as well, so that does not help things.

In reply to Caperix :

GMs infotainment systems work fine without Onstar.  Onstar is an outdated service and obsolete too.  GM actually has some of the best infotainment systems right now and functional AC. A lot of automakers are bad at both.  

If the real driver for this was to simplify the build process since most people purchased the heated seats option anyway, the move from BMW would be to simply remote heated seats as an option and make it a standard feature and raise the base MSRP accordingly.  After all, 90% of their customers are buying it anyway.  Would 100% of the remaining 10% actually walk away because they can't get a car without heated seats and they don't want to pay the higher price?  No, this is simply the spot where they decided to begin boiling the frogs.  Go ahead and let people vent all the outrage about it while you can still reply "it's just the heated seats!  It's not that expensive!  You can get a lifetime option!".

Slippery said:

How does BMW know the car has been sold?

The same way Sirius/XM knows when I buy a used car and sets me up with a free 90 day trial.

Douche move? Yes, but somebody will find a work around

In reply to AnthonyGS (Forum Supporter) :

In my Dads 2022 Colorado to get turn by turn navigation you need a onstar guidance subscription, remote start is part of a subscription as well.

dean1484 said:

I so hate this buisness model. $200 plus a year to use heated seats in your car.   That is 2k over 10 years. 

Bold assumption that a modern BMW will still be on the road in 10 years.

"BMW's charging subscription fees to use the heated seats? That's cute" - AMB/MyLaps

93EXCivic said:

That is why I don't use Adobe Lightroom because I am not about to pay a monthly subscription to a software. I would have bought it if it was a one time fee.

Same.

I paid ~$100 for Lightroom 4.  I used it for 10 years.  I got a new camera and LR4 doesn't support the raw files it generates.  So I happily went to go look for the current version of Lightroom, which would be $15 a month.  Now IF it had the same option of a lifetime subscription like the BMW seats, I'd be fine with it.  It doesn't, so it would be $1800 for the same period.

Conversely I get how some software, like CAD, has a cost of entry so high its difficult to stomach coughing up $10k for it if you just want to try something out, so the option to instead pay a $200/month/seat fee seems fantastic.

The subscription fee bothers me a bit, but I'm not outraged.  If they wanted to simplify their configurations they could and just charge an "unlock" fee to turn it on in their software, or use what is effective a hardware dongle or whatever.  Its already common for manufacturers to do similar stuff.  The main wiring harness is the same on most modern cars, so in effect we are all "paying" for wiring we many not use.

In reply to Caperix :

I don't use turn by turn nav.  I'm pretty old school.  My wife depends on it though and it works fine in her Tahoe no subscription.  It works fine in my Honda too, but her interface is still better.  I also would never use remote start. 

I dont feel the same about OnStar because it had where you can contact them in an emergency, navigation which would need satellites or something, etc. It requires service and people from outside the car to work. BMW heated seats are simply using parts that on the car you paid for. I get what's being said about the option to buy it outright for the same cost but if this doesn't fail it's going to grow and spread.

In the old days people had a smaller amount of stuff that was made to last. Then we started more stuff that was cheap and made to be used for a little bit then thrown away. Now we are moving towards a business model where you dont own things but pay forever for a "service"  I dont like it.

Guys... have you ever looked at seat warmer wiring? At least in the cars I've seen them in, it's really rather simple. Surely, in a place like GRM, we can figure out how to wire in a manual switch. Wiring is by far my area of expertise, but I have a pretty good feeling I could figure it out.

ProDarwin said:

93EXCivic said:

That is why I don't use Adobe Lightroom because I am not about to pay a monthly subscription to a software. I would have bought it if it was a one time fee.

Same.

I paid ~$100 for Lightroom 4.  I used it for 10 years.  I got a new camera and LR4 doesn't support the raw files it generates.  So I happily went to go look for the current version of Lightroom, which would be $15 a month.  Now IF it had the same option of a lifetime subscription like the BMW seats, I'd be fine with it.  It doesn't, so it would be $1800 for the same period.

