Earlier this week, Apple announced a raft of changes to the App Store with a focus on pricing. For Australians, it means apps can be priced at anywhere from $0.39 through to $18,000. The new price points will work like this.
Prices:
will start as low as A$0.39 and, upon request, go up to A$18,000 — will offer an enhanced selection of price points, increasing incrementally across price ranges (for example, every A$0.10 up to A$10; every A$0.50 between A$10 and A$50; etc.
Apple media release
There will be some further changes allowing for greater flexibility so bundled pricing doesn’t have to end with a ‘9’, allowing for rounded off pricing. And global sellers will be able to dictate ricing in different countries with greater flexibility.
What I’m looking at is the bottom end of the market. The introduction of a $0.39 pricing category does two things.
Firstly, it give developers the opportunity to recoup some of their costs. I suspect we’ll see apps that might previously have been offered for free now hit the market at low price points. I doubt many people will begrudge rewarding a developer with such a small mount for a useful app.
For Apple, this opens up a new revenue stream. It can generate income from apps that previously didn’t create any revenue. The App Store takes a 30% commission on app sales. These free apps are great for developers trying to build a profile but make nothing for Apple. If developers start to move away from free to cheap, Apple stands to make some money.
About 95% of the 2.2 billion apps on the App Store are offered for free (some have In App Purchases to boost returns for developers). If just 1% of those charge $0.39 that creates about $80M, generating about $2.5M for Apple. That’s not a lot but with other low cost price points we could see a reduction in free apps with super-cheap apps taking their place.
While this is good for developers, I suspect we are entering an era where Apple’s focus on its service business, which is growing faster than any other market segment, means it will look for new ways to increase revenue.
It’s not all bad for customers. The lower price points are unlikely to cause customers to stop trying apps. After all, $.039 is hardly a bank account buster. But it will make us more discerning and that means software quality should improve as even a small purchase will make us stop and think whether we really need that new app.
Anthony is the founder of Australian Apple News. He is a long-time Apple user and former editor of Australian Macworld. He has contributed to many technology magazines and newspapers as well as appearing regularly on radio and occasionally on TV.