Saturday, May 6, 2017 [Tweets] [Favorites]

Phil Schiller on App Store Upgrade Pricing

Kunal Dua interviewed Phil Schiller (via Federico Viticci, Steve Troughton-Smith):

The reason we haven’t done it is that it’s much more complex than people know, and that’s okay, it’s our job to think about complex problems, but the App Store has reached so many successful milestones without it because the business model makes sense to customers. And the upgrade model, which I know very well from my days of running many large software programmes, is a model from the shrink-wrapped software days that for some developers is still very important, for most, it’s not really a part of the future we are going.

I think for many developers, subscription model is a better way to, go than try to come up with a list of features, and different pricing for upgrade, versus for new customers. I am not saying it doesn’t have value for some developers but for most it doesn’t, so that’s the challenge. And if you look at the App Store it would take a lot of engineering to do that and so would be at the expense of other features we can deliver.

On the other hand, subscriptions aren’t available for all types of apps, are more difficult to implement and use, and—except for really high-priced apps—customers seem to dislike them compared with upgrade fees.

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

Update (2017-05-06): Mark Munz:

I’ve never seen the level of anger from loyal customers like when topic of subscriptions was brought up.

Michael Love:

I’m fortunate that my biz model allows me to monetize old users w/o upgrades, but does affect what I spend time on.

We’ve also done a major, time-consuming UI refresh on iOS, and two of them on Android, since those have a big impact on new customer sales.

But making a heavily-used feature better in ways that are only obvious to people who already bought it is not a very profitable proposition.

Whereas with paid upgrades, making a heavily-used feature better in ways that are obvious to existing customers is how you make money.

In other words, existence of ‘professional’ apps is kind of a happy accident that relied on historical circumstances we may never see again.

Update (2017-05-07): Marco Arment:

Paid upgrades aren’t always bad, but I think he’s right that they’re ideal for a pretty narrow niche relative to the entire App Store.

Siddhartha Oza:

Since OS upgrades are always free, I doubt we will ever see upgrade pricing.

Apple can’t allow OS to upgrade and a few apps stop working.

Andrew Hart:

It’s how well paid upgrades do on the Mac, and how often they’re utilised, that convinces me otherwise.

Peter N Lewis:

Upgrade pricing is not about “value for some developers” - it is about ensuring value for existing users by closing the feedback loop.

Dan Counsell:

Hands up if you’re a user and prefer subscriptions rather than paid upgrades for apps.

Jeff Johnson:

There’s a mix of app buyers:

1. Always upgrade posthaste

2. Upgrade years later

3. Never upgrade

Subscriptions scare 2 & 3 from buying app.

Diane Ross:

Apps that I recommend with subscriptions scare away 9/10 users.

Matt Gemmell:

This Schiller interview’s segment re app upgrade pricing seems extremely disingenuous. The issue isn’t “complexity”.

Will Cosgrove:

Major eye rolls when I read this quote. They want apps to be free and ad supported or VC funded money losers.

Traditional devs have no place in the app store. No one, including Apple, wants to pay for the work involved iterating apps.

Ivan Vučica:

I love “App Store has one price for an app, when you see it, you see if there’s a price on it, that’s the price” <- what are IAPs then?

Update (2017-05-12): Dan Counsell (tweet):

The idea that developers will be able to charge their users a few bucks a year and make a living from it is bonkers. You only have to do the maths to see this is going to be tough for anyone what tries it[…]

[…]

No sane person wants to subscribe to each app they use on their phone.

Here’s how I’d like monetise my apps on the App Store:

I release version 1.0 of my app on the App Store. I continue to ship free updates just like I do now. Then when I’m ready to release version 2.0, the App Store can prompt all my existing users and asks if they’d like to purchase the upgrade. The user can choose to upgrade then, or ignore it.

Kirk McElhearn (blog):

Apple doesn’t generally use the excuse that something is too hard. But Schiller makes it clear hear that this process is complex.

Update (2017-05-15): Ben Thompson:

Still, even if the U.S. government is less to blame than Smith insists, nearly two decades of dealing with these security disasters suggests there is a systematic failure happening, and I think it comes back to business models. The fatal flaw of software, beyond the various technical and strategic considerations I outlined above, is that for the first several decades of the industry software was sold for an up-front price, whether that be for a package or a license.

[…]

The truth is that software — and thus security — is never finished; it makes no sense, then, that payment is a one-time event.

12 Comments

It has value only if you want to be able to succeed at your own terms rather than Apple’s. Only relatively few developers should try that. They are a very important niche in the ecosystem, though. But Apple benefits more from the commodification of apps. So to me this “most” reads like coded language, somewhat akin to a dog whistle.

Phil is either trying to joke his way out of the problem or just adding insult to injury.

Not able to implement a basic upgrade system? Yup, his ass.

I've shipped Mac software successfully now for 20+ years. I've used the same basic model (trial, full price purchase, 50-66% price upgrade every 12-24 months) for most of that.

