Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

And when it comes down to it, my beef with the app store isn't a legal issue either. I might be able to sue the developer for breach of contract or fraud or something, but I won't. That's an even worse move than the restaurant calling the cops.

It may be that 24 hours is too long. Or maybe the return policy should only a apply to non-games. I'd hope a return policy would obviate the need for demo versions and so on. I use them whenever possible, but sometimes it's too much of a pain to be worth it. As for reviews... please. They're too easily gamed. All the apps I've been burned by had good ratings and reviews. If they hadn't, I wouldn't have bought them in the first place.

Perhaps the rational thing to do is just buy more apps and accept that it's always a gamble and sometimes you lose. I don't find myself doing it all that often though.

Yes, there is. But not on a market where $2 is a premium price. If you want to make a living from software products you should stay away from mobile.

At least it plays out well for Apple who wanted to commoditize software for a long time.

I have heard of precisely one first hand account of this being used for a truly terrible meal. The police were called and confirmed the dinner's rights.

Say I make great coffee, I get the beans myself, I ship them by sailboat from Indonesia, and do everything by hand. People would expect to pay a lot of money for coffee like that, more than at Starbucks.

Say I make great software, I have the best designers, work for weeks on user interface details, and make a great web site to go with it. Quite apart from the general expectation that my software should be cheap, or free, there is a logical conclusion that if my software is so great I must be selling millions of copies, and at $10 a copy I'm charging way to much. If I'm selling millions of copies I should be able to price at a volume level. In economic terms my marginal costs are near zero, and if the app is so great that it is selling well then my fixed costs should be divided by a very large number.

So for physical goods, the better the product, the more you can charge. For software the opposite is often true.

At the other end of the spectrum there is software that is not expected to sell in huge volumes, and for educated purchasers they understand that these apps cost more. Probably most apps in the app store that are priced over $20 are in this category. Apple does a really bad job of supporting these apps though, theres no mechanism for trying before you buy, so the risk factor is large. If you are in a market that is well connected though, then this risk is lowered by word of mouth feedback. If your market is not well connected then you have a problem convincing users of your value.

We were in the top paid iPad apps category briefly with an app that was priced at $49, but our market for that app is small. We choose that prices based on an estimate of selling only hundreds of copies, to a user base that had already paid thousands of dollars for the required hardware for the app. We were competing against a $3 app at that time, but our assumption was that price would not be a large deciding factor for our user base, and we were right. We could invest more in the product because our price was realistic (I think) whereas our competitors had very little money to reinvest. They had to sell 15 times the volume to make the same revenue, in a small market, and that didn't happen.

Actually, what happened for the most part was that customers bought both apps. We got $35.00 from each customer and our competitor got $2.50. Once the purchase was made the price was mostly forgotten, it was the reliability and features that mattered from then on. If you do have a high priced app you'd better make sure that it works well.

      That's why RMS always said that charging for the
      act of software development is right. But charging
      for copies of the same stuff (and not providing its 
      source) is not.

When designing a new car, a lot of money goes into research and development, money that cannot be recovered (sunken costs). However, once that's over and the assembly line is put together, the cost of creating new copies (while never zero) it definitely converges to the cost of the raw materials involved. The more items the assembly line produces, the cheaper it gets. And when buying a car, you're paying a lot more than that, because you're in fact buying a brand, not just some pieces of metal put together.

I also disagree on a car being "open-source". Assuming you can make copies of your car and give those to other people, you'll be obliterated by trademark, copyright and patent lawsuits. Also many car manufacturers are voiding your warranty if you go to unauthorized car repair shops. And if you can look under the hood, that's only because of strong consumer protectionism laws.

Apple has more than 50% profit margins on iPhones. Is that moral? Well, they need to earn a profit (otherwise they wouldn't be in this business) and they also need to pay the research and development costs for newer versions or for other products. And after all, this is capitalism - if you don't like it, buy from somebody else.

So why can't this rationale also work for pure software? After all, the developer needs the profit to develop newer versions, improvements or other applications from which you may also benefit. And again, this is capitalism. If you don't like it, search for something cheaper, or create your own.

RMS's principle (being paid only for creation of software, not for delivery of copies) does not work because it doesn't scale. You cannot put together an assembly line for software, like you can for physical products. This effectively means that you end up selling your time, which makes a good living, but it won't make you rich and it won't allow you to work on lots of silly things that may or may not pay off.

Also, only simple apps can be cloned easily. No software can currently match Adobe Photoshop, which still deserves every penny, and it wasn't for a lack of trying. I use Gimp because the price of Photoshop is too high for my amateurish needs, but I would shell out the cash for Photoshop in a heartbeat if I would be a professional photographer or designer.

The $.99 price tags is common just because the app stores are filled with crap, with most apps not even deserving $.99 - but create an app that enriches people's lives and even allows them to make some money, and you'll have no problem selling it for $90 or even $900.