Dear Apple: How About that Premium App Store?

Just prior to iPhone 3.0 there were rumors that Apple would introduce a Premium App Store which would let high quality apps in the $10 or $20+ range enjoy some breathing room away from the "race to the bottom" pressure of the current cheapy novelty app crowd. Why is this still a good idea? Well, AppCubby has run the numbers and it looks like $5 (down from $10) is the new ceiling for App Store apps:

With the average price in the App Store now at $1.39 for games and $2.58 for all apps, the App Store is killing the value perception of mobile software shoppers. Some would argue that this is just market economics at work, but I think there is a very strong case to be made for Apple being directly responsible for this trend. Whether they did so deliberately or inadvertently is still up for debate, but either way, the future of iPhone platform and of the entire mobile software industry hinges on the direction Apple takes with App Store 2.0. The downward spiral in app prices caused by the Top 100 list and Apple's relatively hands off approach during the first year of the App Store has created completely unrealistic pricing expectations that may haunt the entire mobile software industry for years to come.

The logic is this: if developers can't earn a fair living making great iPhone apps, they aren't going to make great iPhone apps. (Think about it, would you work day and night if you couldn't feed your family at the end of the week?)

Gizmodo adds in the gaming angle:

There's no easy solution to this, which means that iPhone users shouldn't expect much more complicated games than what's already on there now. All the talk of the iPhone competing with the DS or the PSP in terms of quality may be moot if there's nobody there to spend the effort developing that level of games.

We here at TiPb have long held that we don't mind paying higher prices for higher quality apps. Why? Because we want them, we love them, and are happy to support them so we get more and better for years to come. The iPhone itself isn't cheap and the idea that we can't afford $10 (or more) for an amazing new game or innovative new app is just ludicrous.

Apple mentioned on their Q3 2009 conference call yesterday that they had room to improve on the App Store. A Premium App Store (or App Store Plus, or whatever name it goes by), perhaps combined with Craig Hockenberry's idea of a premium developer membership, could be a great place to start.

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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There are 23 comments. Add yours.

d.allen says:

This seems silly to me.. people are going to purchase what they want to purchase. I bought mega man 2 yesterday for 4.99.. I wouldn't have paid 10 for it though.. I have expensive games, and inexpensive games.. The inexpensive obviously far outweight the higher priced, but thats because thats all I'm looking for at the time.. I would never pay 15 bucks for an IM feature like beejive, cause I don't have the use for it, but I would purchase a tom tom device, if/when it comes out, cause I would use that. It seems people are just not making enough great apps to ask for a higher price point.. and are complaining, before they even get an app on the market. If you sell a $10 app to 1000 people, or a $1 app to 10000.. you make the same profit.. the iphone has a lot of users, looking for quick buys.. take advantage of that as an app creator, I say.

baconboy says:

I'd be happy if they'd just allow us to sort search results by the number of stars that customers have rated a particular app. I'd be happy to pay an extra few dollars for an app that is really good over a poorly designed app that is free or $.99. I hate having to search through a bunch of apps to see which ones are actually decent. Plus this would allow the best apps to rise to the top.

sting7k says:

Something needs to change to seperate the 60,000 completely dumb crApps from the 5,000 ones that deserve some attention. Need a new way to search or categorize the apps so you can get past the junk.
A premium section or something I would not mind, I would like it if there were apps worth it. I remember in the days of the PDA there was a pretty big section of software for Palm devices (even some Windows CE), why does no one feel the need to pay for quality software anymore?
It may be hard to charge people's minds now except for the techy power users. A huge amount of people I know with iPhones have said they will never spend a single dollar in the app store with all the free stuff. Even after I show them the full version of games they have and truely awesome paid stuff they still won't even pony up for 99 cent apps.

The Devil's Advocate says:

Has anyone thought that maybe this new model plus economics are driving down the cost because that's what the market wants? I see tons of quality apps. Some of the best quality apps are even free! Some of the crappiest apps are $5. Price does not always determine quality.
Take for example, Beejive. I can get quality multi-IM chat clients on my Mac or PC for FREE. And Beejive has the balls to sell a similar app on the iPhone for $10? If, and when, Trillian Astra for iPhone is ever completed, it will destroy beejive because chances are it will be free. I also do not need to pay to check my IMs on my iPhone, they aren't important. Maybe Meebo will compete here eventually as well because they plan a push client too.
We have this notion that it's got to be $20 for Nintendo DS games, $50 for console games and $50 for PC games. But that's a price point the entire industry agreed on but that doesn't mean the games we buy deserve to ask for that kind of money. Apple created a market space which disrupted the current marketspace and this has huge benefits for consumers. There is plenty of crap out there but there are also so many great gems as well in the app store.

Rene Ritchie says:

@The Devil's Advocate:
Why should any of us get paid for any type of work then? I'm sure our employers/customers were rather get all our services for free...
@Sting7k:
Yep, it's almost impossible to change large scale perception. People will toss away $10 on junk but won't pay it for an app they use many times a day. No easy answer.

