Thursday, June 9, 2016 [Tweets] [Favorites]

Pre-WWDC App Store Changes

Apple:

Starting this summer, you’ll be able to participate in the Search Ads beta and see the ads in action.

[…]

We’re opening auto-renewable subscriptions to all app categories including games, increasing developer revenue for eligible subscriptions after one year, providing greater pricing flexibility, and more.

Apple:

If you have an app with auto-renewable subscriptions, you have the option of offering free trials to new users. The length of the subscription determines how long the free trial can be. For example, for a monthly subscription you can offer users a 7-day or 1-month free trial. When users sign up for a subscription with a free trial, their subscription will begin immediately but they won’t be billed until the free trial period is over. They will then continue to be billed on a recurring basis, unless they turn off auto-renewal.

Apple:

Within each subscription group, you can offer different levels of service (for example, basic, premium, and pro memberships) as well as durations (such as weekly, monthly, or annually).

Starting this fall, users will be able to move easily between service levels, and choose to upgrade, downgrade, or crossgrade (that is, move to another identically ranked auto-renewable subscription in the same subscription group) as often as they like.

Apple:

After a subscriber completes one year of paid service of your auto-renewable subscription, you automatically receive 85% of the subscription price, minus applicable taxes, on the subscriber’s subsequent renewals.

Apple:

Rather than needing to code your own subscription management UI, your app can open the following URL:

https://buy.itunes.apple.com/WebObjects/MZFinance.woa/wa/manageSubscriptions

Opening this URL launches iTunes or iTunes Store, and then displays the Manage Subscription page.

John Gruber:

Until now, subscription pricing was reserved for apps that served media content: streaming audio and video, news, etc. Apple is now opening it to apps from any category, which effectively solves the problems of recurring revenue and free trials.

[…]

This could be the change that makes the market for professional-caliber iPad apps possible. On the Mac, there has long been a tradition of paying a large amount of money for a pro app, then paying a smaller amount of money for major updates. The App Store has never allowed for that sort of upgrade pricing — but upgrade pricing is what enabled ongoing continuous development of pro software. Paying for each major new version, however, is arguably a relic of the age when software came in physical boxes. Subscription-based pricing — “software as a service (SaaS)” — is the modern equivalent. That’s the route both Microsoft and Adobe have taken. In the old world of boxed software and installation disks, the natural interval was the version. In today’s world where everything is a download, months or years are more natural payment intervals.

[…]

I think all serious productivity apps in the App Store should and will switch to subscription pricing.

There is uncertainty, however, because Apple’s statements seem deliberately worded to exclude some apps from subscription pricing:

In a sidebar titled “Types of Auto-Renewable Subscriptions”, Apple lists only two, “Content” and “Services” […] Professional apps that require “a lot of maintenance of new features and versions” don’t fit either of those categories. Would Twitter clients like Tweetbot and Twitterrific qualify for subscription pricing? After talking to Schiller yesterday, I thought so. Now, I don’t know. Developers are definitely confused.

It’s also not clear whether Apple will require, as it does with in-app purchases, that the app be useful without a subscription.

It’s hard to predict the effects of subscriptions without knowing the answers to these key questions. I’m cautiously optimistic because Apple is finally trying to address the problems of trials and sustainability. On the other hand, you could look at it as: this is Apple’s answer. There definitely won’t be true free trials or upgrade pricing any time soon—or, probably, ever.

The 85/15 revenue split after a year is also encouraging, not only because Apple is acknowledging that “the developer is doing most of the work,” but also because it opens the door to other fee adjustments in the future. I think there are a lot of cases where something lower than 30% would make sense. Interestingly, Google has already one-upped Apple and gone to 85/15 for the first year, too.

