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Waves Discontinues Perpetual Licenses (UPDATE: They have gone Subscription Only)


Martin H.

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10 minutes ago, smallstonefan said:

All software companies over time that want to have a big exit and not stay a life-style business will move to subscription. The only question is how will they do it - and I think Waves has shown a great example of how NOT to do it.

Exactly! Nothing wrong with software subscriptions. But at least they should give a way for existing customers to keep their investment from all those years. As I said before I never WUPed or even planned to WUP but an upgrade to a Mercury bundle was always  in my plans.

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i've bought a bunch of waves plugs thru the years, i like em, i use em.

 

"Of course, if you purchased Waves plugins previously, you continue to own them (at the latest version you had prior to the launch of Waves Creative Access)."

 

 

that's all i care about.

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29 minutes ago, smallstonefan said:

All software companies over time that want to have a big exit and not stay a life-style business will move to subscription. The only question is how will they do it - and I think Waves has shown a great example of how NOT to do it.

Waves may have correctly analyzed their sales trends and determined that hobbyist support costs were higher than sales of perpetual licenses could cover. Maybe their OEM business with hardware manufacturers and subscriptions to commercial users are their future. 

We've seen our small clients now paying disproportionate annual subscriptions for software with unwanted upgrades that become a cost center themselves. 

 

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21 minutes ago, Sergio said:

Exactly! Nothing wrong with software subscriptions. But at least they should give a way for existing customers to keep their investment from all those years. As I said before I never WUPed or even planned to WUP but an upgrade to a Mercury bundle was always  in my plans.

If I was running Waves one option I would have considered is telling customers that you can continue to WUP for the foreseeable future but ONLY products on existing WUP -  with a grace period to let everyone who wants to get on WUP do so. This would allow people on perpetual to keep their licenses current but it would require them to stay current on WUP. This would require customers to commit if they wanted to stay current and create a pseudo-recurring revenue stream. At some point in the future they could then say that WUP was going away, but they would have eased the burden and prepared customers to move to subscription. At that time you tell everyone on WUP that you are offering them a deep discount on subscription to honor their loyalty.

They need to look at this as a long game, not a short-term transition.

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5 minutes ago, Doug Steinschneider said:

Waves may have correctly analyzed their sales trends and determined that hobbyist support costs were higher than sales of perpetual licenses could cover. Maybe their OEM business with hardware manufacturers and subscriptions to commercial users are their future. 

We've seen our small clients now paying disproportionate annual subscriptions for software with unwanted upgrades that become a cost center themselves. 

 

True. Always thought they should’ve gone with different levels of support. 

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52 minutes ago, Carl Ewing said:

Waves will likely do very well with this model despite the angry minority screaming away on the internet. And small developers will think this is opportunity to capitalize on angry consumers. This will fail, like it does in all industries where large competitors who can afford a robust subscription infrastructure wipe out smaller competitors. Happens every day.

Sounds like Waves Audio advocacy based on wishful thinking more than a realistic prediction. I hope that the CFO of the company is wiser than this, but looking at the “success” story behind WUP it looks very doubtful.

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Honestly, this changes nothing for me except for my mindset. I will continue to use the plugins I've got until they don't work any longer or I've replaced them. Nothing is different because I was never a WUPPER either.

What HAS changed is that now there is no option for me to move forward as a Waves customer. I cannot buy another plugin if I wanted to NOR can I upgrade my existing ones to get them working again. So Waves has successfully severed me as a current and long-term prospective customer, because I cannot foresee ever wanting to subscribe.

As I said earlier and has been pointed out a number of times, I think they crunched the numbers and this portion of the business (perpetual licenses) was not cost effective. So now, they'll move forward with their licensing deals with the various manufactures and support those who subscribe (like pro studios) who as a result are always on the most current version of the Waves plugins.  And now they have a more predictable and recurring revenue stream.  It makes things a whole lot easier on their end. It's just business.

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47 minutes ago, smallstonefan said:

Like it or not, subscription is the future.

I'm guessing I'm the only guy on this board that took a perpetual software company to a subscription model - this is a topic I'm absolutely a subject matter expert on. I'm also rather proud that we navigated those waters successfully without institutional investment (thought we did almost run out of cash).

With predictable revenue from subscription we were able to staff up and increase the pace of releases - creating a LOT of value for our clients. Our software is used to run entire businesses, so the the constant innovation and support makes sense. It's been a great thing for our company and I think it's been good for our customers overall, but I know many of them have a different opinion - and I respect that.

