Are iPad Apps Overpriced?

In my initial iPad Reactions, I observed that the development community (and the media community) are clearly trying to reset customer expectations with regard to the price of native applications on the iPad. Whereas most apps on the iPhone are either free for very inexpensive ($0.99 and $1.99 are the two most common price points), iPad apps are frequently $4.99, $9.99 and even $14.99, a price point generally unseen on the iPhone. I’m hardly the only person to observe this, of course, but there seems to be widespread disagreement over whether iPad apps are overpriced or merely more expensive than those on the iPhone.

For my purposes, I step back and wonder why we expected these apps to be free (or nearly so) in the first place. Should something like Pages or Keynote be free on the iPad? Why? Consider the market for office software. On the one hand, you have Microsoft Office, longstanding champion on the desktop and the crown jewel of Microsoft’s cash machine. Today, on Amazon, the full version of Microsoft Office is over $300 ($400 if you want Microsoft Access). On the other hand, you have Google Apps – free for consumers and small businesses. $50 per user per year if you want the Premiere Edition. Pages, Numbers and Keynote on the iPad? $9.99 each.

In a way, we’re caught between conflicting paradigms for how both software and media should be priced. On the one hand, there was a period where there was a general expectation (both by consumers and by scholars and academics) that “all content should be free”, which inevitably bleeds into “all software should be free”. Books were published making this exact point and business models were built around this basic premise. And yet I wonder – exactly why do we think that all content, software and media should be free? Because radio was free (supported by ads) or because broadcast TV was free (supported by ads)? Cable isn’t free. Satellite TV isn’t free. HBO or Showtime aren’t free. Neither is Sirius/XM.

Remember that web browsers weren’t even always free. While the university-created Mosaic was free, back when Netscape was a standalone business, one of its revenue lines was charging $50 for the web browser. Their viewpoint was that this was important software and it stood to reason that a business that continued to improve an application as important as the web browser should get paid for it. What changed? Microsoft realized that they wanted to own the browsing experience, released Internet Explorer for free (subsidized, of course, by the massive profits from Windows and Office) and reset expectations that web browsers should be free, and with predictable consequences for Netscape.

As I consider the value of the iWork apps, or MLB’s app (which, for $15, gets me access to every game and allows me to actually watch every game with my mlb.tv subscription), or genuinely good games that cost $5, I struggle to generate empathy for those complaining that these apps are expensive. A latte from Starbucks is $4. A bottled beer at most bars in New York is at least $8. So why wouldn’t I be willing to pay $4.99 for Instapaper Pro, an app that’s useful, well-designed and enables me to take the web with me wherever I go? Why wouldn’t I be willing to pay a few dollars for references of various kinds, the likes of which would have only been found in $100 textbooks fifteen years ago?

I agree that the capital efficiency of software development has led to dramatic increases in the efficiency of its production, but I don’t think that leads to a rational conclusion that all software should be free or ad-supported. I’m actually glad, in the long-term, that the pricing expectation seems to be changing. In the short term yes, I’ll pay a bit more for apps, but in the long term this ensures that the quality of apps continues to be high and that developers have a reason to take the time to create really compelling things for this platform. At $0.99 an app, this motivation isn’t necessarily there, so as a user, the higher price point of iPad apps is good for me.