The Diff | Byrne Hobart | Substack

One possibility is a hardware product bundled with a subscription. This is what Fitbit has done

A final option is financial engineering: turn a hardware purchase into a subscription by either leasing the product to the end user or financing their purchase for them.

When the buyer population shifts from early adopters to average people, it necessarily shifts from people who will buy every brand-new update because it’s a brand-new update to the much larger cohort that’s satisfied by default with the current options and doesn’t feel the pressing need to upgrade.

And, in another sense, hardware companies that shift to a subscription model are pricing according to reality. If you buy something and use it every day for years, it makes sense that you’d pay for it as you use it rather than buy an uncertain amount of usage at one upfront price. The gradual shift to subscription-based hardware is just the economi... See more

For a hardware company to grow, it needs to ship more units or ship more expensive units every year. Early on, the challenge is operational: GoPro had to figure out how to assemble more cameras, and had to design better ones. But in the later stages of a hardware company’s growth cycle, two problems emerge:

The upgrade cycle gets longer.

Apple, of course, is one of the most successful versions of this. The company currently has 585m total paid subscribers for its various services, allowing it to earn revenue over the usage cycle rather than from purchase to purchase.

It’s hard to determine the total addressable market.

Paul Graham points out something Fitbit, GoPro, and Sonos investors have also observed: hardware is hard.