The Downward Trend of iPhone Pricing and What it Means for Developers

If you wait long enough, that app you have your eye on will eventually cost $0.99, or even nothing, depending on how patient you are. A lot of iPhone and iPod touch applications go through a distorted bell curve pricing process, whereby they start off relatively cheap, owing to a “promotional, introductory offer”, then become more expensive (“regular price”), and then dip again, either for a set period to climb the rankings, or forever to stimulate sales for a product that otherwise wasn’t selling. A big reason for the yo-yo cost of apps is the level of competition in the App Store. We saw the number of available applications cross the 10,000 milestone recently, up from only 500 at launch. That’s a 2,000 percent increase. With those numbers, readers can afford to be choosy.

Unfortunately, for developers, attracting customer dollars often comes down to being cheaper than the other guy. The race to the bottom that results is causing problems, or at least that’s what engineer Craig Hockenberry of Iconfactory, developer of Twitterific and Frenzic, wrote Tuesday in an extended blog post directed at Steve Jobs. He claims that instead of giving iPhone app development the time and attention it deserves, developers (he speaks for his own firm, but it applies to others, as well) are focusing on limited utility and quick turnaround, in order to churn out “99ยข ringtone apps” and other apps of limited utility, but wide market appeal. The quick-hit titles are necessary just to stay solvent, according to Hockenberry.

He breaks it down into simple, dollars and cents business logic. The risk you take on when you engage in longer, more involved projects, considering the going rate for developers and designers, far outweighs the potential rewards. Essentially, a developer has to see a “perfect storm” of factors like audience and media reception, chart climbing, and extremely high weekly sales numbers to recoup on a $225K investment. If you’re looking at development from the standpoint of a responsible investor, you’re aiming for the greatest margin of return on your investment, and currently, that means developing throwaway titles with minimal turnaround and slapping a recognizable brand or internet meme in there somewhere.

There’s also the issue of volume sales, which is currently how most developers make money on their iPhone and iPod touch platforms. Hockenberry fears that given the increasing number of apps available, nabbing spots in the top lists, which is currently probably the best way to move units, will be harder and harder, especially for niche apps with handy, but very specific utility. Generally, getting to the top means having a lower price point, proven by the mad rushes on software that get discounted to the $0.99 range, as were all Pangea VR products, when they recently occupied a number of the top spots.

So how to stem the tide of bloatware and allow for an environment that encourages the development of innovative, quality applications? Hockenberry suggests introducing the ability to demo software. He believes that people will pay for quality products when they have the chance to actually compare them, not just visually, but practically, to their cheaper competitors. That’s definitely something that should be introduced. The Xbox Live Arcade is proof that the model works. Another solution? We need a cumulative independent press review site, like Rotten Tomatoes for movies, where apps won’t be priced out of the top of the charts. Promotional codes for reviewers will help increase the breadth of coverage when an app is released, but we still need a central location to connect the dots. AppShopper.com could prove a suitable venue, since it already offers a complete applications list, and the ability to browse by price and price change.

How do you make your app purchasing decisions? What do you think can be done by either Apple or the community to encourage innovative development?

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