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Comment by zdragnar | Hacker News Reader

I can see how a subscription model would be appealing if it was in lieu of outright buying expensive equipment. Operating expenses for some machines are cheap but the machines are expensive enough that the tests themselves are expensive to pay off the machine.

Of course, the reality is more likely that the hospital still has to buy things and the subscription is a net loss on top of that so patients (or the people paying for the care) are screwed twice.

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Or the equipment is otherwise expensive up-front to a small clinic. Ophthalmology, for example. The subscription feature is cheaper than becoming a financier.

How?

I was far from it, but ophthalmic firms didn’t know how often this diagnostic would be used. A high up-front would make it difficult to compare to the alternative (contracting per-use with a rival). So we offered a low up-front with a known, guaranteed per-use subscription.

I don’t think I have ever even once been in a product design session where the stated reason for going with a subscription model was, “So the customer can pay us less money.”

Of course the customer is going to pay more in the long term.

Even if the TCO for the clinic were exactly the same over X number of years, the manufacturer that sells subscriptions still comes out ahead because they're effectively in the financing business, too. Why tell a customer to go borrow money from somebody else when you can make them borrow from you?

Arguably the customer gains the option of not paying, which has some value. Whether that option value is close to the extra they pay through the subscription is left as an exercise for the reader.

Getting a loan from a bank would be cheaper than subscription pricing.

There are two reasons to use subscription pricing:

1) Price discrimination: You want to charge a large customer more for the same device

2) Lowering the capital expenditure by hiding the true price in operating costs

You could argue that (1) is good for small clinics, because they get access to the same machines as big clinics for a smaller cost. But I believe it's just a way to remove opportunities for competitors and results in everyone paying higher prices, even smaller clinics.

It also creates a HARD dependency on internet access.

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