Last year, over 30 software developers met in a luxury loft in New York. It was an invitation-only meeting hosted by Apple, and it happened just before Apple started changing the App Store’s business model: that of app subscriptions (via Business Insider).
Developers didn’t all suddenly decide at once to create app subscriptions, Apple encouraged them. In part, this is good because it’s a more sustainable business model than a one-time only price.
The older model of a one-time price also led to a race to the bottom, where many iOS apps ended up being around US$1 or US$2. Another reason in favor of a subscription is that it means developers don’t have to rely on invasive and annoying advertising.
There are two kinds of apps: networks and hammers. Networks, like Facebook and Twitter, rely more on advertising, and the race to the bottom didn’t affect them. Hammers are utility apps, like a photo editor, tape measure, etc. These are the apps that were hurt.
But the App Store put a lot of stress on hammer makers, people and small businesses who developed tools for people to draw, or write, or program — basically, apps called “utilities” in the App Store. These developers would sell an app for a few dollars in a one-time transaction, and then they were stuck paying server costs and upkeep indefinitely with free updates.
In order to help these developers, Apple introduced a new business model in 2016. Supposedly it was referred inside the company as “Subscriptions 2.0.” It would be a way for developers of utilities to have a steady flow of money.
And it worked. Last month during Apple’s conference call, Tim Cook said “Paid subscriptions from Apple and third parties have now surpassed $300 million, an increase of more than 60% in the past year alone.”
But those don’t come from utility apps. The majority of Apple’s subscription revenue comes from the major companies like Netflix, Pandora, HBO, and others. These are content subscriptions. When Apple says at each developer conference that it “paid out US$100 billion to developers,” the majority of that money is being paid to those big companies, not independent developers.
The number of app subscriptions is probably going to keep rising, and this can be a problem for users. Those monthly or yearly subscriptions add up fast. As annoying as ads are, they are the reason why the internet is largely free. A free internet benefits everyone, while subscriptions favor people with money, and not poorer people.