The Netflix of software is about to disrupt the disruptors

The subscription model has changed music and revolutionised how we consume films and television shows, but can it disrupt the software industry? Is it high time for a Spotify or Netflix for a stagnant desktop and bloated mobile apps market? Setapp creator Oleksandr Kosovan thinks so and he is starting with the Mac.

Kosovan is chief executive of Ukraine-based software company MacPaw, which has a worldwide customer base of over five million and has just launched Setapp, a new subscription service for the Mac operating system. Similar to how Netflix offers an instant catalogue of movies and TV shows at your fingertips in exchange for a monthly fee, Setapp has over sixty desktop apps ready to download and use.

Most of us are happy to shell out around €9.99 per month for the opportunity to binge on all the music or movies we can handle. However, we still generally pay per download for our desktop software and mobile apps – or make do with free versions that clutter our screens with irrelevant ads and unrelenting upsells. It looks like that's about to change though. Technology research analysts at Gartner predict that by 2020, over 80 per cent of software vendors will change their business model from traditional pay per download to a subscription model.

Current subscription models available from software as a service (SaaS) vendors – such as Adobe Creative Cloud or Microsoft Office 365 – make sense for these vendors but it translates to a substantial annual fee for each application a consumer subscribes to. It all adds up, says Kosovan.

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“Our DevMate platform helps developers license, distribute and sell their product outside of the Mac App Store; with this experience and our close relationship with the macOS developer community we collected a lot of feedback on how they would like to sell and feedback from clients on how they would like to use software.”

Periodic updates

The normal route for desktop applications involves a first release and periodic updates thereafter improving upon the original version. This works for developers until it doesn’t: they can keep updating their product while getting an income but it means delaying a lot of new functionality until there is enough to justify shipping an upgrade meaty enough that their customer considers it worth paying for.

Meanwhile, customers must carry out a cost-benefit analysis of the new version versus the current one they already own, and can be stuck waiting for new functionality until it arrives in an upgrade.

“This is one of the biggest problems we set out to solve with Setapp. Of course, the subscription model as it stands is one of the solutions, and from the point of view of developers it is great but for consumers subscriptions can be a horrible experience. Imagine having to pay for dozens of different software subscriptions,” says Kosovan.

Kozovan says he came up with the idea of a Netflix for Mac applications not only because customers can “binge” on apps but because he wants to curate quality software in contrast to what he calls the Mac App Store “nightmare”: “There are more than 30,000 apps in the Mac App Store and a lot are very similar, or simply clones or copycats of popular apps. The consumer is spending too much time searching for the right app.”

Setapp is making it debut with just over 60 apps and Kosovan hopes to build to 300 within the year. The grand design is that these apps will be all the average Mac user will ever need; you buy a Macbook, you subscribe to Setapp, you won’t need to buy any other apps. “We’re working on getting all the applications that one would use on an everyday basis so that once you subscribe to Setapp, you’re all set,” adds Kosovan.

While this sounds relatively attractive for the customer, developers will be wondering about the revenue model. How do you give a fair cut to creators of expensive-to-develop yet relatively infrequently used applications, such as graphics editing software, versus a cheap and cheerful yet heavily used Twitter client?

This is one of the most important questions developers have, says Kosovan: how do they make money out of this arrangement? To find the answer, Kosovan and his team analysed user data to learn more about software usage patterns: what apps people use and how often they use them. They then built a prediction model to calculate future earnings, keeping in mind that each app will have a unique price coefficient based on market value, usage scenario and complexity.

“It’s a fairly simple but sustainable financial model based on monthly usage for each app. Every developer will have a percentage of revenue from each active user, proportional to their value.”

Closed ecosystems

One wonders what Apple and its famously closed ecosystem thinks about all of this. "We spoke with people from Apple developer relations. They like the idea of Setapp and they don't see it as a problem. As they explained it, Apple's main focus is to deliver the best experience to the customer; they don't mind whether it comes through the app store or another platform. From this point of view, we seem to be Apple-friendly," he explains.

So does this mean MacPaw has its sights set on disrupting the iOS market? “We would like to expand into other markets but this is likely going to be Windows and probably Android,” says Kosovan.

“With the iOS store it might be a bit more complicated because it is a quite a closed ecosystem; Apple did not provide any pass to go into this particular ecosystem,” he says, adding that in the future Apple will probably have to make some changes on this front as the Netflix and Spotify business model spreads beyond the consumption of movies and music.

“We think our ‘Netflix for Mac apps’ model will be successful; the market is ready for this now with more and more large vendors, like Adobe and Microsoft, pushing the ecosystem towards subscription. Even Apple has made some changes towards subscription support in the app store but you still have to pay for each of these apps individually.”

Computer market

Kosovan thinks Setapp will be unique in providing this kind of service for the moment because major vendors in the software industry are focused on pouring innovation into mobile, which makes sense to an extent.

While smartphones and tablets have muscled into the computer market, a recent Pew Research Center report found that laptops and desktops are still among the most commonly owned devices in US households. Moreover, according to research firm ComScore, they are still the most trusted: a 2015 survey showed that while 60 per cent of total time spent shopping online is through mobile, 87 per cent of actual purchases are carried out on laptops or desktop.

“It seems like Apple and other players are starting to forget about their desktop business,” Kosovan says, adding that the laptop/desktop market still has great potential and plenty of high-quality developers.

For now, Setapp is the only Netflix-style offering on the software market. Having just launched yesterday, it already has 35,000 beta testers providing bug reports and "a lot of positive feedback" with some new features and lots more apps to come. As a parting aside, Kosovan mentions Setapp has been incorporated in Ireland: "Right now we have a legal and finance department [in Cork] but if everything goes well we think we will be expanding our Irish office." Watch this space.