This model ensure that I am working as much for existing customers as for new users, and that I am incented to add new features that add value for existing customers and new customers as fast and effectively as I can.

With Apple's "free upgrades", I would be incented to only change my application to reach an ever wider audience, perhaps by simplifying it and removing features or complexity.

With subscription, I have less incentive to improve the application as fast as I can.

Regular paid upgrades close the feedback loop that ensure my interests and my customers interests are aligned and I have yet to see another system that more closely aligns them.

Marco wrote: "but I think he’s right that they’re ideal for a pretty narrow niche relative to the entire App Store."

I suspect that's because apps where upgrade revenue is crucial has avoided the App Store completely, and the App Store is full of disposable and/or never-updated software.

Personally, very few of the apps I've obtained through the App Store are ever updated. Most updates I get are for OmniFocus, 1Password, and Navicat database tools. Plus Apple stuff.

The problem for me with subscriptions is the suspicion that I'll start subscribing and then not get much of anything that would make the subscription worthwhile. So I'd be unlikely to subscribe to an app from a new developer. I'd be more likely to subscribe to something from, say, Omni, because I trust them.

Then again, I trust Adobe to continue doing work on their applications, but CS6 serves my needs just fine.

I realize that mine is a minority view. My perspective is that of a Mac developer with a modestly-priced MAS app. I had to resort to IAP as a way to increase revenue, while keeping the initial price "low."

Subscriptions are a definite way to align a developer with users. You can offer an initial (e.g., annual) subscription for a price much lower than a one-time purchase. Your customers will re-subscribe when the app is useful to them. You reinforce those renewals by continually improving the app. That's the fundamental alignment, which also helps bring new customers on board.

I agree with Jon H regarding that its hard for a new/small developer to gain the trust of customers. Its a tough problem.

@Brian There’s definitely more alignment with subscriptions than with a one-time purchase. I think most people agree with that. However, I think the problems that Love and Lewis describe are real. If the app stops working for me unless I renew, that gives me an incentive to renew, but it only encourages the developer to do the bare minimum to keep me renewing. Upgrade pricing encourages the developer to do things that I, the customer, value; and it gives me the freedom to keep using the old version without upgrading if the changes are not to my liking. There can’t be good alignment if the customer doesn’t have a choice, which is basically the case for an important app that stops working on an arbitrary date. That said, I think there are probably some app types where subscriptions make more sense for all concerned.

"However, I think the problems that Love and Lewis describe are real."

Indeed. The upgrade model definitely aligns the interests of the dev and the customer in a way that no other model possibly can.

But there's also the factor that a very sizable number of customers tend to hate the subscription model, both for perfectly rational reasons that one could write many paragraphs about, and also for less rational reasons.

I personally avoid subscription applications like the plague, unless an application is so mission-critical to me, with no viable alternatives, that I basically have no choice.

I tried subscribing to an app once, when Marco's Overcast changed to that pricing (I had previously paid for the app). I think I did it for 3 months maybe, then reverted back to the free-with-ads version. It's not that I don't want to support him or the app, it's just that subscriptions just feel weird. I'm paying for it on the hope that he'll update it one day? Yeah, no. I'd rather pay $5 now if I find the app useful, then pay more $ later to add features via IAP or whatever other one-time payment mechanism, to pay for new features that I want. It's a give and take. With subscriptions, it's just take take take and hope that one day the developer gives back. No thanks!

[…] more features could it need? It doesn’t seem like the kind of app that would need a lot of maintenance or that customers would want a subscription for. Yet platforms changed, Unicode and Emoji emerged, and the app continued to receive development […]

Ben Winters

In all transactions, it's best if the user knows what they are paying for. Subscriptions work well when there is a significant ongoing service component because its value is known in advance.

Upgrades work well when there is a solid set of new and compelling features. Not all apps, especially those designed for a 4.7" screen, should have a significant number of features added every year.

Upgrades are most needed to incentivize the development of pro apps for the iPad, where there isn't a service component. This will determine the future of the iPad and whether Pro is a useful descriptor.

Having some sort of 'standard' for subscriptions might help ease concerns. Codifying things — like always having access to your data regardless of subscription status, or having subscriptions automatically lapse if the app isn't actually used for a set period of time — could go a long way. For example, Lightroom's cataloguing and Quick Develop features are free even without a CC subscription. Being able to count on having access to my Lightroom catalog regardless of subscription status is one of the reasons I'm comfortable with paying for CC at the moment.

I know I'm in the minority as far as consumers are concerned, but I prefer subscriptions over upgrades. I feel like several of the upgrades I've purchased in recent years weren't because of new or improved features, but rather because the upgraded version is what the developer will support and update for future OS compatibility going forward. In that situation, I sometimes find that the UI of the upgraded app is changed more than it needs to be (for the sake of 'convincing' people that the app is updated and worthy of an upgrade), which usually ends up being disruptive in some way. I'd rather pay a developer a recurring amount to keep the app up to date/compatible and evolve the UI and feature set in ways that make sense for the app rather than to satisfy an upgrade cycle.

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