The New Mac App Store: The Story Behind Those 1 Million Downloads
By all accounts the Mac App Store is a runaway success for Apple (APPL). The service, which allows consumers to download software directly to their Macs like the mobile Apple Store provides for iPhones, had more than one million downloads on its first day alone. The problem is the financial sacrifice long-time Apple developers have to make to get on board the Mac App Store, as their short-term gain may end up giving them less profit later.
The newly launched Mac App Store is a great showcase for the different values put on physical and virtual goods. Modeled after the mobile Apple App Store on the iPhone, iPod, and iPad, it launched last week with more than 1,000 apps, most priced well under $50. It essentially makes software easily downloadable directly onto the Mac. Meanwhile, similar or identical software is available for $50 (and up) from traditional brick-and-mortar outlets like Best Buy, Target, and Apple's own physical Apple Store. With identical software, the significant price difference can only be attributed to the packaging.
PC Magazine quotes Richard Gaywood of the Unofficial Apple Weblog saying:
As far as pricing goes--another eye-opener for those accustomed to paying $1 or so for apps for their various mobile Apple devices--most apps on the Mac App Store live within the category of apps priced at $5 or under. Less than 100 of the apps Gaywood surveyed are free, and slightly over 300 cost anywhere from $10 to $50.
WIRED also noticed the deep discounts:
Apple's flagship photo-editing software, Aperture, is in the store for just $80. You can still buy it from the conventional Apple Store, but it'll cost the usual $200. That's quite a saving.
Consumers expect to pay less for virtual goods because they know the companies don't have to manufacture and distribute a physical product, a misconception that's reinforced by these same companies giving deep discounts on virtual goods like apps. But producers still pay for distribution -- as my BNet colleague Erik Sherman noted, 30 percent of the retail price to be placed in the home or mobile Apple app store, for instance, compared with about 40 percent in traditional retail. And consumers may miss an even bigger point: It still cost the same amount of money for a company to develop the software, regardless of the packaging.
Consumers' price resistance for virtual goods is easy to see right now. Digital music is significantly cheaper than physical media and ebooks of hardcover titles cost only a third of the price of the actual hardcovers.
Eschewing physical products for cheaper apps may be the trend of the moment, but companies should take care that they don't end up losing money in the long run.
Photo courtesy of Cristiano Betta // CC 2.0
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