Conversely I get how some software, like CAD, has a cost of entry so high its difficult to stomach coughing up $10k for it if you just want to try something out, so the option to instead pay a $200/month/seat fee seems fantastic.

 

The subscription fee bothers me a bit, but I'm not outraged.  If they wanted to simplify their configurations they could and just charge an "unlock" fee to turn it on in their software, or use what is effective a hardware dongle or whatever.  Its already common for manufacturers to do similar stuff.  The main wiring harness is the same on most modern cars, so in effect we are all "paying" for wiring we many not use.

The work around for the lightroom issue for me using a new unsupported camera was converting the raw file using Adobe's own RAW to DNG converter. Yeah I probably might not get the lens corrections and new features, but for the casual work I use it for, I am fine with it as is and not being tied down to a subscription fee. 

In reply to Duke :

Exactly, try being a "regular old draftsman", earning modern draftsman wages but NEEDING Revit to make money...Two steps forward, one step back for project completed. Autodesk is out of hand with the pricing model. 

Really hoping this business model fails so it doesn't get extended to other features.

Sport mode, sunroof, rearview camera, heated mirrors, etc. Before you know it the total cost will be $100+/month.

They can't do it to rearview camera at least since those have been mandatory since 2018.

I've been wondering about this... let's call it "manufacturer arrogance" for a while. Most of the commentary I see (including this thread) is written from the point of view of the individual customer, and that makes perfect sense. However, let's think about this from the point of view of (for example) the SEC or a big auditing firm. No article I have read on this subject has addressed what happens in accounting terms if a "vehicle purchase" should more accurately be considered a "software lease with accompanying hardware."  For example, if a car dealer has an operating line of credit secured by his stock, do the terms of the credit line change if the stock is no longer deemed to be physical inventory that a customer can purchase?  What about the accounting implications for BMW or GM if, as they seem to be asserting, their factories are now making products their customers can't technically buy?  What about the large, publicly traded corporations that own dozens of car dealerships?  They (and their auditors) have confirmed the existence and the value of certain assets (i.e., cars and trucks), and their stock prices reflect (in part) those numbers.  How would this change in philosophy affect them? Call me old-fashioned, but I have to think that the sudden recalculation of a LOT of loan covenants would get a corresponding amount of attention at the boardroom level. And then maybe the smug little berk who came up with the pay-as-you-go heated seats will be encouraged to succeed somewhere else.
 

I'll be walking out the door if there is any of this BS on my next purchase.

I've purchased 6 vehicles that came with Satellite radio, even though my daughter works for Sirius I've never signed up once the free subscription is done, just not my thing. Same with the navigation, Cadillac keeps bumping me for OnStar, Sirius and Nav updates. I have my phone, laptop and Garmin.

Funny part was when I purchased my 2012 Boss 302. Salesman slides nav brochure across the table and starts to explain, me, ah, the car doesn't have a nav system.

Then he slides across the Sirius brochure, me, ah, the car doesn't have a sat radio. There was something else that also wasn't on the car. Then it was undercoating, rust proofing, interior protection, paint sealant, etc. Nope, just sell me the car as is, please!

Didn't read the whole thread, but was a Sirius/XM customer for at least a decade. Terrestrial radio is just awful, and I was spending 6 hours a day in a car for work so it was a worthwhile expenditure.

But...the annual renewal process was an aggravating experience. Every year I'd get an email that my annual fee would be some atrocious price. So I'd call them, and play the dance of "I'm going to cancel" and they'd counter with a lower price. If I held off long enough they'd eventually give me the attractive, reasonable rate I'd paid the prior year. But I had to play this game every January.

I finally got tired of it and told them to stuff it (I also quit driving 125 miles a day). I can see that same horrible business model being used for the car 'features'.

In reply to ddavidv :

Good point - if they don't make it just as easy to deactivate a feature as they do to enable it, there should be some serious backlash.