Jack Dodson says:

Rubbish. Market forces establish prices, nothing more. The fact of the matter is that most of the developers (Hockenberry et al) simply don't produce apps that the market sees as worth the higher prices they aspire to charge. It doesn't matter if a developer works night and day for five years to create his marvel: it is only worth what the market will pay. If you have any doubt, watch the price of the 'name' satnav apps. TomTom hasn't gone to the trouble of developing an iPhone version to sell it at $5. But just because people are prepared to pay $50 or whatever the cost will be for TomTom, that doesn't translate into paying $50 for a pimped Tweeter app.

Rene Ritchie says:

@Jack Dodson:
Not true at all. Did the market set diamond prices or did de Beers? "Market forces", like any complex system, are subject to initial conditions and myriad interactions (manipulations), and will end in chaos if not balanced. Extreme behavior is seldom tolerated in nature. :)

d.allen says:

@Rene
Off the top of your head, could you list your top five apps over $10.. and then, after purchasing, do you feel you get the use out of them that you would expect(not now if you don't have time, but maybe in a premium app review). I currently have no apps over $10.. I have payed the $9.99 price point many of times.. but I just don't see what apps people are talking about.. like I mentioned.. it feels like people are complaining about having to compete with a market of low priced items, when really.. they aren't competing at all.. cause they aren't in the market.. Why anyone would pay $5 to $15 dollars for a twitter app, or for beejive is beyond me.. you have safari on your phone.. why not us it.

Rene Ritchie says:

I paid $9.99 for the original Twitterrific and would have paid the same for 2.0 had they not made it a free update. I want to incentivize the kind of innovation that came between 1.0 and 2.0 so I can get more yet with 3.0.
You can spend more than $10 at McDonalds these days for a meal that's gone in an hour but haunts your health for a week. Bad movies you wish you never watched have ticket prices over $10 that people flood the theaters for.
It's not that there aren't $10+ apps that are worth owning, it's that there are apps worth over $10 that aren't charging it.
And given the current market and user consciousness, that's likely not going to change: devs will either make high selling, low cost fart apps or leave the platform.
"market forces" may have something to do with setting prices, but they can't force developers to work for those prices. If there's no viable business case, they just won't make the apps.

d.allen says:

I have purchased air mouse, mlb at bat, tiger woods, officedoc(I stand corrected, I did spend more then 10 on that) in the last couple months.. those were all higher price points when purchased.. I get use out of them.. I just feel your arguement is, you'd like to pay more for apps like twitterrific then you already have.. which seems well.. like you want to give money away.. I got a wallet if you do. :) (yes, I pay 7 bucks at Mcds sometimes, but then I'm atleast full for awhile.. they fed me.. I don't want or need to pay $10 dollars for an app that tells me what my friends and random celebs are doing.. thats crazy, but to each their own)

keiffer6 says:

Here is my reason for not paying for higher priced apps. There is no way to know that the app you are buying is worth the money you spend. If Apple would come up with a way to try an app out before you buy, then I think more people would be willing to pay for higher priced apps. There have been a number of games that I downloaded the "lite" version for and then purchased the full version because I liked it. There have also been some that I have not bought the full version because the lite version wasn't very good.
The rating system in the past was very flawed. It is better now, but I still don't know that I would base buying a $10 app on what the developer wrote, the reviews, and 4 or 5 screen shots. There are quite a few apps that I have been interested in that cost more than $4.99 but I am reluctant to purchase them without being able to see them in action first.
Of course I also agree with many of the others that have commented. There needs to be a way to sift through all the crap apps.

jbrandonf says:

I think the feature of a premium store should be there. People aren't spending the money now (hell I won't participate in it, donthave the excess cash) but when things pick up and money is flowing again the premium store will be able to hit the ground running.

jusbnmean says:

I agree with the others on a better search. I really would like to see the star ratings be a bit more prominent on the initial search page (similar to what Amazon does on its items). That rating just kinda helps target in on apps that might be getting good reviews from people or ones that have hit a bad streak. I am not sure how apple would create a premium app store though as who decides if an app like i-fart isn't a premium app or not and for that to not start popping up at the premium pricepoint. I kind of like having all the apps in one place. I also would be willing to pay more for higher end apps but nothing i have seen yet has set that standard. When Tom Tom releases it's navigation software that I would pay for. If some major game company started releasing high end games then that to i would pay for. So far, it's people who are just starting their own development and like any other company, nothing they have produced out of the starting gate is worth a premium price yet IMHO.

jbrandonf says:

To add, I use beejive everyday and I payed $16 for it. It's in my dock for chrissake. How can you assume the app wouldn't be used? Because i don't spend long periods of time in the app? I've spent more time in it cumulatively than any game I own.
It's a quality app that developers took a risk charging a premium for that meets my needs both functionally and aethestically. Hell, it's even on Apple list of "Apps we like".

shollomon says:

You don't manage markets because, well, you can't. Every time its tried, it fails. Be it some Politburo or Apple. Here's what will happen, and should, when the price gets to low to be sustainable for developers, they will exit the market (the company will fail or write other kinds of programs, individuals will get different jobs, whatever)and supply will decrease.
Relative scarcity will of supply produced when producers exit the market will cause prices to rise again which in turn will cause new entrants to the market. Works every time its tried.
Nobody owes software developers a living making software (same for cowboys or doctors and lawyers and such). If you can't make a living doing software development, do something else and quit whining for what amounts to price controls.

