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A $5 app isn’t expensive: Customers need to help fix the App Store economy

Lex Friedman | April 8, 2013
Given that iPhones are anything but cheap, why are so many of us surprisingly cheap when browsing the virtual shelves of the App Store? Ironically enough, that tendency to be cheap may end up proving costly in the long run.

So yes, there are free RSS readers, free writing apps, and free games and some of them are gems. But odds are that the paid apps are better, because free apps aren't sustainable.

There's a simple reason that developers charge for apps: Apps cost money to make.

When developers charge money for their apps, they can pay themselves back for their initial investment of time and resources and also invest in future app development. We as customers benefit: We get improved apps, or new apps from those developers, instead of languishing, forgotten free apps from developers who can no longer afford to work on them. For example, on myiPhone 5, there are still a few apps I use that haven't been updated for the phone's taller screen. None of them is a paid app.

Sure, you could get the free Twitter app. But paid alternatives like Tweetbot are worth the few bucks they cost.

On a $1 app, developers get about 70 cents for every sale. At that price, a developer needs to sell more than 70,000 copies of an app to make $50,000 in revenue. If it's a solo developer, that $50,000 needs to cover expenses and development and design costs - along with a salary, too.

If it's a $1 app from a company of, say, three people, then that app needs to sell well over 300,000 copies to make a sustainable business for them.

Now, if developers are pricing their apps at $1 (even though some would argue that they shouldn't), then we needn't feel guilty for buying them. But, to a certain extent, it's become a catch-22: Developers are pricing their apps too cheaply, because that's what they think people will actually pay. And so long as they're right, we as cheap customers are having a negative impact on a lot of both real and potential businesses.

The rise of freemium

Developers, though, are resourceful. Because so many App Store customers hate to pay for apps, we've seen the rise of the freemium model. To many of us, that strategy - you get the app or game for free, but to keep enjoying it, you need to make one or more in-app purchases - is even more irksome than simply paying outright.

And it's not just the fun that micropayments end up sucking out of games; oftentimes, they can end up taking even more cash out of your wallet, too. EA's Real Racing 2 initially cost $10, and plenty of gamers found that they could enjoy the game at that price, while some users instead chose to use in-app purchases to get access to more features and options without waiting. Then, Real Racing 3rolled in with its free-to-download price tag - hooray! - but it's filled with micropayments that can cost players considerably more than $10 over time, just to derive roughly the same amount of enjoyment that Real Racing 2 provided.


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