Assuming that any app could use subscriptions without restrictions, what would that mean? Subscriptions are definitely controversial. Customers generally don’t like them, though they may end up being the least bad option. One issue is the loss of control. It feels better to look at what’s in a new version and decide whether it’s worth it, rather than keep paying just to keep using what you already have. However, the trend is clearly toward everyone running the latest version, rather than supporting old versions. Simply maintaining an app takes work, and it makes sense for payments to reflect that. The other main issue is the overall cost. Subscriptions can really add up, and people will need to think more carefully about budgeting and saving in order to maintain access to key apps if their circumstances change.

From the developer side, recurring revenue is key, but will customers be reluctant to sign up? Even as someone who likes to pay for apps, I think twice about subscriptions. In a competitive marketplace, will customers find a subscription product attractive next to a competing one that is a one-time purchase? Will it help that only the subscription product can have a trial? How often will customers be able to try the app? How can a developer figure out a fair ongoing price up front, when it’s not known how the app’s launch will go or what path its future development will take? Will providing your own server and implementing subscriptions prove to be a difficult hurdle? I’m surprised that Apple does not provide a way to handle this automatically.

How will apps transition to subscriptions? Will they wait until when the next major upgrade would have been? How will existing customers react? Will they get special consideration? What will happen to the corresponding direct sale versions of the apps? Will they continue to be available with traditional upgrade pricing? Or will they try to honor the App Store subscription? Or offer a parallel subscription using a different payment processor?

I think the best thing that can be said for subscriptions is that they’re honest and mostly align everyone’s incentives properly. Customers will essentially vote with their wallets, on an ongoing basis. Developers who maintain and improve their apps will get recurring revenue. Apple will get more revenue when it steers customers to good apps. Over time, more of the money will flow to the apps that people actually like and use. My guess is that the average customer will end up spending more money on fewer paid apps. Some apps will become more sustainable, but others will be culled.

It remains to be seen how the search ads will work in practice, but my overall reaction is negative. An iPhone screen currently only displays two App Store search results at once. Now, the top one of those will be an ad, although customers may not realize it’s an ad. In theory, search ads could help a quality unknown app gain traction. But indie developers fear that big companies will use big ad budgets to tilt the playing field. And everyone may feel compelled to pay protection money just to keep their app in the search results for its own name. Lastly, everyone wanted Apple to fix search. Not only do search ads not do this, but they seem to give Apple a perverse incentive not to fix it.

These are clearly the biggest changes since the dawn of the App Store. I see it as a good sign that something is happening. However, much remains to be done. The store apps themselves need work, as do the underlying OS services. The Mac App Store still lags behind, without support for gifting apps or TestFlight, and the sandbox remains a mess.

More personally, although I have enjoyed quicker review times than in the past, I continue to encounter problems simply updating my apps. My last two updates were held up for two weeks by a backend store bug that prevented the packages from being uploaded with Application Loader.

Then, when one of them was finally ready for sale, I had to pull it from the store. Apple had incorrectly codesigned it so that customers could not even launch it. Why doesn’t Apple have automated testing in place to make sure that the app file that downloads is actually valid? This is a terrible first impression for new customers. And for existing customers, one day the app was working for them, and the next it was not.

After several days and failed attempts, it appears that the right people at Apple are now aware of the problem with my app. Meanwhile, I am fortunate to be able to issue customers licenses to the direct sale version so that they can actually use the app that they paid for. I’m confident that my app download will eventually be fixed, but the important point is that problems like these remain common so many years after the store’s launch. Instead of releases becoming routine, there always seems to be a new frustration.

See also:

Previously:

Update (2016-06-10): Nick Heer:

It definitely won’t work for every app, though, or even every niche. Once the uncertainty about which apps are eligible for subscriptions is cleared up, I think there are going to be specific qualities that justify a maintenance-style subscription: quality apps for a particular audience, made by indie developers who issue regular updates. And I think it needs all of those factors. Users aren’t going to pay for an app maintenance subscription if the app is of mediocre quality, or if the developer is a huge company, or if it is infrequently updated — or, at least, does not have some sort of ongoing justification for its subscription cost.

Glenn Fleishman:

This article has been updated to reflect clarification from Apple that apps approved to use subscriptions can require a subscription to use the app at all.