Something else everyone here misses is that most businesses are valued on a multiple of their EBITA (ie profit). Software companies are usually valued on a multiple of their recurring revenue. So, a traditional business doing $10 Million in revenue with $1M in profit might be worth 3x or 4x their profit - a valuation of a $3M-$4M. The same company that does software with that $10M being subscription revenue (what we call recurring revenue) is worth closer to $30M (a 3x on recurring).

Which would you choose if you ran a company?

The reality is that a CEO's #1 job is to increase shareholder value. PERIOD. If the shareholders of Waves are thinking about a company sale, then moving to subscription is absolutely the right course of action.

All software companies over time that want to have a big exit and not stay a life-style business will move to subscription. The only question is how will they do it - and I think Waves has shown a great example of how NOT to do it.

I think this represents only the company and investors view!

IMHO you're missing one important thing: Competition that serves the customers! Most subscription services today reduce competition substantially. They bind the customer and thus remove the possibility to influence the business target (e.g. if you only use the plugins of 1 vendor). Like this there is the risque of overpricing and idleness. In the end this leads to something comparable with the former soviet system.

Just look at music streaming services, they have ruined the music market. The big ones in music business (with a lot of money in the background) can issue whatever they want and newcomers have almost no chance and the audition has not a lot of influence! Or if I look at the food market in Sweden where the 4 biggies define the prices and what is available, or the do-it-yourself shops, or ...

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1 hour ago, whoisp said:

Waves Scheps Omni Channel was £29 but now of you want to buy it  £15 a month is the reality 😂

Actually, Scheps plugins are only available in the "Ultimate" tier, which costs a bit more monthly... ;)

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1 hour ago, MarcL said:

Just look at music streaming services, they have ruined the music market. The big ones in music business (with a lot of money in the background) can issue whatever they want and newcomers have almost no chance and the audition has not a lot of influence! Or if I look at the food market in Sweden where the 4 biggies define the prices and what is available, or the do-it-yourself shops, or ...

Streaming content vs. software subscription is apples vs. oranges - they are simply two different animals.

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3 hours ago, Carl Ewing said:

As of 2023, roughly 20% of the $40 trillion dollar credit card processing market is subscription processing. That keeps going up, and up, and up. It will eventually take over virtually everything involving distributor-to-consumer sales. This applies to companies with near monopolies (Microsoft, Adobe) or industries with multiple subscription models competeting against each other (eg. what will now happen with Plugin Alliance and Waves, etc.). 

Do you think this happening because subscription models are bad for businesses;  a one way ticket to bankruptcy, and consumers hate it? Or do you think it's because it's enormously profitable and something consumers clearly want / use? One answer is correct and is proven year after year by revenue / profit models for (almost) every company that switches to it.

Sorry, but this description really scares me! It reminds me totally of feudalism in the Middle Ages where many people didn't own anything, they were only working for the leaders (almost like slaves). It seems history is returning! Everything is very similar, but not that obvious!

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2 hours ago, Doug Steinschneider said:

Waves may have correctly analyzed their sales trends and determined that hobbyist support costs were higher than sales of perpetual licenses could cover.

no Waves here, but weren't they the innovative market leaders of price point inflection with $29 pricing and never ending sales?

I imagine their analysis has noted a post pandemic drop in low hanging fruit and are attempting to plug the hobbyist market into the matrix.  I also imagine they aren't the only ones feeling the pinch given other recent sales offers. UA, IK, PA/Soundwide are surely taking notes. 

fwiw, always made a point to avoid companies with significant infrastructure overhead. there's never any value added for a customer. 

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59 minutes ago, smallstonefan said:

Streaming content vs. software subscription is apples vs. oranges - they are simply two different animals.

Exactly. If you could pay £10 a month and get access to 90% or whatever percentage it is Spotify offer, of ALL plugins, regardless of the vendor, including new releases, the take up would be tremendous.
Can you imagine how overwhelming that would be though!

But to get the equivalent of what Spotify offer in terms of market coverage, would cost over £300 a month easily.
Plus with music, you can typically buy it outright if you want to.

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18 minutes ago, Doug Steinschneider said:

We all knew this wasn't going to end well. 😬

Yesterday I alluded to the point smallstonefan made today with respect to company valuation and selling. This is Step 1. Be on the lookout for a potential Step 2. Everything they can do to level cashflow and lower run costs boosts any number they could potentially get from an entity like Soundwide. Just wild-eyed speculation.

Edited by John1984
clarity and typos
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