Wednesday, October 27, 2010

Mac App Store Mania

It's only been a few days since Apple announced the Mac App Store and there are already predictions of rampant software piracy, Apple locking down future version of OS X to only App Store sales, and price drops to 99 cents. Let's calm down and take a step back people.

First of all, pirates will be pirates and if they want to crack your software, they will. Apple's copy protection will be broken just like every other system out there. This does not mean that your sales will drop. The honest truth is that the dishonest people using pirated software wouldn't be your customers anyway. I've lost track of how many illegal download sites display MoneyWell as one of their offerings, but I also don't lose sleep over this problem.

As to Apple shutting down all sales outside the Mac App Store, can we give them time to get it up and running before we start blaming them for something they haven't done yet? I'm willing to give Apple the benefit of the doubt on this one.

Now on to the topic that is a huge issue for me: discount pricing. I can't stand the dollar store pricing on the iOS App Store and it shows because MoneyWell is at the $9.99 price point even though many of its competitors are lower. I think it's worth even more than 10 bucks and the price is more likely go up instead of down as we add features down the road. Our Mac version currently sells for $49.99 and that price will go up when we ship our 2.0 release in early 2011. I'm also not planning to lower it when we start selling on the Mac App Store.

Why? Because our software is worth the price I charge. I also owe it to my customer base to make sure my company is well-funded and continues to provide excellent software and support in the future. The profit curve is not negatively affected by higher prices until you are significantly out of the range of your competition—and by competition, I mean software that matches your software in quality. I've seen too many companies go out of business because they try to compete on price.

I truly believe that the Mac App Store is going to increase sales for every quality Mac product on the market, but we don't know by how much. Assuming that you can cut your price in half because your volume will increase by a factor of five or ten is insane. High volume sales are never guaranteed and you may need the cash reserves you make from an initial sales spike for long term development projects or an onslaught of support.

Just because software is made up of electronic bits doesn't mean that it has any less value than computer hardware or or other electronics. There's an argument that computers have gone down in price and software should do the same, but companies like Apple aren't making less money on each computer sold. In fact, most of the time they work to increase their margins as manufacturing costs drop. Apple doesn't have $51 billion in the bank because they cut their profits in half.

There's an opposing argument which states we can charge a fair price for software because we provide lasting value. What do you pay for lunch or dinner? How about that trip to Starbucks? What's your ROI for that meal or latte and how long does that "value" stay with you? Think about that for a minute. Got a visual? Good.

If I invest in a software tool, I expect it to hang around for more than a day or two and to continue to get a return on my investment of 12-18 months before spending more money on it. Will I pay $20, $40 or $60 for software I use several times a week throughout this timeframe? Definitely. It has real value. I don't buy many games, so most of the software I invest in is either saving me time, improving my communications, or making me money. If I'm using it constantly, I want to use the highest quality software I can get. It should be well-crafted, rarely crash and never lose my data. I'm happy to pay for quality. Building excellent software is hard work and we deserve to get paid for our efforts.

Let's stick to our guns and price our software fairly so we can prosper and continue to give great service to our customers. Let's earn some profits and invest in training to improve our coding and business skills. Let's build some company bank accounts so we can afford to expand our indie companies beyond simple solo acts. Who knows—if we stop tripping over each other to get to the bargain basement—we actually may end up with several hundred more indie developers who can afford to quit their day jobs.