The App Business Has Gone Rabid, and Apple's Mountain Lion Is Leading the Pack

By Nathaniel Mott , written on July 25, 2012

From The News Desk

Apple's App Store was one of the first viable mobile platforms for independent developers, allowing them to reach a new, software-hungry customer base easier than ever before. Some developers, like Instapaper's Marco Arment, have been able to create a successful business out of app development. For all its efforts to improve software development, however, Apple has transformed the perception of the App Store from an idyllic wonderland promising riches to a cold, cutthroat marketplace where the app with the lowest price "wins."

Today I bought an operating system for $20. Just five years ago I would have paid $129 for a physical copy of Mac OS X Leopard, and today I paid less than one-sixth the price for the digital-only release of OS X Mountain Lion. Even the paltry $20 that Apple is charging can seem like an exorbitant amount to a generation conditioned by mobile operating systems to expect free, long-term upgrades.

David Barnard of App Cubby, an iPhone app development studio, explains this in his response to Sparrow’s acquisition by Google. “The thing is, the entire software industry is changing. Computer users used to spend hundreds of dollars for great software and pay again every couple years for upgrades,” he says. “But over the past couple decades people have grown accustomed to getting more and more value from software while paying less and less for it. The Web has played a huge part in that, but the trend was accelerated by the App Store and Apple’s management of it.”

Part of the problem is the App Store itself. Because Apple’s online store is so hard to search, users often rely on the Featured or Top Apps sections to figure out what they should download. Barnard provides a chart detailing Launch Center Pro’s first month in the App Store and the steady drop from being one of the top-ranking apps to a ranking somewhere between 400 and 500. Let’s split the difference and call it 450; a potential customer would have to hit the “Load 25 more” dialog box 18 times before Launch Center Pro would appear.

With a slip in the rankings so often meaning a loss in both current sales and future sales, many developers avoid the App Store abyss by giving their app away for free. Anecdotally, the top free apps tends to change much more often than the top paid apps because of sales or large clusters of impulse shoppers downloading an app because, hey, why not? This makes sense for companies with other revenue streams, like Facebook or Twitter, but free won’t put food on the indie developer’s table.

Even if a developer avoids the free trap, many don't branch out far beyond the 99-cent, $5, or $10 sweet spots. There are notable exceptions, but as a general rule it's hard to convince users to purchase an app that doesn't fit within that narrow price range. Much of this can be blamed on the sheer number of similar apps in the App Store -- search for a note taking or weather app and watch your afternoon fade away -- but the way Apple prices its apps is at least part of the issue.

Of the top 25 paid iPad apps, for example, only one application costs more than a member of the $9.99 per-app iWork suite. Many are priced lower, hovering around the $4.99 (again, per app) price of Apple's iLife products or sitting at just 99-cents.

The general consensus gleaned from the large amount of Mountain Lion reviews is that Apple’s latest iteration of OS X is a fine improvement. Apple has released a genuinely good product for a lower price than ever before, setting high expectations for app updates while kicking the price in the knees and sending it closer to the bottom than ever before.

Making Mountain Lion available for $20 makes sense for Apple, as the company isn’t dependent on software revenue and can, in all likelihood, afford to lose money on the operating system. As an Apple costumer I’m happy that I don’t have to pay an extra $110 for the privilege of using Mountain Lion; as a technology reporter that has to watch as more and more apps are launched without a sound revenue model beyond “Get users!” this move towards an even cheaper software ecosystem is horrifying.