This Week in Tablets: The secret inequity of app store pricing

April 7, 2012
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This week, three interesting developments provided evidence that, despite concerns the tablet and mobile markets are reaching a state of maturity, there’s plenty of evolution left.

As much as the media likes to focus its attention on the hardware, apps and software are driving the tablet revolution. Doubters need look no further than RIM’s ailing BlackBerry PlayBook—a superior piece of hardware with no developer support—for proof.

However, for many tablet and mobile developers, the pricing model that is so appealing to consumers can work against long-term profitability.

Consider this: You’re a developer. You sell your app for $3.99 or $4.99. After a nice wave of purchases and the subsequent feature/change requests from users, you decide it’s time to update and upgrade your app.

Unfortunately, barring a change of business model, you’ll never get another dime from the consumers who have already purchased your app. These users, and all the new users who buy your app, literally get lifetime access to all the upgrades, improvements, and enhancements you’ll spend your time on over the next x years.

That’s a problem. Every quarter of every year, developers sweat out many hours working on their existing apps in an attempt to keep up with evolving demand, yet they don’t see a dime from their efforts from existing users.

Ironically, this is the 180-degree opposite of the problem that exists in the desktop software world, where annual updates by Microsoft, Apple, and other companies force individuals and the enterprise to pony up substantial dollars every year or two in order to gain access to a few valuable new features and a host of features they’ll never use.

So what’s the answer?

A few months ago, I had lunch with a developer whose apps are consistently at the top of the Android charts. The developer, who will go unnamed, lamented that some of their users were coming up on 3 years of use for a $2.99 app that had received substantial updates eight different times.

That’s incredible value for end users, and with the consecutive waves of new users pouring into the tablet and smartphone gates on a daily basis, no one—developer or consumer—is complaining right now.

For the most part, tablet apps are smaller in scale and ambition than the ponderous desktop software suites of yesteryear, so the reduced fees are logical. But my lunch companion voiced the suspicion that, over the long-term, the notion of unlimited upgrades feels like a losing proposition.

So what’s the fix? Over the last few weeks, three major announcements and releases from developers—two small and one independent—opened my eyes to the notion that a shift in app pricing may actually be occurring right in front of our eyes:

The complimentary pairing: In announcing the newest, design-enabling release of its database software, FileMaker also announced that the iPad extension of the database—a full-fledged data in/out app—would be free for people or organizations who purchased the new desktop version of the software. Sound thinking and, considering that last year’s version of FileMaker Go cost $20 for each device, ample incentive for database driven deployments to upgrade. To be fair, this model is already pretty common in some vertical industries. But not everyone is on board here yet. Ahem, Microsoft. 

Recognition of multi-device streaming: Last year, Major League Baseball frustrated a number of consumers by forcing us to pay a yearly or monthly subscription fee, and then $10 more for each version of the app on each device we owned. With the MLB At Bat 12 app release, you don’t have to pay for the app at all if you’re an existing subscriber. And if you aren’t an existing subscriber, you can pay $15 up front and a recurring in-app subscription charge of $3 per month to watch the same games you can via the big-screen version. Viewing sports on mobile devices still has a long way to go–regional blackouts remain a pox–but this is a good start. 

Pay-for-what-you-need pricing: The recent release of Paper by FiftyThree opened eyes, not only because the ideation app is so elegant and easy to use, but also because the pricing model allows users to download the app for free, and then pay for specific tools they need, versus paying a chunk of money up front for a bunch of tools they don’t.

There’s still no easy answer for app developers who work tirelessly to upgrade their apps, but I’m convinced that a fourth and fifth category will quickly emerge to support these developers. At some point in the near future, we’ll begin to see in-app upgrade options that allow user to pay $3.00 to unlock or upgrade to new features.

Alternatively, we’ll begin to see premium app subscription models that offer ongoing improvements, new features, and more for a recurring monthly fee.

We’ll see the former well before we see the latter, but developers are beginning to figure this one out and, as long as prices stay below $5 or $10, I’m not imagining that anyone will complain.

One thing is clear: in-app purchasing is not going away. Amazon is testing it on the Kindle Fire.

Blurry fonts and the licensing limitations that create them

It turns out there’s a clear reason why some magazine apps have fuzzy or blurry-looking text on the new iPad. In an Epicenter piece entitled How Licensing and Hardware Bottlenecks Confound Magazine Text on the iPad, Wired’s Tim Carmody explains that Apple trickery and font licensing are actually to blame for the fuzzy, non-scaling fonts you may have seen on your new tablet.

The short explanation is this:

1. The iPad pulls off a lot of background tricks to render fonts in a nice-looking manner without slowing down performance.

2. Because of this, and because of the way the iPad handles the output of text and graphics, publishers decided to use PNG files instead of PDFs. (Carmody goes into considerable detail around this.)

3. Publishers also use PNG files instead of PDFs because, in an effort to protect their fonts from being reverse engineered, font foundries do not license their typefaces to be used in PDFs, HTML5, or any other dynamic format.

Thankfully, there’s hope on the horizon. Publishers, font foundries and Adobe are working together to secure the fonts themselves and to reproduce them in crystal clear fashion.

This week’s winner: Samsung

The South Korean electronics manufacturer reported a record quarterly profit of 5.8 trillion won (USD $5.1 billion) CYQ1 2012. The Galaxy Note-a hybrid phone/tablet with a bundled stylus was a big part of the earnings upside, selling over 5 million units during that time. (Please note that I refuse to use the word “phablet”. It’s terrible.)

This week’s loser: RIM

Times are tough for Research In Motion. Previously on This Week in Tablets, I discussed the massive corporate shakeup. RIM cast its decision to retrench around enterprise functions as step forward, and it seemed like a good idea to me.

But the recent announcement that RIM’s new BlackBerry Mobile Fusion product would allow IT administrators to manage not just BlackBerry devices, but Android and Apple iOS devices as well feels like complete capitulation.

Granted, Mobile Device Management is a booming category in the enterprise, and there are still a number of organizations that use the very-secure BlackBerry Enterprise Server, but this feels like a long shot. RIM is just trading in one highly competitive red ocean for another.

On the Horizon

I’ve been able to spend a few weeks with Samsung’s Galaxy Note, and I’ll be reviewing it this week. My initial reaction is that it’s an interesting model of how a stylus can turn a phone into a tablet, and it seems perfectly suited for business and work. If I was an IT organization or worked in a field where mark-up, annotation or sketching was important, I’d think about this device. The stylus could be a little more precise and responsive, however.

Further out on the horizon is DEMO, the “Launchpad for Emerging Technology and Trends”. It’s a really interesting look at emerging technology and computing, and the pitch-oriented structure of the show creates some built-in provocation and tension.

And further out than that is TabTimes’ very own TABLET STRATEGY event on April 27 in New York City. The event will focus exclusively on how organizations are deploying and using tablets to improve their businesses. I’ll be there hosting two panel discussions.

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