Will Apples new device usher in higher priced apps?

With all the wild speculation on hardware specs, features, and contract costs floating around the web on the rumored tablet device, I thought it might be a good time to bring back another highly speculated rumor from last year. On that pertained to subject matter that did actually happen last year but never was implemented. Those discussions were based around the idea of a “Premium” application pricing structure.

Exactly one year ago, the entire iPhone blogosphere as well as commercial websites were predicting that Apple was set to release a “Premium” iPhone and iTouch section on the appstore. This was done in an effort to lure larger developers to create full featured games more in line with the Nintendo DS and Sony PlayStation Portable, and in turn give developers a larger profit margin on sales. I have been assured those pricing discussions did happen, but eventually those plans fell through. I was told this by some of the larger developers I deal with on a constant basis here at appVersity.com

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Gizmodo&#39-s rendition of the tablet sure looks sexy

Richard Teversham, previously the senior director of business, insights, and strategy for the European division of Xbox was hired and brought into the iPhone side of the business with speculation that he was to help position the iPhone and iTouch devices into a commercially viable gaming system. However, if you think about it- the iPhone specifications, design and vision was already created by that time. So….what exactly was he brought in for?

Apple’s gaming ambitions have been a case of Dr. Jekyll and M Hyde. It seems that every Apple event for the last few years would see Mr. Jobs bringing out some developers who praised the newest version of OSX and committed that they and other developers would be bringing the world of gaming to an Apple near you. Months, even years would pass with maybe three or four titles from last’s years PC hits would be released and the cycle would repeat itself.

Fast forward a few years to the iPhones launch when no one expected that the iPhone and iTouch would establish itself as a major factor in hand held gaming. It was literally a crap shoot seeing that mobile gaming had not proven to be a run away commercial success previously.

In retrospect, Apple’s smartest move was to not restrict the pricing scheme of applications and opened the doors to anyone with a hundred dollar bill and some time on their hands. Today the appstore is teaming with thousands of great applications along with hundreds of thousands of “shovel-ware” titles as well.

This alone has allowed the pricing structure of applications to flux. No games have released for over $9.99 and most offer huge discounts for the first few weeks trying to garner the attention and placement of their application in a crowded appstore and amongst the hardcore impulse consumers. With the daily deluge of applications consumers are the benefactor as developers are forced to reduce prices to nothing in order to generate sales.

Fast forward to today where we are on the verge of a possible revolutionary moment for Apple. The introduction of a new multimedia device that could potentially alter the way we think about entertainment once again. We are hearing rumors that Steve Job’s himself has been personally involved with the new device and don’t forget Richard Teversham. He brings immense talent and knowledge- and I am sure he has played a role in helping design and position this new product to entice an ever larger portion of the multi billion dollar gaming community to drink Apple’s Kool-Aid.

Without knowing the final specifications of the new device, it’s fairly easy to guess that it will have a much faster processor (and most likely multiple processors) as well as additional memory and a larger screen resolution making it a real threat to traditional consoles today. Oh, and did I mention it’s portable?

Sure it&#39-s ugly but you get the point. Larger buttons equal better controls.

Sure developers can and most likely will initially upscale current applications to take advantage of some of these features. However, give them some time and developers are going to be creating much deeper and feature complete games for a larger screen- alleviating many of the problems iPhone games face today.

Gamers will have larger surface aiding in better controlled finger movements,  additional spacing for buttons, menus, and finger gestures.  This will open up different types of games that can be made and ported from the PC while allowing them not to suffer control issues from the substitution of a mouse with finger movements.

Developers will need to spend additional time and resources to create more immersive gaming experiences over the more casual experiences on the iPhone and iTouch. Surely, these same developers would expect higher returns for their investment which leads us back to last year.

No one is saying it, and we won’t be sure until we have the final products in our hands, but if I was a betting man I would bet my house on the fact that the new applications designed specifically for the new device will have a different pricing structure that we are used to currently.

Quick and more casual gaming will remain on the iPhone, iTouch, and tablet in it’s current pricing structure with more expensive, and console like gaming being sold at higher price points.  Yes this will fracture the install base some, but we currently see that Apple isn’t afraid to force upgrades on users. How consumers will react to that as well as higher application prices is the biggest question.

Apple was able to get it’s foot in the door with the iPhone and iTouch. Sony, Nintendo, and Microsoft are well aware of how the little boy has grown up so quickly. With the release of the new tablet device, I expect them to not only open that door, but bust it right off the hinges and claim the biggest table for themselves.