John Gruber:

In short, we don’t have all the answers we need yet. But Apple is aware of the questions.

Kyle Baxter:

Glad Apple’s aware of uncertainty re subscriptions and types of apps. But shouldn’t they’ve had an answer prior?

It’s kind of… weird that they wouldn’t have thought through that prior to making the announcement.

Riccardo Mori:

Among the apps I’ve bought over the years, a lot of them are quality apps I love and enjoy using, but I don’t necessarily use them all the time. […] I haven’t minded paying the occasional extra for a paid update or for the in-app purchase that unlocked more photo filters or editing features. But in the extreme case that all app developers behind these apps moved to a subscription-based pricing, without offering alternatives, I would be forced into a position I really don’t like: having to decide which app stays on my devices and which one has to go.

Manton Reece:

I hate that Apple has the power to reject our business model for a potential app. I’m now leaning more to the idea that Apple should approve nearly everything and let customers decide on the value. But there is a difference between maintenance of an app vs. a web service, and the services that are clearly appropriate for subscriptions will be the most successful apps using this new model.

Update (2016-06-11): See also:

Update (2016-06-12): Luc Vandal:

I wonder how many top class apps will switch to a subscription model. Considering it for @screensvnc but many questions still unanswered.

It’d be much better with paid upgrades IMHO in that regard but Apple thinks subscriptions are the way to go…

Vlad Savov:

The way most of us treat app purchases today is akin to buying a pair of shoes and expecting the manufacturer to provide free polishing and repairs. Forever.

The truth is that the economics of the App Store have never really made sense. We are paying negligible amounts once while expecting continuous development and improvement way off into the future.

Ole Zorn:

I still kinda want to decide for myself how long I’m wearing an old pair of shoes, and when I’m getting a new one.

Small developers shouldn’t make the mistake of thinking their app is like electricity, when it’s actually more like a pair of shoes.

See also: The Talk Show.

Update (2016-06-16): Matthew Bischoff:

Really odd that the Subscription session [at WWDC] didn’t cover any of the ongoing conversations about what’s acceptable as a subscription.

Scott Edwards:

During the live show with @gruber Schiller said they want everyone to use it, but are just leaving themselves wiggle room.

Marco Tabini:

Hard to account for “wiggle room” when you’re deciding to invest in building a new app, though.

Update (2016-06-20): Phil Schiller talked more about subscriptions and search ads at The Talk Show Live.

14 Comments

Lanny Heidbreder

Here's a part of Apple's "What's New in Subscriptions" page that I think is interesting and that not many people (if any) have talked about:

Starting this fall, apps using the auto-renewable subscription model will be able to keep active subscribers at their existing price while increasing the price for new users. You can have an unlimited number of price cohorts preserved at their existing price.

...

If you have multiple price cohorts and want to move all subscribers to the current price, increase the price starting with the cohort that is currently at the highest price, then the next highest, and so on. This method ensures that users are not prompted with multiple notices to accept higher prices.

Maybe this can be used to implement pseudo-upgrade-pricing? Say you offer a yearly $10 subscription. At intervals less than a year, you lower the current cohort's subscription price to $1, then immediately start a new cohort at $10. Long-term subscribers pay a truly insignifiicant amount for each additional year, but it's still recurring revenue at the 85/15 split.

Assuming that Apple's policies and iTunes Connect allow this scheme, the other big problem is, the developer really, really has to remember to do this often enough. Maybe someone could write a tool to automate it, like the apps that screen scrape data from iTC already?

Most users use big name apps. The main complaint regular people have with app discovery is in finding those apps. Search ads simply help with that. Yes it helps the big players far, far more than indie developers. But those are the apps most consumers want.

The reality is that the market is saturated now. People just aren't doing the kind of searching they were years ago. We could blame this on Apple's poor search and discoverability, but the reality is that's not the main problem. At this stage, unless popular apps die, people just aren't looking for new apps. They already have their note taker of choice, to do list of choice, map of choice, etc.

