Does the Mac App Store need paid upgrades?

Sad Professor

There has been a lot of interesting discussion in the Mac blogosphere about this in the last couple of weeks. As it currently stands there is no way for developers to do paid upgrades on the Mac App Store. In other words, when you buy an app you've seemingly bought it - and free updates - for life. Developers could offer a subsequent version as a separate app and remove the old one from the App Store, but there's currently no way to transfer app data over, or to offer a discount to users of the previous version. This situation obviously doesn't suit developers. However, since the App Store market keeps expanding it's not a major issue for them at the moment, but it will become one before long.

So what will Apple do? Whatever decision they make will have knock-on effects for the iOS App Store, so it's not a decision they will take lightly. Some feel that Apple really don't have a choice but to offer some sort of mechanism for paid upgrades. However, others think that Apple may use this as an opportunity to try and change how software is sold, possibly even doing away with the idea of paid upgrades altogether. All of Apple's profits come from hardware after all, so they aren't necessarily sympathetic to the plight of developers looking to make money off of the same application for years and years.

What does everyone think?

Talisman

Of course it needs paid upgrades - developers need to be paid for their work. If you were to transfer it to the music industry, purchasing an album on iTunes should allow you to receive a subsequent remastered version for free - never going to happen.

If you buy an OS from Apple it doesn't entitle you to free versions of every subsequent release. Upgrading from 10.7 -> 10.8 is no different from an app going from 1.x to 2.0.

Sad Professor

Do Apple care about that though? The way they see it developers should probably be trying appeal to new customers rather than making money off the old ones. This is how it is at the moment on the iOS App Store.

OS X isn't a good example since Apple charge a lot less for it than they used to and don't charge at all for iOS updates. Also note how much cheaper they are selling iWork, iLife and Aperture on the Mac App Store.

And remastered albums are a separate purchase. There's nothing stopping app developers from doing the same thing. Many already do, but are discouraged from doing so because they can't offer discounts to existing users and don't want to risk pissing them off.

The problem with paid upgrades is that they could easily be abused and would go against Apple's user friendly App Store model. I think it's more likely that they'll provide a way to transfer data over to a new app, thereby encouraging developers to sell their apps cheaply and to not exploit users with paid upgrades to existing apps.

Talisman

Apple don't care about developers, consumers or share holders. I would go as far as saying that they don't care about the law either - Try getting a VAT receipt for an App Store purchase. They just want people's money - you buy an Apple product you are tied into Apple's way of doing business. X million units sold and all the marketing BS that goes with an Apple release is great for the share price. The reason Apple has massive cash reserves is they haven't paid a penny to their share holders. In March they announced they were going to pay their share holders a dividend for the first time since 1995 (17 years), the dividend was $2.65 per share - a generous offer considering they have cash reserves of almost 100 billion dollars.

Historically the most expensive part of software publishing is the manufacturing and marketing costs - printing of packaging, manuals, pressing discs and advertising the product. The likes of the App Store has eliminated manufacturing costs but at a cost of 30% of the revenue going to Apple. There's no help with marketing the product and their suggestion on how to stand out in the crowd is to drop the price which only hurts the developer. Apple are also the gatekeepers of the store - if they don't want your product in there then you're out in the cold.

The reason Apple aren't charging as much for OS X now as before is they can't justify it. OS X is a derivative of NeXTSTEP/OPENSTEP and FreeBSD sitting on top of the MacOS file system. The Objective-C framework and WebObjects came from NeXTSTEP - that's the reason for the "NS" prefix for classes and constants using the framework which users of XCode will be familiar with. FreeBSD provided the TCP/IP and Security layer of the OS. The file system (HFS+) is still the same one they had in 1998 (Mac OS 8.1). Since then the interface has changed but what lies beneath is largely unchanged.

Snow Leopard was supposed to introduce a new file system based on ZFS but Apple decided they did not want to license ZFS from Sun Microsystems. That decision meant there was no major changes to the OS from 10.5 apart from some 64-bit Cocoa migrations consequently the price dropped. OS X 10.7 was announced as having 250 new or changed features, yet they dropped Front Row and Rosetta support. Rosetta was unique in that it was developed by Apple for OS X and there was a cost against it for each new version of OS X, effectively removing it reduced their costs.

My point about a remastered album on iTunes is exactly as you said it's a separate purchase, like wise new versions of application should be. Apple are preying on the developers in this case - they don't have the likes of the music industry in their corner to keep Apple in check.

