KTM's financial woes

I am really struggling to understand why in the hell anyone would "buy" a motorcycle that requires a subscription.

 

It's not a subscription. It's a one time fee to unlock more features.

 

It's bait and switch. Simple as that.

Not any different then going to a dealership for a advertised price just to find out there is a bunch of tacked on bullshit that you have to buy to take the car home.

Here is a 1290SDR. In 800 miles all the features you thought you paid for, won't work. Come back for another shakedown of the coffers.

 

Eh, not really. They are pretty clear that if you want the full electronics package you have to pay for them. It's cheaper for them to put the same electronics on every bike and just unlock them at the dealer than having multiple ECU's and sensors that are different on the bikes. Surprised someone hasn't figured out how to unlock them without paying for it at the dealer though.

 

Wouldn’t it be cheaper still to have an electronics package (that they’ve already developed) that is on every bike (like it is) and *not* invest in some software lock pay-for-play “achievement unlocked” scheme?

 

If nobody opted to pay extra for it then they wouldn’t do it. Obviously a lot of people find value in it.

 

I get the dislike for seeing features not unlocked on a vehicle, but I don't think anyone is getting screwed because of it. Take this broad made-up example to illustrate the change:

BEFORE: A company sells a motorcycle that has two trim levels. Trim A gives you a bunch of additional electronic features and Trim B does not. Lets say Trim A costs $20k retail and Trim B is $17k and the company sells 50 of each trim level for a total of 100 units. It costs the company hypothetically $15k to make Trim A and $13k to make Trim B. Over the course of selling all 100 units, the company makes a profit of $450k and 50 people have Trim A bikes and 50 people have Trim B bikes.

AFTER: A company sells a motorcycle that has two trim levels. Trim A gives you a bunch of additional electronic features and Trim B does not. Lets say Trim A costs $20k retail and Trim B is $17k and the company sells 50 of each trim level for a total of 100 units. It costs the company hypothetically $13.8k to make all 100 bikes because they can streamline production to produce 1 consistent product and they can get parts cheaper because they can buy in larger bulk. Over the course of selling all 100 units, the company makes a profit of $470k and 50 people have Trim A bikes and 50 people have Trim B bikes. PLUS: Some of the people with Trim B bikes get temporary free access to all the features on Trim A bikes, potentially converting them to Trim A bike customers. The company makes a bit more money if those customer decide to upgrade and unlock those features permanently AND those customers end up with a bike they prefer whereas previously they would simply bought Trim B and never experienced or upgraded to a bike they prefer.

Of course this is all hypothetical numbers, but obviously someone crunched the real numbers and found it to be valid. You can buy a less-optioned bike and keep it less optioned if that's what you wanted all along. You're not being screwed if you intended to buy a less optioned bike and you find out your bike has the potential to be a highly optioned bike and you're upset they didn't unlock those features for free.

Also, if you think all of the features should be unlocked on ALL of the bikes, then you're also ok with the base price for the less-optioned bikes to go up because the company isn't going to just hand out profits because you think they should. The price of the less-optioned bikes can stay low in this case only because there is a difference in profit if you pay for those extra features. In the hypothetical above, if all 100 bikes were Trim A, the company wouldn't sell them all at Trim B prices. To maintain the same level of profits, they would have to sell all of them at $18,500 (instead of the lower ones being at $17k). We already hear endless complaining about the MSRPs being too high on KTMs, so that's obviously not a solution either.

 

If they halved the price and added it to MSRP, and didn’t piss away resources on securing the software from people not willing to pony up for it, they could have it as “standard equipment” and not get the bad press for making such customer unfriendly profiteering decisions.

But hey, what do I know? I don’t subscribe to heated seats in any of my vehicles.

 

Bike already has it in the ICU: "Hell no, I won't pay more for access to more performance!"

Bike already has an exhaust: "Hell yeah! I'll gladly shell out thousands more for that Agropervert pipe - feel free to keep the old one and give me nothing for that!"

