App Subscriptions and Premium App Experiences

Today Apple announced some plans to allow apps to offer subscriptions, where you pay periodically for software. Many indie developers were quick to praise it, as support for subscriptions was something asked of Apple for years (which were only officially supported in certain types of apps, like news periodicals). Opening new business models is definitely a welcome thing, as it is currently super difficult to make a living as a small developer on the App Store.

However, I worry that Apple is chasing the wrong idea here. The App Store is now 8 years old, and the race to the bottom on pricing is well documented. Today, the vast majority of apps that get downloaded are free up-front, not paid. With over 1.5 million apps on the store, for seemingly any task you might want or game you might be curious about, there is a free variant made by the same developer or someone else. The mainstream consumer has been well trained to skip right past apps that charge a price for entry, and for better or worse, people scoff at the idea of paying for apps.

So, if mainstream users are already unwilling to pay once, why would they pay for an app monthly or yearly?

Of course, there will always be people who don’t mind (and even like) paying for apps. And there will be certain developers who cater to building apps for tech-savvy people with disposable income. Those apps have been fine and will continue to be do well with subscriptions. Vertical markets, such as those catering to education, healthcare, and retail, will also do great with this model. But for the apps that Apple highlights for consumers in its ads and marketing, demonstrating why they should buy an iPhone? There’s nothing to suggest that people who don’t pay for apps now will suddenly start paying a monthly or yearly fee to them.

Why? People don’t think any given app is worth their money when you can get that same app (from a different developer, maybe with an ad or two). And, actually, they’re right. In a marketplace, consumers dictate what is valuable, and they don’t value a premium $2.99 app over a free one that is less polished. We need to separate the idea of paying for an app from the idea of getting a premium experience. After all, the iPhone is supposed to be the premium experience. That’s how it’s marketed, that’s how it’s presented, and that’s how it’s priced. As long as the App Store is the exclusive way to distribute iOS apps, Apple is exclusively positioned to break this connection.

Apple should charge for a subscription (say, $10/month) to a premium overall App Store experience, and the money would be distributed to developers based on their apps’ usage and ratings. The model I propose is one that follows PlayStation Plus, Spotify, Apple Music, YouTube Red, and many other services. Apps that opt-in would be expected be free to subscribing customers, and would have to follow a stricter set of guidelines for a premium experience, such as having no advertising, having beautiful design, having no promotional notifications, etc. Those apps would be reviewed more strictly by App Review in order to participate. Apps would be suspended (and eventually removed) from the program for noncompliance.

This model aligns developers, customers, and Apple. Developers are incentivized to build the kinds of high quality apps that Apple wants to showcase, rather than shovelware designed to soak up IAPs and ad views. Apple is incentivized to monitor the program for great apps, and pays developers when their apps get used, not when they are marketed well. And customers are no longer evaluating whether they should spend money on any given app, but whether they the experience of using apps as a whole to be better. This will drive some mainstream consumers (not all, but hopefully a decent percentage over time) to buy into supporting apps financially.

This model is, of course, not perfect. Utilities may be underserved by usage if they are only used occasionally (though this could be made up for with ratings). Shady developers will figure out ways to exploit this system. But this has been true of the App Store since its inception. Alternate business models are finally being considered by the top of the App Store’s management. This could make a titanic sustainability shift for developers and for all of Apple’s platforms. The time is right to try.