Paid Software is Dead. Or Not.

Adobe and Microsoft — along with Evernote, Wunderlist, and other web app companies — think the future of software is subscriptions. Apple seems to think the future is lower priced pro apps without upgrades on the App Store, and free bundled apps for everything else. Game developers think the future is free apps with in-app purchases. And traditional developers with paid apps and discounted upgrades are being pushed to the side.

Is paid indie software doomed, perhaps by the very App Store that pushed so many developers to prominence?

Paying? Who Would do That?

Paid apps are over, says Marco Arment of Instapaper fame, at least on iOS. In his blog post published over the weekend, he restated what developer David Smith had discussed earlier on his podcast: normal people don’t pay for apps.

It’s a common refrain anymore. People paid for apps when the App Store launched, enough so that Apple’s paid out over $10 billion to developers since the App Store launched, but the paid train has left the station. It’s go free or go home these days, and no one wants to pay a cent for apps, especially not up front.

Here’s the thing, though: that’s nothing new. Take a look at the average consumer’s Windows PC, and see what paid apps you can find. Chances are, the most you’ll discover are Microsoft Office, a paid security app, and perhaps a few paid Adobe apps and games. Windows is practically devoid of paid indie apps — you simply just don’t see them. There’s free apps, ad supported apps, and the really big paid stuff like Office that people can’t imagine life without — and even the latter is seeing its marketshare eroded by free online alternates and simpler tools like Evernote.

That’s average people. They buy a computer, and expect it to accomplish the stuff they need, no more purchases required. If they’re going to purchase anything else, odds are it’ll have to be something preinstalled — hello again, Office and antivirus — or something they’ve heard of through normal (non-tech) media — say, games.

The Mac owns the higher end market for computers, and thus has a much wider majority of tech enthusiast users. Many of us that buy apps couldn’t imagine life without indie apps, and the constant flow of new high-quality apps is something you just can’t get anywhere else. We’re willing to pay for quality, both for our devices and our apps, and it shows.

And when the iPhone — and later, the iPad — first came out, it was that same techie, early adopter market that snatched them up. Sure, they also appealed to people simply wanting a fashion or status symbol, but by and large the people who got the iPhone wanted it for the stuff it could do. When the App Store opened, it was this market that was quick to snap up the latest and greatest apps, and was more than willing to pay for them.

The iPhone’s not rare anymore, and neither is the Mac. I’m sure the enthusiast crowd continues to grow, but the broad consumer market is growing far faster. There’s a lot more Mac users today than ever before, but the percentage of those who are excited to spend money for new apps is very likely dropping simply because it’s not just Apple geeks who buy Macs anymore. And even among our own AppStorm readers, who obviously love discovering new apps, over 17% of our responders to a recent poll said they don’t pay for apps and 55% said they pay $10 or less per month for apps and services. That’d sure make the complaints I’ve heard from numerous developers about app sales make sense.

Sounds like indie devs had better find another job.

Yet People Still Pay

And yet, it’s not all doom and gloom. There’s still a huge market for paid consumer software — remember that $10 billion number? Sure, a decent chunk of that must go to the certifiably horrible in-app purchases in games like the inexplicably popular Candy Crush, but there’s still enough people buying honest-to-goodness paid software to move the needle. Businesses like the Omni Group can release a fully new version of OmniFocus for iPhone, charge $20 for it, and still hit the top revenue charts on the App Store, and the 1Password team keeps growing by selling quality software. Obviously, people are still paying for software.

And it’s not just über-geeks that pay for software, either. David Smith used his wife as the example, so I’ll use mine. My wife the other night, without thinking, was looking through the App Store and commented on how expensive some of them were — when the most expensive one in the lineup she as looking at was $5. But even she was more than willing to put down $8 for GarageSale for iPad to help her run her eBay business, and $5 for iPhoto for iPad to touch up her pictures. Those apps solved a real need in her life, and she was more than happy to pay for them.

Even geeks that love indie software aren’t crazy. I pay for a decent amount of software, but skipped upgrading VMware Fusion this year because the updates simply weren’t anything I honestly needed. But when iA Writer came out a couple years back with its incredibly simple Markdown writing experience, I gladly paid for it because it made my work nicer. It was the app I always switched back to, no matter what other apps I tried — that is until Ulysses III came out, which with its brilliant document management, export tools, and writing experience quickly paid for itself and became the main app in my daily workflow. The same goes for Transmit, OmniFocus, Sparrow, and a number of apps I pay for — even Buffer, a service that feels a tad expensive for my tastes, solved a need in my life and was worth paying for. Michael Jurewitz found in his in-depth dive into Mac App Store pricing that average developer tools can still sell for $30 in today’s Mac App Store, and business tools on average cost nearly $50 — numbers that easily show that we’ll pay for apps that solve a need in our lives.

Make quality apps that uniquely fill a need in our lives or are exponentially better than their free competition, and people will pay. That’s why Sublime Text has built a business from people who used to swear by free text editors like Vi and Emacs, and Rockstar Games made $1 billion in 3 days of GTA 5 sales while everyone’s been saying free games with in-app purchases have killed the market.

The early adopters — the traditional Mac market — are easier to convince to pay for quality. But normal people will pay too, if you make something that improves their lives, solves a problem, or is simply fun to use. Free software has pushed the bar incredibly high, where you have to do something amazingly great for people to even pay attention if there’s a price tag in front of your app. But it’s absolutely still possible to build a business from paid apps. We can argue all day whether Apple should add free trials and paid upgrades to the App Store — I think they absolutely should add the former and am torn on the latter — but what you can’t argue is that there’s no way to get people to pay for software today.

What is very, very true, though, is that first movers have made so many todo list, focused Markdown writing apps, social networking tools, podcast apps, and more that it’s really hard to differentiate yourself in that market. You’ll have to really think out of the box to compete against the apps already out there — or make something brand new to fix those remaining problems that software hasn’t fixed yet.

We’re waiting, and we’ll still buy your apps if they solve our needs in far better ways than anything before. Promise. We’re just not likely to be in the mood to pay for a simple reskinning of your app, or Retina Display support, or some other small feature addition.