Developers have clamored for a paid upgrade system since the App Store’s inception, but I’m worried Apple won’t offer this feature anytime soon. I’m far from alone – Instapaper developer Marco Arment also predicted Apple’s non-action on his latest podcast. Yet Marco and many others don’t think this is a problem, that the current à la carte system is “the future” of software publishing. They’re completely wrong.
Apple drags its feet on paid upgrades because Apple wants simplicity for their customers. A choice between a full product and paid upgrade muddles this philosophy. For now, all users get all app upgrades automatically. If you introduce optional, paid upgrades, certain updates only apply to select customers. This adds complexity for consumers and developers having to juggle and maintain multiple app versions on the store.
In addition, the lack of paid upgrades keep app purchase prices lower. This is simple economics: on the App Store, developers have to force a repurchase between major versions in the form of a new app. App prices will be driven lower to offset the much larger sticker shock between versions and to account for boosts in upgrade revenue (100% of the product cost instead of some smaller fraction.)
I don’t think this is a good economic model, especially for more expensive, professional level software, such as Omnifocus and Photoshop. But remember, Apple is not, at its core, a software company; they make money from selling iPhone and iPads. The cheaper the software, the greater the incentive we have to keep on buying Apple’s hardware.
Also it’s professionals and power users – both niche Apple consumers – that demand paid upgrades, not the core audience. Given how rarely Apple updates its pro products (e.g. Mac Pros, Aperture, Final Cut) in the last few years, we’re in for a serious wait before Apple takes any action here.
Marco defended Apple’s inaction on this week’s Build and Analyze podcast; I disagree with him. A lack of paid upgrades causes two main problems:
The absence of an incremental purchase kills a huge source of revenue for developers and publishers. Without both new software and upgrade streams, many publishers, from high end publishers like Adobe to independent studios like Delicious Monster and Panic have a hard time staying afloat. In economic terms, a lack of price discrimination between more receptive, existing customers and newcomers is a major problem.
Customers get angry and frustrated when they can’t upgrade. Naturally for apps under a few dollars, this issue doesn’t apply, given the small investment. Yet if you’re considering $40, $80, or hundreds more for a purchase, an upgrade by way of repurchasing the software is costly. It’s especially aggravating if the next big upgrade is launched soon after you buy the old version. This keeps potential buyers on the sidelines between major releases, exactly the time when many developers need revenue to keep going.
Apple needs a change in course here. A lack of paid upgrades is killing both developer revenue and consumer interest in a lot of great apps. It’s also watering down app quality, especially in the iPhone and iPad markets where there’s no App Store alternative.