iPhone App Prices Tanking


Apple (AAPL) is famous for keeping its gadget pricing steady. But the iPhone app store is a much different market: App developers have cut prices significantly in the last few months. And the market for $10 premium apps seems to have evaporated.

The top 100 paid apps in the iPhone app store have dropped 19% in average price over the last two months, according to AppShopper sales charts we analysed. Today, the average top-100 app sells for $2.55. A month ago, it was $2.78. Two months ago, it was $3.15. (The 50 most popular apps have dropped in price even faster: The average top-50 app now sells for $2.39, down 34% from $3.63 two months ago.)

Most noticeable difference: $10 premium apps have vanished from the bestseller charts.

Today, there are zero $9.99 apps in the top 100. On Dec. 26, there were five: EA’s SimCity (no. 2), Ngmoco’s Rolando (no. 12), Gameloft’s Ferrari GT: Evolution (no. 34), Hero of Sparta (no. 35), and Brothers in Arms Hour of Heroes (no. 41). On Jan. 25, there were two $9.99 apps: SimCity (no. 49) and Cultured Code’s Things (no. 95).


What happened to them? The publishers whacked their prices: EA cut SimCity to $7.99 in late January, according to AppShopper. Ngmoco cut Rolando to $5.99 in late January and to $4.99 — its current price — last Saturday. That’s a substantial cut: 50% in about two months. Not something we’re used to seeing in either the gaming or software industries.

It’s possible that developers are making up for the lost revenue in sales volume. We’ve asked a few top developers for more colour, and we’ll update if they get back to us.

But we think it’s more likely that after the Christmas rush, it’s simply become harder to support the $10 price tag.

If that’s true, it means that a rumoured $19.99 “premium games” section of the iPhone app store is far-fetched. If developers can’t keep games selling at $10 — even for really high-end games like Rolando and SimCity — they’re going to have to do backflips for $20.

What does this mean for Apple? Not much. The company is running the App Store as a break-even service, so fluctuations in app pricing shouldn’t affect Apple. All that matters is that iPhone and iPod touch sales stay strong. If that changes, then Apple has problems.