Sad Professor

Okay, we're kinda going off topic here but what the hell. Apple do care about consumers. Consumers buy their products, so it's kinda in Apple's interest to take care of them. However, if you mean they don't care about consumers because they are an evil multinational electronics corporation that only cares about money, then you are correct, but does that really need saying? They are no different to any other big corporation in this regard.

As for the cash dividends situation, given how well the shares are doing, they are under no obligation to pay dividends. In fact, if Jobs was still alive they wouldn't be paying out anything because he was completely opposed to dividends and believed that money should be spent on R&D. And the reason they have such large cash reserves is because they make massively sought after products that sell like hotcakes. I don't own Apple shares though, so I don't really care one way or another. However, from the sounds of it you do.

And I don't see what OS X being based on NeXTSTEP et al has to do with anything.

Tbh, Talisman, I think you completely missed the point of this thread. There is nothing stopping developers from releasing an app upgrade as a separate app on the App Store and making their money that way, or indeed taking their apps off the App Store and selling them via their own website. My question was whether Apple should introduce a mechanism that would allow developers to charge for updates and if so how they should implement this.

conor.hogan.2

Apple do not care about developers even slightly, they barely even pretend to. Many will just release on their own and keep the 30% and the freedom of doing upgrades/new releases however they like.

That 30% is big, putting that back into make better installers/updaters and websites is arguably better than being in the mac app store as it currently is.

Sad Professor

It's not that Apple don't care about developers, they just tend to put users first. As a result, developers have a popular App Store they can sell their apps on that didn't exist before. I appreciate that many developers don't see it that way. They are looking out for their own interests as is natural.

However, I think they are being unimaginative when it comes to the issue of paid upgrades. They should be focused more on bringing in new users rather than making money off the existing ones. I know that's how the software market works at the moment, but the App Store is changing things. It's an ever growing central hub which every user on the platform has access to. The benefits of this to developers far outweigh the negatives. And what better way to entice new customers and keep your current ones happy then by continuing to offer free updates?

aidan_walsh

I think they are being unimaginative when it comes to the issue of paid upgrades. They should be focused more on bringing in new users rather than making money off the existing ones. I know that's how the software market works at the moment, but the App Store is changing things. It's an ever growing central hub which every user on the platform has access to.

Its a bit more complex than that. Its a balance between how much work is this major update worth to me and my users (do I release it as a free point-oh or a paid one), how do I keep existing customers who are my current bread and butter and how do I attract more customers for more bread and nicer butter.

Wil Shipley puts it better than I can:

What we would like to do charge $20 for version “2” customers upgrade to “Delicious Library ∞,” but still charge $40 for new customers. In this way we could make both upgrade revenue and new sales revenue like we did when we launched version “2,” since they both spike when we do a major release.

Remember the furore when Tweetie 2.0 was released? This was a massively redesigned application with a host of new features and it was obvious that a ton of work had gone into it. And yet there was uproar when people were asked to pay $3 to upgrade to the newest version. They felt it was too much for an upgrade (many felt that paying for an upgrade at all was shocking. I'd love to see those people's reactions to Photoshop...) Would this have gone the same way if they had the option to upgrade for $1.50 based on the fact that the App Store had a receipt for an older version? Hard to say, but I wouldn't expect it would have gotten so loud so fast.


Personally, I'm kind of in this situation right now. I don't use Pixelmator a whole lot, but when I do I find it to be a pretty good Photoshop alternative. Now, the new 2.0 went out some time back but on MAS only. Thing is, I had bought the previous release of that direct from the website just a few months before this was announced. I'd like to be on the latest and greatest if I could, but I can't justify €30 for an app that I use three or four times a month at most. If it was a less, maybe.

Sad Professor

You could just as easily use what happened with Tweetie 2.0 to argue the opposite though. That users didn't take lightly to having to pay anything to use the latest version.

A big part of the reason why the App Store has been such a success is its simplicity. If you introduce the idea that you might have to pay to keep using an app, you introduce a layer of complexity that will turn off many non-tech users. All of sudden people will feel like they are being exploited, which is what happened in the case of Tweetie. Even experienced computer users get incredibly annoyed by how developers of desktop applications handle paid upgrades. The forums on their websites turn into war zones over how much they choose to charge existing users and how often they release upgrades.

So as much as some developers may argue to the contrary, paid upgrades may not be in their interest. With every paid upgrade you risk pissing of your existing users who may decide to stop using your app, or (worse) tell their friends about it. On the other hand, if developers focus on keeping their existing users happy (via free updates), they stand to gain more users. This may not work with every app, but those developers have the option to release major upgrades as a separate app. However, that means pricing the app accordingly in the first place. This seems to be what Apple are planning to do with iWork, Aperture, etc, hence the price drop.

