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Is Apple's 99-cent app price point sustainable?

According to iPhone developer App Cubby, unless your app is the "next big thing," 99 cents is not a sustainable price point for developers who hope to earn a living making iPhone applications.A few weeks ago, App Cubby reportedly experimented with its own applications on Apple's App Store.
Written by Andrew Nusca, Contributor

According to iPhone developer App Cubby, unless your app is the "next big thing," 99 cents is not a sustainable price point for developers who hope to earn a living making iPhone applications.

A few weeks ago, App Cubby reportedly experimented with its own applications on Apple's App Store. It would lower the price of its three apps -- Trip Cubby, Gas Cubby, and Health Cubby, which previously sold for a few dollars apiece -- to 99 cents for a limited time to see what effect it would have on sales. Simultaneously, App Cubby would invite its users to donate more money to the company if users felt that the apps were useful.

According to App Cubby's David Barnard, it didn't quite work in the end:

During the 7 days of the experiment, we received $75 in donations, and sales volume shot up enough to make the 7 day experiment essentially revenue neutral compared to the prior 7 days. During the first few days of the sale I was starting to think the $0.99 price point might actually be sustainable given the increase in volume.

However, Barnard notes, a lot of the initial sales spike was prompted by press coverage of the experiment, and sales began to level off as the news cycle moved on.

The solution, for App Cubby, is to embrace its applications’ niche status and charge what it believes the applications are worth: in this case, $10 apiece. The company will also be releasing “lite” versions of its apps so users can try before they buy and aggressively implementing substantial new features for its users. Or, in other words, focusing on competing not in terms of price but in terms of value.

And that's not even considering Apple's 30 percent take on profits. A graph showing what happened:

Another expert, Mike Schramm of TUAW, chimed in: "If someone can sell 100,000 copies of an app for a buck apiece (walking away with $70,000 after Apple's cut), why are the talented developers leaving? Surely you can make a quality app for less than $70,000, right?"

But very few can sell 100,000 copies of an app, apparently.

Lesson learned? Perhaps Chris Anderson's "Freemium" business model -- where one product is offered free, and the other at full price -- is more sustainable.

Thoughts?

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