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  • k88dad

    One possible side effect of the larger “tablet” format is seeing more games that didn’t make sense on a tiny screen. I’ve always chosen a computer version over a console version for certain types of games. I don’t want to play, for example, Sims or Civilization on a console. In general, I also don’t want to play them on a tiny screen (I admit that Civ Revolution is not bad on the iDevice.)

    If the larger format encourages bigger/deeper games then it makes sense to charge more for them. Support is an issue. I support developers who support me. I try their other offerings. I mention their good support in reviews. Likewise, I spread the hurt on developers who fail to support their games.

    As for iTunes, I have few issues with it. When it launches, I’m one click away from the App Store. I can also go directly to a specific app genre with a single click (menu choice.) It beats the Amazon media-buying experience. It beats any other app store. It could be better but there sure isn’t any competition nipping at its heels.

  • hkiphone

    Great article, and stimulating topic!

    Don’t have much time right now, but will get back with more comments.

    – I really do pity developers who put in so much effort but cannot get a positive response on higher prices.

    – As a consumer, I am all for paying higher prices for quality software, but I suspect the majority (especially younger generation with limited budgets as the iPod Touch/iPhone are gifts), are not.

    – If the apps are related to App Store, then everyone will be expecting the same bargain-basement economy. There will be an uproar if it isn’t.

    – Chances of the iTablet and iPhone markets being the same are hinted by the use of a “simulator” to a higher resolution. The only way this will be excused is if the higher resolution is for the next gen iPhone with greater than 480×320 res.

    Have a great weekend everyone! I think I’m going to become an insomniac next week staying up for the event blog live updates on wednesday night/Thurs early morning!

  • Snow_mani

    While I support developers and have spent many $ purchasing hundreds of apps and games, I just can’t see significantly higher prices being acceptable to the majority of current purchasers. The problem is the lack of quality control. And sadly the lack of support from so many developers. I have lost track of the number of games I’ve purchased that are just unplayable or have major flaws. Some are no better than primitive beta versions. Many are never updated and I’ve given up emailing feedback to developers who don’t respond. I’m now reluctant to purchase games and apps without first reading reviews from trusted sources or getting feedback from trusted people. Lack of quality control means that unless I know the developer and I am confident that their game will be playable, relatively bug free and that they will provide ongoing support for the game, then there is no way I’d be willing to pay significantly higher prices. And I doubt I’m alone in that.

  • JCman7

    Can I ask a question. Isnt it better to make money with the .99 value then make less sales with a higher price? Is it that big of a difference? Say for example some PC games are around $20 but I have seen them on the appstore for $5 or less and yet I buy the one on the appstore instead of the PC one because of the price, and so do a lot of people. I think many people are buying more because it costs less. I dont know I can see pros and cons and I do agree their needs to be some changes in the App Store

  • Todd Bernhard / No Tie Software

    Glenn, as a developer (and advertiser on AppVersity… full disclosure!), I would like such a turn of events. It’s been a struggle trying to price an app above $0.99, and we have a number of apps that are worth a lot more than a buck. But to stay in the Top 100, we have to be $0.99.

    Temporarily, Apple featured ‘Top Grossing’ apps. I think that might be the solution. Start weighting the rankings by dollars and you achieve what developers want. Cut out the race to the bottom, and make it worthwhile to sell a smaller amount at a greater price.

    Another result I would like to see is a pure App Store program… i.e. iTunes without the music, podcasts, movies, etc. Many people just want to search for apps, and those additional forms of media clutter up the results. If you had just an App Store viewer, you could have more categories, such as premium apps. You could also “wall off” the 17+ bikini apps, which are getting to be ridiculous.

  • Glenn

    Thanks Todd for your reply. I agree something needs to be done about the appstore layout. Rumor is that the newest iTunes after the launch of OS4 and this new tablet will have some major changes to the layouts etc..

    While I agree that pricing anything over .99 is a problem for alot of the developers I have written emails from developers that those conversations did take place and that some of the larger developers wanted and still want higher prices on their applications.

    If the tablet truly is a replacement for a laptop and developers spend more time and resources to make bigger more computer like applications I’m sure they will want a much higher profit margin. We will soon find out won’t we.

  • JCman7

    WOW nice article!! Its definitely a good question and I sure hope that prices wont go up because I will be more broke then I already am! lol But I do hope that developers will take more time into making great(er) games and then I will def pay more for them