And not all App Store developers agree with Shepley. I also know of several apps where the developer has gone back and re-written the app from scratch while still offering it free. The developer of Reeder, for example, is currently re-writting the iPhone version and has confirmed that it will be a free update. Personally I don't think Tweetie was worth another $3, or even another $1. It should have been a free update.

Sad Professor

aidan_walsh wrote: »

Personally, I'm kind of in this situation right now. I don't use Pixelmator a whole lot, but when I do I find it to be a pretty good Photoshop alternative. Now, the new 2.0 went out some time back but on MAS only. Thing is, I had bought the previous release of that direct from the website just a few months before this was announced. I'd like to be on the latest and greatest if I could, but I can't justify €30 for an app that I use three or four times a month at most. If it was a less, maybe.

I've been in the same boat. 1Password went MAS exclusive last year. So basically I ended up paying for the app twice within the space of 6 months. However, they sold it at reduced price for the first month on the App Store and the next major release will be a free update. Interestingly on the forum the developers refuse to answer what their plans for the subsequent version is. They've mentioned they may switch to a "different model", suggesting that if the app is successful on the App Store they may continue to offer updates for free rather than release a separate app.

conor.hogan.2

1password is not (at least not now, maybe it was) MAS exclusive.

Sad Professor

They are still selling 3.8 via their website, but the latest version (v3.9) and all future versions are MAS exclusive.

Stainless_Steel

Personally I think the mac app store model is a good model. It has worked for ios devices.

There are a lot of mac users that wouldn't buy 3rd party software without it. It removes a lot of the research/purchase/installation activities that the average user won't bother doing. And they trust buying from the app store.

Regarding paid vs free upgrades - it really depends on the application and how much effort it takes developers to make a major revision. It can be good and bad.

conor.hogan.2

Sad Professor wrote: »

They are still selling 3.8 via their website, but the latest version (v3.9) and all future versions are MAS exclusive.

Ok thanks, that is something I wish they told me when I emailed them (I forgot about 1password so I re-downloaded it)

Sad Professor

conor.hogan.2 wrote: »

Ok thanks, that is something I wish they told me when I emailed them (I forgot about 1password so I re-downloaded it)

The only thing is v3.9 is Lion only. I assume that's why they are still selling 3.8.

conor.hogan.2

Sad Professor wrote: »

The only thing is v3.9 is Lion only. I assume that's why they are still selling 3.8.

Thanks. I already bought it but if 3.9 is Lion only I can not use it as I have yet to install Lion.

Talisman

Sad Professor wrote: »

Okay, we're kinda going off topic here but what the hell. Apple do care about consumers. Consumers buy their products, so it's kinda in Apple's interest to take care of them. However, if you mean they don't care about consumers because they are an evil multinational electronics corporation that only cares about money, then you are correct, but does that really need saying? They are no different to any other big corporation in this regard.

Apple care about consumers buying their latest product - once you've already made a purchase they don't really care about you. There was a good thread on one of the Mac focused sites (possibly MacRumors) some time ago sparked by a letter that a former retail employee wrote to Apple when he was leaving. The letter highlighted that Apple retail stores are no longer about giving people the Apple experience but getting them to part with their cash. For example rather than provide support for older systems staff were instructed to sell new product to customers.

As for the cash dividends situation, given how well the shares are doing, they are under no obligation to pay dividends. In fact, if Jobs was still alive they wouldn't be paying out anything because he was completely opposed to dividends and believed that money should be spent on R&D. And the reason they have such large cash reserves is because they make massively sought after products that sell like hotcakes. I don't own Apple shares though, so I don't really care one way or another. However, from the sounds of it you do.

You're right they are under no obligation to pay a dividend however if the share price were to take a nose dive they would leave themselves open to a class action law suit from share holders because they hadn't been returning a dividend. I don't think the timing of the announcement is a coincidence given that the Obama administration is eyeing up the the 100 billion dollar cash reserve of Apple and trying to figure out how to tax it. If the US government starts biting a chunk of their profits the share price will dip.

And I don't see what OS X being based on NeXTSTEP et al has to do with anything.

OS X was originally built on the best technologies available to Apple. Snow Leopard was supposed to migrate the OS to a new file system - ZFS. Apple pulled the plug on it and since then is stripping the OS back, making it more iOS like in the process. They can't justify charging €129 for an OS update when all they are essentially doing is changing the interface while removing features.