Stealthtercel said:

I've been wondering about this... let's call it "manufacturer arrogance" for a while. Most of the commentary I see (including this thread) is written from the point of view of the individual customer, and that makes perfect sense. However, let's think about this from the point of view of (for example) the SEC or a big auditing firm. No article I have read on this subject has addressed what happens in accounting terms if a "vehicle purchase" should more accurately be considered a "software lease with accompanying hardware."  For example, if a car dealer has an operating line of credit secured by his stock, do the terms of the credit line change if the stock is no longer deemed to be physical inventory that a customer can purchase?  What about the accounting implications for BMW or GM if, as they seem to be asserting, their factories are now making products their customers can't technically buy?  What about the large, publicly traded corporations that own dozens of car dealerships?  They (and their auditors) have confirmed the existence and the value of certain assets (i.e., cars and trucks), and their stock prices reflect (in part) those numbers.  How would this change in philosophy affect them? Call me old-fashioned, but I have to think that the sudden recalculation of a LOT of loan covenants would get a corresponding amount of attention at the boardroom level. And then maybe the smug little berk who came up with the pay-as-you-go heated seats will be encouraged to succeed somewhere else.
 

I ain't got no fancy MBA, but companies that have recurring revenue streams - what us normies would call "subscriptions" - have much heavier valuations than companies that rely on transactional sales.  There's a lot of inertia in a subscription customer that just doesn't exist with the traditional model of getting people in the door and selling them a widget and hoping they come back to buy another someday.  Getting the customer in the door is the hard (expensive) part, then you have to get them to close the deal.  Once you've done that, you can improve your return by upselling them on a more expensive model or with add-ons.  That's why there's all that crap by the checkout lines, why Foot Locker employees will nearly kill themselves just to get you to buy a pair of shoelaces with your new sneakers, and why everyone has a "protection plan" for pretty much everything north of a candy bar.  When you've mastered that, you move the customer to a subscription model so that they're automatically buying from you every week/month/quarter/year.  Now you have a revenue stream that is predictable quarter-to-quarter because it's hard to remember to cancel a subscription.  From an auto manufacturer's perspective it's even better because there's usually at least a couple years lag-time between a typical customer needing to re-purchase.  That's why lease deals can work out well - it's a subscription-lite that all but guarantees you're going to darken their door in about 24 months.  With a subscription offering, though, now the automaker can count on a recurring revenue stream for years to come.

That guy isn't going to wind up going anywhere, he's going to be employee of the month.

I'm not an accountant, but – full disclosure – I posed this exact question to a guy who teaches accounting to MBA students, and his reply was basically "Interesting point, but I think the dollar amounts are low enough in comparison to the total vehicle cost that it won't be an issue."

However, that was in 2015, during the fuss about the Digital Millennium Copyright Act and the right to repair. Subscription heated seats, etc., were not yet a thing.

I totally get the appeal of recurring revenue. I just would like to understand the financial consequences if auto makers were to be forced to recognize subscription revenue only over the life of the vehicle and not up front when the vehicle is sold. I believe somebody earlier in this thread mentioned a mandatory option of $1500 on GM trucks: what if GM's reportable revenues suddenly went down by $1200 per truck because their auditors made them recognize that $1500 only over 5 years? (This might lead to amusing scenes of auditors pointing to Brand X ads bragging that their trucks are the longest-lived models on the road, so subscription revenue for mandatory options should be spread out over more years, while the company accountants feverishly try to claim that the trucks are junk by the time the warranty runs out, so could we please have the money sooner.)

Similarly, once we reach the point where a vehicle is essentially non-operable without the subscription services, then doesn't/shouldn't it cease to be an asset that a dealer can borrow against for his floor plate loan?

As I say, I'm not an accountant. But there are rules about this sort of thing.

Well Ford is somewhat trial ballooning it with navigation per the email I got today....

Because who doesn't want updated maps? I mean google and apple do just fine by me...

I thought this was interesting. Non automotive, but subscription related.

Restaurants trying subscription programs

Will it work? I really doubt it. It's a good idea when there's lot's of excess money floating around but once things get tight, the subscription services will be the first luxuries to go.