We have seen a large shift in the app economy over the past 7 years which has had a huge impact on indie software. In many ways, we have regressed to state which is simply unsustainable in the long term. If you only look at the highly publicised successes, you might assume independent developers are rolling in cash. Do not be fooled, the situation on the ground, especially on iOS, is actually very different – many indies are struggling to make a living.
Making software costs a lot of money and it has to come from somewhere. Broadly speaking, apps can be:
- Subsidised. Just because you might not be paying for it directly, you still are or someone else is. But most indies are in the business of selling directly to their customers without any such schemes, so we will ignore subsidised models in this post.
- Paid Directly. With such software, either the price has to be sustainable or the developer will go bankrupt.
We have seen large amounts of abandoned software in the App Store which is a clear symptom of unsustainable pricing. It's impossible for the market to support 1,000 new sustainable apps every single day.
The Undesirable Effects
Two undesirable side effects arise from the unsustainable pricing of apps. Firstly, it creates a low-value perception of software. Even worse, the negative perception is not confined to a particular app or developer but in the mind of consumers, it applies to all apps. After having many conversations with young professionals who possess the means to purchase apps, it's always the same story: they flat out refuse to buy apps, period. They correctly reason that when there are so many free apps available, there is no reason to pay for software. Except the vast majority of those free apps are unsustainable for their developers and they end up hurting other devs – when your competitor has priced themselves out of existence, there's not much you can do about it as most consumers are price-sensitive above everything else.
This attitude is extremely widespread and has been echoed by all of my fellow developers that I've spoken to on that subject.
Another issue arises from the fact that the price of software cannot fully capture what you're getting. Let's compare two apps that look similar on the surface:
- A $5 app that will be effectively abandoned receiving no significant updates and lacking customer support. To put things into perspective, the time the developer spent reading a support email is worth more than he got paid for the app. The App Store model is perfect for such "consumable" software as you pay a low entry price once and that's it.
- A $30 app that will be actively developed receiving significant updates and having stellar customer support. Not very suitable with the consumable nature of the App Store as it offers no trials or paid upgrades.
Looking squarely at the price, the $5 app will always win because on the surface, the two are not very much different. That's certainly the case for consumable software that you only use a few times and does not provide repeat value to the consumer. But for software that people get a lot of value out of and which they depend on, the $30 app represents much better value.
The second undesirable and very toxic side effect is that unsustainable pricing requires and encourages a dump-and-run attitude. Developers will go and build something, price it at a low pricing thinking they will just make it up in volume and when reality hits, they realise there is no point in continuing to work on their app. Naturally, it gets abandoned and they move onto the next shiny thing. Meanwhile, the App Store is filled to the brim with crapware – 1,382,097 apps at the time of writing. Have a guess at how many of these apps are abandoned and how many are total garbage. Coupled with the totally inadequate and broken App Store search engine, it's a recipe for disaster when you're trying to find good quality software. On a personal note, I'm puzzled why premium platforms (OS X, iOS) would encourage, via multiple policies, a store that focuses on quantity and not quality.
The two side effects are very harmful and breed mistrust in developers and I am totally on the side of consumers – if their favourite apps get abandoned, how can you be sure that the next one will be any different? You just cannot.
Drivers of Unsustainable Pricing
There are multiple intertwined reasons that have lead us to present state where the vast majority of apps are unsustainably priced.
Developers hope that due to price elasticity, they can stay profitable by just selling more copies at a lower price. This encourages reducing the price more and more in the hopes that getting into the top charts would produce enough volume to compensate. Except it does not and cannot for two simple reasons:
- There are exactly X number of apps in the top charts, so by definition, even if everyone reduced their prices, only the top X apps will be winners, everyone else will be a loser. Paid apps used to cost about $5-$10 when the iOS App Store launched. What happened is that we hit the floor at 99¢ and a lot of apps have been incurring heavy losses for their developers. Things have started to slightly improve over the past year or so, as more and more indies are waking up to the fact that the volume will never come and they have to price their software much higher.
- Your indie app will always be niche and you cannot hope to make it up in volume. Note that your app can be niche in two senses. On one hand, your app might be serving a niche market. On the other hand, even if you're serving a mainstream market, there will be entrenched players which are going to provide a very competitive product (even free) which you cannot directly compete against unless you become niche by concentrating on a certain aspect to give you a competitive advantage. No one cares about your handcrafted experience when there are 10,000 free apps just like yours.
The lack of trials exerts a downward pressure on prices as consumers become more and more cautious of spending significant amounts of money to try out yet another disappointing app. Statistically, the consumer is absolutely right – the chances of the next app being high quality are slim. To counteract this trend, developers have no choice but to lower the barrier to entry. But you cannot only go so far, as sustainable software will always have a higher upfront cost.
The App Store model does not provide a proper way to try out more expensive software. There are many workarounds but they are just that – workarounds, not solutions. Each approach comes with its own set of problems. Now, coupled with the general skepticism towards apps (due to being abandoned or subpar as a result of unsustainable pricing), no sane person would spend $30-$50-$100 just to try it out. It's simple as that.
The vast majority of business cannot be sustained by the revenue coming from new customers. Naturally, for a business to survive, it needs to tap into its user base – by definition, the people that actually derive value from its software. And if you actually talk to your users, they will be more than happy to support you because you are making the apps they love! Unfortunately, there is no proper way to do that on the App Store. There are some workarounds (e.g., bundles with both old + new apps being available, free with IAP, etc) but none of them are ideal and each have their own set of issues.
Paid upgrades are even better than subscriptions. Your product works even after you stop paying and you can use it for as long as you like (on the OS that it was supported on).
A related issue, that developers are partly to blame for, is instilling the expectation that once a you purchase an app, you are entitled to updates forever. This sentiment is extremely widespread and counter-productive because it's an economical fantasy.
The Path Ahead
The truth is that unsustainable pricing leads to the destruction of the healthy indie ecosystem in the long run. It's those exact same indies that are responsible for building up the platform and innovating. I have seen it first hand, try talking to developers behind the scenes. Even though I'm not very well-connected in the indie community, I personally know several top-notch indies who have just given up and stopped making apps as it's no longer sustainable. I only expect this trend to accelerate in the future.
If things continue as they are, we are on the path to miss out on a lot of innovation. Large companies are not even interested in making software that grosses anything in the $100-200k range (that figure might only cover a single engineer's salary, not including additional taxes and costs like offices etc). But that sort of money is significant enough to have an indie dev work on your favourite app full time.
At the end of the day, it's in the best interest of both consumers and developers to price software sustainably. Consumers get an app that provides them value while developers get to make a living, it's a win-win. Pricing software cheaply means that your software is doomed and has no future, guaranteed. Put a sustainable price on it and let the market decide whether it's worth it, do not pre-emptively make the decision on behalf of your customers.
Don't be afraid to price your software sustainably and fairly. It makes zero difference if there is no market for your app but if your product is genuinely useful, the difference can determine whether you will be running a proper business or just abandoning your creation.
Clarification after receiving feedback: I'm not advocating to just go and price your software higher without any reason. Set a price that will be able to sustain development. Whether that would be 99¢ or $9.99 or $99.99 is irrelevant – pick whatever is appropriate for your app, market and business.