Tbh, Talisman, I think you completely missed the point of this thread. There is nothing stopping developers from releasing an app upgrade as a separate app on the App Store and making their money that way, or indeed taking their apps off the App Store and selling them via their own website. My question was whether Apple should introduce a mechanism that would allow developers to charge for updates and if so how they should implement this.

I didn't miss the point - I responded to the original question and you asked if Apple care - I don't think they care and elaborated in my subsequent response. You may have wanted me to focus solely on the App store but that is not possible when talking about Apple 'caring'.

At present Apple get money from the developer annually to be a member of a Developer Program and 30% of the revenue from sales - there is no incentive for them to implement a mechanism for upgrading Apps. They are smart people, after all they have convinced the world to buy iPods, iPhones and iPads and developers to populate the App Store with applications that help to sell more hardware at little cost to Apple.

Of course there should be an upgrade mechanism but if Apple introduce such a mechanism they will complicate the App store - it would be a struggle to maintain the store with the upgrade facility.

What happens if a user decides not to upgrade to v2.0 of a product (App), Apple will need to keep v1.x available for such a user.

What happens if such a user subsequently decides to upgrade from v1.x to v3.0 skipping v2.x - Should the user be forced to upgrade to 2.x first, effectively having to pay for two upgrades?

This is the model Apple followed for OS X Lion: Snow Leopard was a requirement in order to upgrade as it was originally only available through the App Store and Snow Leopard was required in order to access the store. Following that path for the App store will effectively put Apple on a collision course with the Federal authorities and the 30% 'agency' commission will come under investigation.

Personally I use the App Store as little as possible because I believe the model is flawed and I prefer to give the money directly to the developer. If the App is only available via the App Store then it's the developer's loss as far as I'm concerned.

My Mac App store purchases to date: OS X Lion (first purchase), Keynote and Pixelmator - A whopping €64 out of €2,300 spent on software in the past 12 months.

Sad Professor

Sorry, Talisman, I probably dragged the thread off-topic with my earlier post. When I asked do Apple "care", I was referring to the issue of upgrade pricing and helping App Store developers charge for upgrades. I don't really want to get into a debate about Apple's corporate ethics or about how the App Store is screwing developers and I apologise if I inadvertently pushed discussion in that direction.

Anyway, lets say Apple decide to implement upgrade pricing. This would give developers 4 main ways to handle upgrades:

1) Offer it as a free update

This keeps existing users happy who will tell their friends, leave good reviews, etc. As a result, new users buy the app at a rate that they never would have done before because paid upgrades would have lost many existing users or left them with an outdated version of the app. Provided it's not a niche app and the platform continues to grow, a developer could continue to make money this way for years to come. This is good for users and some developers but bad for others who may find it difficult to make money and put more work into improving existing apps.

2) Offer it as a separate app at the same price as the original (e.g. Tweetie 2.0, Apple's own apps)

This is a risk for the developer as they could piss off and lose their existing users. For this to work, the upgraded app would have to offer major improvements over the previous version and be sold at a reasonable price given that you can't offer upgrade pricing. The biggest advantage is that the app will be sold cheaper to begin with, meaning more new customers (see Aperture, FCPX). The biggest disadvantage from the developer's perspective is that without upgrade pricing there's no lock-in. So every full price upgrade is another opportunity for users to switch to a competitor's app, or simply skip the current version. Although from the Apple's POV and users in general, this might be seen as a good thing.

3) In-app purchases

This is relatively new, but a developer could potentially issue a free update to an app with a new feature that requires an in-app purchase to unlock. This is kind of a best of both worlds situation, except it would have to be a new feature to avoid incurring Apple and your users' wrath. The problem with this is that if the feature is crap, users won't buy it. Unlike with 2 and 4, the developer can't push their existing users into it and many may choose to continue using the app as it is.

4) Upgrade pricing

This is what Shipley wants and it's how the desktop software market currently works. You sell your app for €30, then a year later you release v2 for an upgrade price of €10, and so on. Unlike option 2 above, this rewards existing users, but more importantly it's a way to lock them in. As long as your existing users can get the latest version of your app for upgrade pricing they are less likely to switch to the competition. This is very good for developers, who by releasing yearly upgrades can sustain themselves, but not necessarily good for users who pay more upfront and find it difficult to switch.

Apple seem to have thrown their lot in with option 2 and knowing what they are like ("our way or the highway", etc), they probably aren't too interested in porting over the existing model to the App Store. Personally I think most new developers, the ones who have benefited from the iOS store, could survive perfectly well using option 1 or 2. The lack of upgrade pricing would probably keep the big guys away though.