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Apple created an entire market for mobile apps with its App Store, but it has also been derided by developers who lament that the economics and pricing models are geared toward free or 99-cent games rather than serious productivity software. In the past few years, several high-profile developers have spoken out, explaining how the App Store’s pricing pressure, expectations of eternal free upgrades and lack of trial software makes developing pro-quality apps economically unsustainable.
Apple finally realized that the App Store’s rigid pricing was preventing developers from creating and maintaining serious apps.
Premium content providers have also been frustrated by Apple’s ongoing 30 percent commission on digital content sales and subscriptions. Amazon notably avoided giving Apple a cut by steering customers to the web browser for purchases instead. Spotify chose to deal with the issue by passing along the extra cost to subscribers and then encouraging them to cancel and renew directly at the end of their billing period.
Apparently Apple listened. Right before this year’s Worldwide Developer Conference, Phil Schiller announced that the App Store will soon support a much wider variety of monetization options, including trials and a reduced commission on in-app subscriptions after the first year. Apple finally realized that the App Store’s rigid pricing was preventing developers from creating and maintaining serious apps — the kind of apps that increase the "stickiness" of a platform and prevent users from leaving. In short, the kind the iOS ecosystem needs to attract and keep customers.
It was 99 cents
When the iTunes Music Store launched in 2003, it defined how music would be consumed for the next decade. By offering every song for 99 cents, Steve Jobs brought order to the chaotic landscape of digital music and jump-started legal downloads, bolstering Tim O’Reilly’s argument that "‘Free’ is eventually replaced by a higher-quality paid service." In 2008, Apple repeated that successful formula with the App Store by again focusing on consumer trust, seamless purchasing and straightforward, albeit limited, pricing — starting at 99 cents.
Creators might realize too late that the economic model a particular platform espouses doesn’t work for them.
Fast-forward to 2016, and streaming services like Spotify have eaten away at music downloads while the App Store has stagnated. App offerings have largely coalesced around free add-ons to existing services and low-priced games, leaving developers who want to build high-end software left without a viable business model, and driving premium content publishers to process transactions outside of Apple’s platform.
With its recent pricing announcements, Apple executives may have finally realized that what it takes to build an ecosystem (in this case, simplicity and uniformity) isn’t necessarily the same as what it takes to help one evolve and flourish long-term. But a more important realization might be that the creators who add value to the platform should own their relationships with their customers and have more freedom to decide how to best monetize their products.
Building a business on someone else’s platform is a Faustian bargain. In some cases, like the iOS App Store, it’s the only choice (without resorting to a web app). In others, like YouTube, Spotify, iTunes or Amazon’s Kindle store, an aggregator is often the path of least resistance because that’s where the audiences are. But creators might realize too late that the economic model a particular platform espouses doesn’t work for them. In Apple’s case, many developers have already made the tough decision to leave the Mac App Store in favor of direct sales. We’ll see if the new monetization options get them to return.
Let the creators choose
This isn’t to say monetization would be easy if creators just had more control. We can look to the newspaper industry as an example. There is no single dominant platform for news like there is for video and music — although Facebook is beginning to come close. Publishers have had almost two decades to experiment with new ways to make money, and despite the effort, many have gone out of business trying to figure out a sustainable solution. Staff numbers have been cut, and budgets for time-consuming investigative journalism have been slashed in favor of driving page views and ad impressions though clickbait headlines.
But while some publishers have failed to adapt, others have begun to thrive with innovative business models. Subscriptions are working better than ever for many quality publications. Blendle is gaining support for its micropayments platform for journalism and short-form writing. Other sites like Vox and BuzzFeed have eschewed display ads entirely in favor of native advertising.
To have any chance of success, we should encourage creators and developers to discover models that are effective for their brands.
Far from being a warning, the trials of the publishing industry can serve as a lesson. To have any chance of success, we should encourage creators and developers to discover models that are effective for their brands. Apple’s new monetization options are more evidence that looking to marketplaces to impose a one-size-fits-all approach doesn’t work.
Louis C.K. might be the poster child for this movement. In addition to offering tickets to his performances himself, he distributed "Horace and Pete" directly to fans — selling video downloads using a minimal homegrown payment system. Creators shouldn’t necessarily need to roll their own technology stack, but they do need to own their audience relationships. iOS developers have always been limited to distributing their apps through the App Store — but many have been forced to handle their monetization outside of it to make the economics work. At least now, creators may be able to combine the convenience of in-app payments with a sustainable model that allows them to continue producing great products.
Regardless of whether it’s software, content or services, there’s no simple path to helping an ecosystem grow. But denying creators the ability to experiment is surely a path to stagnation and irrelevance. One size doesn’t fit all, so we should applaud Apple for giving creators and developers the opportunity to craft their own bespoke solutions around their audiences.
Ed Laczynski is the co-founder and CEO of Zype, a direct-to-consumer video business platform that makes it easy for content owners and brands to own their audience and their revenue streams without any middlemen. Prior to Zype, he led cloud services at Datapipe, jockeyed digital technology at McCann-Ericksson and was a coder on Wall Street. Reach him @edla.
This article originally appeared on Recode.net.
