The Angry Drunk wrote a good little piece on “The Death of Upgrade Pricing” in the new Mac App Store, essentially arguing that what developers can do is to adjust prices so that they don’t need to charge less for upgrades:
Bob’s Nifty App 1.0 is currently priced at $39.99. Bob releases 2.0 also priced at $39.99, but he offers discount pricing to the owners of version 1 at $19.99. Total cost over two versions: 60 clams. Now let’s look at this scenario in a Mac App Store world. Bob submits BNA 2.0 to the App Store priced at $29.99. A year later he released BNA 3.0 in the App Store for the same $29.99. OMGWTF?!?! That’s a huge ripoff! Or not. What is the total cost over two versions? 60 simoleans.
Okay, but instead of Bob’s Nifty App, let’s look at Rich’s. BBEdit has historically run $125—just dropped to $100—with a $30 upgrade price for major versions, and it’s a program that people hang on to. (I bought it at version 5.5, upgraded to 6.0, and recently upgraded that to 9.6 after admitting that TextMate 2 won’t be out until they finish writing Duke Nukem Forever with it.) So what’s the “right price” for BBEdit in the App Store? If we’re going to pay full price for each major point release, I’d be loathe to go over $50. Yet Bare Bones has no guarantee that somebody who buys BBEdit 9 will upgrade to BBEdit 10, and if they don’t, they’ve gotten only $50, period, instead of $100. So they have an incentive to charge $100, and they are. But how many people will pay $100 for BBEdit 9 and another $100 for BBEdit 10?
Apple can get away with the lack of upgrade pricing on the iOS App Store because the vast majority of iOS applications are $4.99 and under. It’s fair to say that people bitching about having to buy a $2.99 app over again when version 2.0 hits are just being cheap bastards, but when version 2.0 of the $49.99 OmniGraffle for iPad comes out, if we’re asked to pay $49.99 again a lot of us are going to think about that really hard. The Drunk’s solution is, I think, excellent at the price points in his example—but I’m not sure it’s so excellent if those prices double. And it remains to be seen if on the Mac, you can really slash your prices by a half or more and make it up on volume.