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An Opinion on App Store Pricing Options

If you missed the latest debate around the App Store, it's about In-App purchase in free Apps. Implementation of the freemium model by developers is causing some discontentment apparently. Firemint's Real Racing for example is being widely discussed. But there are good reasons to believe this pricing model is here to stay.

It's a Long Story

Discussions around App Store pricing haven been in the air for ever. The debate goes mostly in circles, ending up with rants claiming that developers are ripping people off and software should be free. 

The App Store sells software to some people that are not aware that they are actually buying software. They get an "App" form an App Store they were subscribed to de facto as they bought the device.

The "cup of coffee" analogy causes a lot of damage because it tends to let people think of software like service, disposable good or worse, that anyone could write an App just like they make a coffee!

Software Pricing includes Future Uncertainty

Price factors affecting Apps are not just offer and demand on the spot. 

Writing software has a cost, but that's fine, it's generally an investment an independent software is ready to make, that's the risk his enterprise is ready to take. Selling a license normally covers this cost and should grant a premium for the risk taken by the developer.

Once a license has been sold, that means that there is a contract between the licensee and the developers and the terms of the contract involve that the licensee has a right to use the software. That means, conversely that the developer has an obligation to let the licensee enjoy the software.

Whatever the details of the license, whatever the fine print: the seller has a moral obligation to make sure the software will work "as advertised". This changes the game, because that involves constant adaptation to the Operating System changes, maintenance and support, which is hard work. The longer the usage's time span, the more work it is to maintain the app. 

This work, the perspectives of the updates and the support associated with the changes in environment should be built in the Apps price.

Absorbing the Costs of Maintaining Software

Desktop software can ask a fee to upgrade to a specific version. This is often justified by the developers with addition of new features and understood by users as it often provide enhancements they have been demanding or expecting.

This way of doing is well perceived generally as the legacy version keeps on working all other things remaining equal - that is, on the same platform with the same hardware.

The Case for the App Store

The App Store however grants a lifetime update cycle to any app purchase. There is no other option for developers but to stop supporting an App and launch another one.

In-App purchase significantly widens the possibilities of future revenue for developers. And although recurring fees are not something users seem to be ready to pay for now for productivity or utility apps but is widely accepted for newspapers and more and more games.

This model is economically justified: the more users enjoy the software the more he has to pay. 

Freemium or Ads

But is it strategically desirable to charge more people that are the the App's biggest fans and promoter? 

Freemium should set some standards, as for Real Racing 3, it's less the model that is at stake but the lack of visibility. It is difficult to establish what the payment's effect will be in the longer run, which can be the deal breaker.

One alternative enabling a revenue stream is advertising. It's not an option for most developers. We loathe advertising as users - we mostly hate it as developers. Because we hold in high esteem our users, no matter if they chose the free version. And because we want our Apps to be cool, effective unobtrusive.

So Where do We Go From There?

We keep innovating, growing, capturing a bigger audience among the million new iPhone, iPad and iPod users! We keep offering good free software and ensure that people that really use it an appreciate it get what they need when they do us the pleasure of buying our premium version.

Vic - DigiDNA Team