 

Nope. This is, "expanding product value chain monetization." Which is why OEMs introduce these schemes. The development cost b/w bike A & B is the same. You paid for the hardware to run both versions of the software and you sunk the cost into the wiring harness, switch gear, owner's manuals, etc. This monetization / value chain scheme is some MBA trying to "hack" a new revenue stream by pretending a hardware company is a software company. And, unsurprisingly, customers balk. The other answer is the they got lazy with mix and take rate analysis and band-aided it with a "subscription FTW, y0!" but that's less likely. What's more likely is the MBA intern playing in the sandbox again and trying to be "disruptive".

 

The ECU doesn't come from Bosch with the software. That software comes from KTM. So, yes, KTM is selling access to the software KTM developed.

There is no "Subscription" - one time cost - any time after you buy it.

It seems to me that the "eLeCtRonic NaNnies ArE rUinIng MoToRcYlinG" loudmouth crybabies should be thrilled to death that KTM is offering the Luddite Edition for less money.

If I were Dictator of KTM for a day, list price would include the upgrade mark-up - the Luddite Option would come with a rebate offer. Then the only discussion would be about what sort of moron would go for the inferior option.

 

You're right. It's not a subscription. Either way, it's an after the fact charge.

 

PS - I don't like subscriptions, either.

There's a reason why I laugh in Adobe every time I fire up my Windows 8.1 laptop and use LightRoom 3.6 to edit pictures...

 

Imagine buying a car, and paying cash for it. 5 years later, the manufacturer contacts you and let's you know they've converted your purchase to a lease. One that you can't buy out, and will never be free of. That's what's going on in the CAD CAM world.

 

"Boss, check out this idea ... it's disruptive (and I'll be outta here by the time you're outta business)"

I think on the arc of all things, moves like this are usually in response to some perceived or real immanent existential threat from an external / nascent competitor or greed bellied by hubris. Why else strong arm your customers? Typically continuing the beatings does NOT improve moral or retention.

I don't know the particulars of your industry, but imagine that 3D printing, lower cost options born of that, etc. are creating a threat to legacy firms. I could also be totally off base and could have misconstrued your implied CAD CAM market dynamics comment.

 

Microsoft did that with their office suite. Why do I need to access the internet to use excel or word?

 

Another model is to plan obsolescence and then replace that product with a subscription base. Remember when AMB said they would discontinue the 260 and replace it with a subscription only X2? Luckily the 260 still works but it drove the used value of the 260 up significantly. Yes the X2 has additional features so I understand why they wanted to add a subscription but there were certainly customers like me that just wanted a simple transponder that worked with the orgs I chose to run with. A simple and inexpensive transponder doesn't exist - even in the used market.

 

Certainly there's been a democratization of certain capabilities in the manufacturing world, but this business model shift was well in advance of that. Additionally, while there are quite a few tools that are reasonably capable when looking at the cost/benefit ratio, those are really not direct competitors to the companies that really own the CAD CAM markets. In my view, it's been somewhat a lack of competition in the strata they play in, as there's been quite a bit of consolidation in that industry. Autodesk in particular has bought up quite a few companies in the field, and they've gone pretty much full subscription on everything. Really not that different with other software. I used to use Quickbooks for one of my smaller companies and had purchased the seat. One day we get a message that all bank connections will be severed, unless we buy the new version. There really wasn't a functional difference in capability, so didn't see the need, but they basically hold a gun to your head so you have no choice. Not like it was a crazy amount of money, but just the point of it. If I bought it, then I own it. How is it legal that they change the terms of a contract after the fact?

 

QuickBooks does the same shit.

Now you HAVE to use their cloud product, and all your data is theirs, and hopefully they don’t get hacked or their service goes down AGAIN.

And if you have legacy native apps? Well guess what, you can’t import your monthly banking statements anymore, that “feature” expires with your annual “license”.

 

This guy is great. He gets it.