Value of Lifetime Subscribers to Roon

Perhaps an unpopular reply, but I’ll do it anyway. Part of the benefit of being a lifetime subscriber is that you are exempt from paying a recurring subscription fee, one that might also increase over time. It would stand to reason that in signing up to a lifetime of service for a single fixed amount you gave up your right to a referral bonus. Seems like a fair deal to me.

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@pechelman is absolutely right. After all, if Roon is to survive long term, the annual subscribers will bring in the money. Lifers are dead weight. Basic economics.

It makes sense to incentivize sources of repeating income. It doesn’t make sense to add to the heavy cost of fast financing.

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No, he is not right. That’s an opinion. There is no right or wrong. Secondly, lifetime subscribers are not dead weight. Tell that to someone who just sent $700 to Roon.

And, it’s not only $700, it’s $700 plus Roon’s time value of money or cost of capital every year for the next 5.8 years.

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You would have to know the average stay of Roon subscribers and the total revenue for each subscriber, if they went annual vs lifetime. And to be precise, you would need to factor in Roon’s cost of capital, future price increases, and inflation.

I suspect these are some of the factors Roon used when they increased the lifetime subscription price from $500 to $700.

$700 at a “safe” 5% rate-of-return (a standard figure for these sorts of calculations) is worth $3/month to Roon, in perpetuity. (Whether they actually spent the money on paperclips and mouse cosies is immaterial.)

That’s a lot less that $10/month, but it’s not nothing. I assume it’s more than the marginal cost of supporting another user (licensing, IT infrastructure, …), but that’s a discussion for another forum thread.

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And the piece we don’t know is how long do Roon customers stay Roon customers? Some will pay $700 and won’t be around for 5.8 years, for one reason or another. Point is, they are not dead weight to Roon.

Roon hasn’t been around long enough for that to be a meaningful question.

But, yes, I gather that no one lives forever.

So, rather than saying that a $700 up-front payment is worth $3/month (more precisely, $2.91/month) in perpetuity, we could equivalently say that (under the same 5% rate-of-return assumption) it’s worth $7.42/month for the next 10 years.

It is a meaningful question. We don’t yet know the answer.

Dead weight that took the monetary risk in Roon’s infancy.

Quite pleased that my lifetime subscription is fully paid for in term. It’s all house money now.

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Just to pester this concept a little further, an upfront payment of $700 is equal to 5.8 annual payments of $120. Roon’s cost of capital is probably much higher than 5 percent, but if Roon invest the $700 at 5 percent and draws down to zero over 5.8 years, the interest income would be $120. So, a lifetime subscriber is really worth $820. That’s equivalent to 6.8 years of annual subscriptions, not counting price increases and inflation. I guess it remains to be seen what percentage of annual subscribers hang around for more than 6.8 years. I don’t see any dead weight here.

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The lifetime subscription worked out in my case. The biggest risk takers were those who signed up at startup in 2015.

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I am glad I was able to pay for 5.8 years up front while I had the cash. I hope I (and Roon) be in good shape in six years. But only then would I consider myself any sort of a burden customer. I also spent thousands on a Nucleus+, so my investment is high.

In 6.8 years, perhaps I will be able to afford an annual subscription for the office.

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I paid $500 for lifetime plus $1119 for a Nucleus. I’m guessing Roon’s cost for the Nucleus is about 1/2 of that. I probably won’t live long enough to become dead weight.

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We could do that to death, but there’s a general formula, into which anyone can plug whatever assumptions they wish.

An upfront payment of $P dollars is equivalent to n monthly payments of $M dollars at an annual rate-of-return of r (we’ve been using r=0.05 = 5%):

            P r/12
 M = ---------------------
     1+r/12 - (1+r/12)⁻ⁿ⁺¹

E.g., per your example, a $700 upfront payment is equivalent to 82 monthly (6 years, 10 months) payments of $10/month.

But, again, even if you continued to use Roon forever (n→∞), your $700 upfront payment is still worth $2.90/month forever.

Yes, you can analyse this however you want. I posted my analysis. I don’t use generalized formula. Obviously, the answers are different depending on interest rates and payout periods, etc. To be more precise, you would include price increases, inflation, tax rates, etc. I think the point has been made.

In my previous life, for cost of capital, we used the first P&E project that didn’t get funded. Whatever, it’s ROI would have been was considered our cost of capital.

Let’s hope you do and play with the house’s money!

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Did anyone mention the risk the lifetime member is taking if Roon goes out of business? In all likelihood the software would still work, but I’m not entirely sure how much Roon is phoning home to check your license (does it stop working if there’s no server to check?). Not to open a debate on what happens to your software if Roon goes EOL, I think there are plenty of threads on that. I’m just saying it’s possible that $700 lifetime may be for life or Roon, not you.

There’s also the risk you grow tired of Roon or a competitor comes out with a far superior product (maybe even a free one) - and you already paid $700.

I’m just saying parting with $700 upfront is a higher risk that a monthly subscription. Whether that risk is worth it is up to he buyer, assuming the buyer has $700 to risk. The risk should be factored into the decision.

Discussed in great detail.

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By the way, there is no monthly subscription. Only annual or lifetime. But you are correct. Risk should be factored into most personal decisions we make, including financial decisions.

Roon Nucleus + Lifetime Membership cost less than 1/2 of my preamp cost. Roon is a bargain.

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