updated 10:40 am EST, Mon February 23, 2009
iPhone and App Prices
A new study shows that iPhone and iPod touch owners are not only frequent buyers of mobile apps but are actively driving prices down and spurring interest in app development. The findings from an ABI Research survey in November note that the iPhone's App Store is successful enough to have skewed prices of mobile apps downwards, with software often selling for $1 to $2 instead of the $7 to $25 at other stores. This encourages a large number of purchases and is said to be forcing developers to choose between price and sheer quantity.
Developers "have a 'margin vs. volume' quandary," ABI says. "Sell many copies for the iPhone at a very low price of which the developer receives 70%, or sell fewer via one of the other application storefronts, but charge a higher price and earn more per transaction."
Despite the lower prices, many iPhone and iPod users are also believed contributing to heavy spending on mobile apps as a whole. About 16.5 percent of the studied group had spent between $100 and $499 in total on apps, hinting that many of these users have bought several apps or more. The lower average price of software on the App Store and the short four-month run between its launch and November suggests that iPhone and iPod owners are aggressively downloading paid apps.
While most of the attention is going to the Apple-run service, ABI senior analyst Jeff Orr describes a "halo" as being created around third-party apps on any platform, with competitors also noticing a lift to purchases and free app downloads. He draws attention to the upcoming BlackBerry Application Center, Microsoft's Windows Marketplace for Mobile, and Nokia's Ovi Store as examples of portals that are launching in direct response to Apple's move. Google's Android Market already provides a similar front-end for phones like the T-Mobile G1.
The growth of manufacturer-run app stores represents a sharp break from the previous approach to third-party downloads, which have often depended either on third-party stores like Handango that cut royalty rates for strong sales or else downloading the software from individual websites and carrier-specific gateways.