Software has been sold for decades. Twenty years ago, it was sold through stores like Babbage’s, Electronics Boutique, Comp USA and others. In the last ten years, a shift was been made to almost exclusively online sales. In 2008, Apple launched their App Store for selling applications for the iPhone. It brought the online purchasing of software into the mainstream, and Apple followed it up with the Mac App Store in early 2011. A year and a half later, most Mac software is purchased this way.
Software is unique from most other goods that can be bought and sold from around the world. Because it’s a collection of digital bits, and not something physical, it can be modified and updated in ways that something like a TV or lawnmower couldn’t be. Even before online distribution, software upgrades existed. In the mid-’90s Microsoft produced “upgrade” version of Windows so that a user could go from Windows 95 to Windows 98 without having to purchase the “full version”. Essentially the idea was to reward existing/past customers by providing them with a discounted version of their new software. The catch was that in order to install this upgrade, the user had to have the older version already installed. So if they purchased a new hard drive, they would first have to install the older version and then install the upgrade.
Typically software versions are represented by a number in the format X.Y (for example, 1.2). When the ‘Y’ number is incremented, that is usually considered a “minor” upgrade and usually includes bug fixes and minor feature improvements. When the ‘X’ number is incremented, that is considered a “major” upgrade and is usually reserved for more major user interface upgrades or bigger features. Paid software upgrades typically came with “major” version upgrades, while “minor” upgrades were usually freely distributed.
When Apple released the App Store (for both iOS and OS X), they removed the ability to directly charge for upgrades. Once a user bought an application, any and all updates were free as long as the update remained in the App Store. This created a problem for most developers, who now had no way to charge for continued to improvements to software. I would venture a guess that most people didn’t have a problem with this, and probably thought it was a good thing.
The average person probably doesn’t know what it takes to make software, or the amount of time required to add new features. Often the amount of time to go from version 2.0 to version 3.0 is significant enough, that new sales alone probably aren’t enough to offset development costs. In the old world, developers could require users to pay an upgrade fee. But the App Store limited their options to either giving away updates for free (and hurting themselves) or creating a separate application and charging all users the same price.
There are a lot of problems with creating a new application in the App Store. First and foremost it alienates users who already paid full price once. It’s also confusing for both existing and new users since there are now multiple versions in the App Store. Also, even for existing users who are willing to shell out for a second app, the data is not transferrable between apps (unless the developer has taken the time to work this out) and therefore the existing users could lose some (or all) of their data.
Apple added in-app purchases to the iOS App Store a while back, and eventually added this to the Mac App Store as well. Many people saw this as solution to the upgrade issue with the theory that developers could get creative about features to try and make up for any other type of solution. So far though, the experience has been less than stellar.
Instacast is one of the most popular podcatcher1 apps for iOS. It recently got a version bump to 2.0, and along with it gained an in-app purchase to make it the “Pro” version. The idea of calling a more feature filled version of an “Pro” has been popular since the iOS App Store was originally launched. Developers were creating two versions of their apps, a cheaper, or free version with fewer features, and a Pro version that was not free, or more expensive with more features.
Instacast’s “Pro” in-app purchase included several features, including the ability to create/modify playlists and smart playlists, place bookmarks in podcast episodes, set setting for individual podcasts and push notifications for new episodes. This upgrade cost $1.99. In addition to those changes, Instacast 2.0 brought some interface changes that created some new workflows for people. A result of this was that some of the ways to browse and sort podcasts was removed from the “stock” version and is now only available via the in-app purchase. As someone who uses this app every single day, I didn’t mind paying $1.99 as a way to support the continued development of the application2, but some people did not agree.
Christina Warren with a series of tweets:
There were plenty of people who shared her sentiment, and most of these people universally agree that the issue isn’t with the developers, but with Apple’s policy that there is no “upgrade pricing”. It’s literally not financially feasible for most of these developers to continue putting many hours and dollars into new features if they can’t charge for them. While new features do drum up interest, and likely lead to new sales, it’s not enough. This predicament has no doubt led to more abandonware in both the iOS and Mac App Stores. Developers release an app, make some money and move on to something else. But reputation starts to play a role. I also look at an app’s update frequency before purchasing it because I want to know if this app I am buying will still be working with the next version of the OS and also if it’s constantly being improved.
One of two things has to happen. The option that is easiest for developers and end users alike is to simply add the ability to charge for upgrades in the App Stores. This would cater to people used to the traditional model and would allow developers to keep making improvements without sacrificing their financial livelihood. The second, and more likely option is that developers and users are forced to cope with the new regime and adjust. No one that vented on the subject of the Instacast in-app purchase had any sort of issue with the in-app purchase itself. Many, like me, were happy to give the developer more money for a great and often used application. The bigger problem in this case was that features were removed from the app for existing users who were forced to pay more money to do something they used to be able to do. Even in the old world of paid software upgrades this was not the case.
I expect that in the next year we will see a shift by developers to find creative ways to use in-app purchases. I think the Instacast situation was nearly perfect. They dropped the price of the app from $1.99 to $0.99 so new users could buy the app and in-app purchase without paying much more than the existing people paid. And existing users could get the new features for a couple of bucks. If it wasn’t for the idea of removing features, it would have been perfect.