If players want to continue in the market they either have to target very niche markets where people are willing to pay a premium price or else build a significantly better mousetrap and then figure out the problem of marketing. And for that latter I think the ads offer a real solution.

@Clark I didn’t realize people were having lots of trouble finding the big apps. Don’t they already show up in the charts and search results (if you know the name)? Search ads do (potentially) solve a real problem. I think a big part of the complaints is that they’re being rolled out before fixing search in general.

[…] More on App Subscriptions […]

Chris Snazell

I didn't upgrade to OmniGraffle 6.x until an OS X update forced me to last year. When I evaluated 6.x at launch I couldn't stand the new UI and found it rather buggy so I didn't upgrade. If I'd been paying by subscription to use the app I'd have been battling the app store's constant efforts to downgrade me from something with which I was satisfied to the latest version for a couple of years. My general experience of SAAS is that the products tend to exist in a permanent state of being slightly broken. Windows 10's a really good example of this.

Phil Schiller's assertion in the Verge interview that subscriptions are easier to implement than free trials is bollocks frankly. The Windows Store has had free app trials since the days of WP7 and from a developer standpoint it's significantly less hassle to integrate into an app than IAPs or Subscriptions in the Apple world.

As a developer myself, I understand why developers would love the subscription model. Recurring revenue is essential to funding ongoing development, although I have to admit that when presented with a choice, I tend to purchase apps outright instead of subscribing to them.

The "consumer" side of me isn't so sure about this, especially for productivity apps which is where a lot of people seem to believe the subscription model would be best applied. If an app stops working the minute the subscription lapses, what's to stop developers from holding their users' data hostage? Imagine a scenario where the developer creates their own cloud storage system and uses a proprietary data format. You may be able to export your data to a PDF or a JPEG but the actual file you've worked so hard on is not only based on a proprietary file format that is only readable by the subscription-based app, but it is locked into being stored on that developer's server. Keep paying for the privilege of keeping your data around even if you no longer need or want the app. Or export the file to a PDF and give up the original file. Welcome to Adobe Photoshop for iOS - Subscription Edition.

OK, this is probably an extreme example. But then, who would've thought the freemium model would be so prevalent when the first games came out? People can create a lot of important data in a year which means a lot of people may not have any choice but to pony up to a subscription if they want to keep their data around, even if as the app begins to languish; takes a radical turn in direction; better alternatives become available; or the apps are simply no longer needed (career/life change, etc.).

A consumer-friendly compromise would be to ensure that apps remain usable to allow access to existing files after their subscriptions lapse, but that introduces an additional burden on developers to make sure this capability exists and is tested, and provides no future-proofing guarantee when old versions of apps break as iOS updates get released. It'll be interesting to see how this plays out in the long run.

[…] First, there’s this, from Michael Tsai’s blog: […]

[…] The New App Store: Subscription Pricing, Faster Approvals, and Search Ads by John Gruber, and Pre-WWDC App Store Changes by Michael Tsai are two good starting points. In short, the various Apple’s App Stores (iOS, OS […]

[…] as usual, Michael Tsai has a great roundup on Pre-WWDC App Store Changes if you feel like getting deeper into the discussions. If not, pleasant dreams waiting for that […]

Derek Fong: "Welcome to Adobe Photoshop for iOS - Subscription Edition."

See also Facebook. I'm all for the choice of selling services or seats according to which is the most appropriate business/customer model, but the users' data is the users' data – and how dare anyone try to take that from them.

Eh, serves us all right for stupid enough to sleepwalk straight into the Brave New Tyranny of these damned techno-authoritarian martinets.

[…] ad for a competing app above it in the search results. This is exactly the sort of thing developers feared when search ads were […]

[…] doesn’t work very well, so this change could potentially make apps harder to find. As with search ads, the name limit is not necessarily a bad idea, but it’s worrying that Apple continues to work […]

[…] Previously: Software Pricing Damage, App Store Subscriptions Clarification, Pre-WWDC App Store Changes. […]

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