Have you purchased Tetris for a PSP? It costs $10 to buy the game. The Tetris iPhone app on the other hand costs just $5. This is not an isolated case.
The prices of iPhone apps are disproportionately lower compared to the same software being sold for other platforms.
Here are some pricing numbers: Zagat's premium To Go guides costs $48 a year on Windows Mobile. On the iPhone, it only costs $10. Another navigation app, CoPilot 7 was launched at $200 on Windows Mobile. On the iPhone it costs a measly $35. There are several examples like this where the iPhone apps of software are being sold at a much lesser price than the original price elsewhere.
Why is this happening? There are primarily two causes. Firstly, the iPhones have amassed a high volume captive audience who are now known to be voracious app consumers. There are over 50 million iPhone users who have downloaded an average of 35 apps - approximately 13%-21% of them paid apps. At such high levels of app consumption, the app developers are tempted to play the volumes game expecting a high rate of download that can offset their discounted price per software. It does make sense sometimes when $0.99 apps make much more overall revenue than the slower selling $30 iPhone apps.
A second reason behind the cheaper pricing is the way app developer get visibility. With close to 85,000 apps now on the iPhone App Store, it is not very easy to capture the iPhone users' eyeballs. Also, with Apple only ranking the iPhone apps based on the number of downloads rather than the overall revenue made, it is only the low priced apps playing on volumes that get to make it to the top ten list more frequently. It recently added the Top Crossing iPhone apps recently, but I would be surprised if users download an iPhone app based on that list when you already have the Top Paid Apps list.
All this has led the app developers to a point of no return where even those genuinely seeking a price rise due to improved features or higher production costs are vilified. Gokivo, an iPhone app that launched at $10 had higher range of features than its rival MotionX GPS Drive, which was priced at $3. Despite the additional features, the app faced huge criticism and was forced to bring down its prices to $5; which in his words has highly damaged the pricing for the entire segment.
So, what is the long term effect on the app economy? One possible eventuality is that iPhone app developers who cannot survive the price wars will have to eventually move out - a lesser competition could then drive the costs up by a little margin which can improve the situation. But that is unlikely to happen in a marketplace such as the App Store which is all but an unchartered territory. As developers leave, more developers shall join in with higher volumes of iPhones sold. This makes it plausible for the price wars to continue.
The problem does not stop with Apple. App developers for other manufacturers who have relatively lesser volumes to show as of now are trapped in a catch-22 situation. For instance, Palm users might expect the apps to be priced on the same lines as what is available on the iPhone. However, with lesser volumes at play, app developers might not get sufficient returns at low costs.
The future of the app economy does look hazy to an extent. Do you think it is time the industry sit up to take notice of this downward trend and take corrective measures or should iPhone app developers leave it to the marketplace to figure out the right price for their iPhone apps as it offers them a huge market, which is not available in any other mobile platform? What are your thoughts? Please let us know your thoughts in the comments section.
[via Gizmodo]
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This is an interesting and complex experiment.
I don't think Apple should change a thing. This is a win-win situation for both Apple and the developers.
For Apple it's obvious. The extra competition and lower prices is a boon for sales and people on the fence will be swayed. Should I buy a Palm or an Apple phone? In the long term Apple is the clear winner. Your cost of use is less because the applications cost less.
A win for Apple.
On the other side Apple has created an environment that developers can create and distribute products for very little cost. They are able to sell products (applications) for less given the volume of sales and the attractive profit split with Apple. A developer can not find any deal better than the AppStore to roll out a new product.
This allows the developer to play, to take chances. Developers are making products for the iPhone that they would NEVER be able to do on any other platform. This is awesome for a small developer trying to make a mark in the world and a fantastic opportunity for the big boys too.
In the end, we all win. Apple has a device people like and it has cost effective applications.
The developer has a huge resource to roll out a new product to an eager audience at minimal cost, possibly striking it rich.
The user has an incredible device that is both fun to use and economical to expand with new applications.
What more needs to be done? Will it implode? I hope not. I say let it run the course and maybe, just maybe we'll all come out ahead.
The app store is fantastic in that it has eradicated the usual barriers of entry. Now the small guy can get into the mix and profit from the app store. However, I feel that the price wars that we see presently in the app store are causing some serious distortions. I have paid a dollar for a brilliant app and then I have paid two dollars for an utterly useless one. The market should be allowed to decide the price. There should be more places like http://www.iwikiphone.com and appfire to be able to see exactly what the apps are like from independent points of view and actual users. The prices can be misleading sometimes and it is just pot-luck whether or not you get value or not.