Miles says:

Personally I don't see any apps on the app store that are worth more than $10. If an app was special enough to charge $20 for it then people would buy it.

Doug Hogg says:

The problem with the App store as it is now, is that all apps are ranked together by download. All the apps are in the same bin, regardless of whether they are $10 apps or $1 apps, and of course, more $1 apps are sold, so they float to the top of the paid apps list. So then the $10 apps lower their price to get on the list. An example is Hero of Sparta which lowered its price from $10 to $1. Sure their sales are up, but if all the high-priced games go to a $1, that pushes the other apps off the bottom of the list. Right now, Apple is in danger of losing developers who can't make a living because they can't get exposure in the most important place for apps: in the top 25 list. iPhone owners will not be too happy if Android winds up with ten times as many apps a few years from now. Guess what, people will move to Android phones, just as then bought Windows instead of Mac because it had more software.
In this society, we don't evaluate cars only by the number sold. If we did, BMWs would never appear on the top list -- that list would be populated by Honda Civics, etc. Then BMWs would be forced to drop prices to get on the list and become visible, but then they would have to remove features to remain viable. Of course, in the car market, there are many lists such as those put out by car magazines. But as of now, the app store list still rules what does well in the market and what doesn't.
What if Amazon only had one top 25 list, ranking every product by the number sold. We would have movies ranked with books ranked with sewing machines. What a mess! True, everything sold on the app store is an app, but they need to be ranked by type and price. In fact, if apps were ranked by dollar value of sales, that would be a better measure. Then a game which sells 10 copies at $10 would rank higher than a game which sells 50 copies at $1.
The real solution is more lists: a $10 game list, a $5 game list, etc. The developer would still get to choose his pricing tier, but Apps would be compared with other apps of the same type and pricing range. Buyers would be able to look at the $1 game list or the $10 game list as they wished.
Another needed change is better searching, so that customers can find what they want.
Basically the App store is busting at the seams and changes have to be made before it bursts and has a big meltdown (loss of developers) similar to the internet dotcom crash and the recent real estate debacle.

frog says:

The expensive apps sell if there good. I think the honest answer here, is not many apps are worth more than $5/$10 at the moment. I'll buy Tomtom, regardless of the price. I've also bought a number of $10+ apps.

ronnie says:

wow im so discouraged by this website as of now.
it is not your business to report whether apps are being inappropriately priced. im so incensed. the iPhone is so expensive that it's unrealistic to assume that a ten dollar app can't be afforded? yea, maybe ONE ten dollar app, assuming it's any good, but not multiple for a lot of people. how many iPhone owners are students whose parents are already paying a plethora of money for the phone, the monthly fees, college tuition -- and it's unrealistic to think that they don't have $10 to buy some app to help sustain some developer's living style?
the cheaper the apps the higher the demand for those apps and voila, enough people purchase an app compensating for the app's low price. this is the same argument being used on wallstreet to maintain high salaries and implementation of bonus schemes -- to retain smart employees, but it's all theoretical.
this post is more offensive in its ignorance and cornucopia of assumptions than it is informational. too much theory and not enough factual reporting. quit telling other people what to do with their money even if you think you're right in your suggestions. it's just rude.

Rene Ritchie says:

@Shallomon @ronnie
Thanks for the comments, we read them on iPhone Live! tonight and they'll be in the comments. Discussion is never bad, editorial is about choosing a point of view and arguing it, and comments allow different voices to round it out.

Don says:

When there is no assurance of quality there is little perceived value.
Most of the apps I have paid for have been "premium" apps in the $10-$30 range. However, one of them - a GPS program, I am extremely dissatisfied with.
I would return it and get a different one but but there is no promise of quality, functionality, or usability. This diminishes the value of all apps.
I also agree that finding the Quality Apps among the Comedy/Recreational Apps.
Having a seperate Q-App store and a CR-App store would definately help.

Charlie says:

I agree with this article in the sense that there is a lot of junk in the app store and the pricing is all over the place but I think there is a different issue here. 1) being that there is no way to preview the apps is causing developers to get money no matter how crappy the app is as long as it is pitched well and 2) users are downloading this crap way too much so the market is basically telling the developers iphone users love crappy apps. If apple developed a way to preview the apps first I think people would start becoming much more selective. Also my biggest gripe is why is it next to impossible to get a refund? Another tool that would eliminate the crapware.