How Much Should Software Cost?
In the last couple of years I’ve reviewed many applications with a net cost of well over a thousand dollars. Considering I only review applications I like and would use myself, then I’ve told you dear readers to fork out quite a bit of hard earned. You’re lucky I try to keep it to the affordable ones. But even then, as the cost adds up, they aren’t.
If I review a $20 app every week, that’s actually over $1000 per year I’m suggesting you spend. A lot have cost less than that and many have been free, but a few, such as Parallels, have cost quite a bit more.
Over that time I’ve often pondered how much software should really cost. I don’t use every app I’ve reviewed and haven’t bought that many, although I have been lucky enough to get a few at no charge from the developer. But I don’t directly seek them out and nor does that influence my review. I haven’t posted reviews of a few because I wasn’t happy with them. (By the way, I only review apps I recommend because I’m trying to save you from doing all the legwork. Sure I could tell you what not to buy, but it saves time just to hear what you should buy. Who doesn’t go check the “Editor’s Choice” in those multi-product reviews?)
The toughest market is the under $30 market. People buying in it are often quite frugal and have probably looked for a free solution first. Pricing, though, is a sticky issue, with lots of factors influencing the cost of software.
What can I afford?
It’s all well and good for a developer to hit upon a price and whack the sticker on the app, but sometimes that price is more than we, the purchaser, can justify. Especially when it’s the tenth “must have” $20 app we’ve seen in the last month.
What can the developer afford?
Developers rarely develop purely for the love of mankind. Altruism is alive in open source, of course; however, the majority of developers I’ve spoken to do intend to make a living someday from cutting code.
The stage they are at influences the sticker price. Developers trying to turn it into something more than a hobby often charge a little higher than those happy with their day job.
Too much? Too little?
Many of the apps I’ve reviewed have been in the $5 to $25 price bracket. These can add up very quickly! Plus there’s another problem. Some apps give other apps’ prices a bad rep. One of the worst offenders is the sensational ArtRage. Come on guys! How can anyone justify $20 when compared to ArtRage?
When I started reviewing, $20 was a good, cheap app. But ArtRage changed all that. It is an app that any other developer would happily ask $80 for—or more. There have been others, but ArtRage is the standout because it was the first for me. If all software was priced in comparison to ArtRage, much of it would cost only a buck.
And then there is the software that’s overpriced. Stuff you’d happily pay $5 for, but $15? You tend to justify yourself out of it.
Others, which are reasonably priced but in the next bracket, such as Delicious Library and DevonTHINK, suffer because people have seen so much great software for “twenty bucks” that they almost expect everything to cost that little.
The OS X/iLife dilemma
Every Mac comes bundled with OS X and iLife. So when people start looking at apps that add functionality to either of those, they tend to be more cynical about having to pay.
And sometimes the issue is that the application is more expensive than the software it is adding functionality to.
iPhoto Library Manager was a classic example. Twenty bucks for something iPhoto should already do, I hear you say. And consider that if you have to buy it, the whole iLife suite only costs $79. Divide that by the number of apps and you start saying iPhoto costs only about $16. So why fork out $20 for iPhoto Library Manager? Of course, iPhoto is worth a lot more than $16 and—if you need it —iPhoto Library Manager isn’t so pricey.
OS X add-ons can be even more problematic. You see a bit of resentment in forums about having to pay for something that some feel should be part of OS X. Ironically, with Konfabulator/Dashboard, many folks canned Apple for killing Konfabulator’s business.
All up, I don’t have an answer and am opening this up to discussion. Do you have to stop yourself from buying every half decent cheap app? Are those under $30 apps fairly priced? With so many decent apps for less than $30, how do you stop yourself from buying them all?
I know we have some developers in our readership and it would be great to hear their perspective on this tricky issue of software pricing and how they resolved it.
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Comments
Value is difficult to quantify in software.
But let’s try to take a pragmatic approach to pricing. Let’s say that as a consultant, a developer could bill around $200 per hour for application development. Now perhaps I build a shareware app that takes me about a couple weeks to develop (say 100 hours for round number sake).
At $200/hr, that application is worth about $20,000 toward my total yearly salary. Obviously no one person is going to pay my $20,000 for my application, but at $20 per license, I’d have to sell at least 1000 to make what I might make as a consultant.
If I sold 4 times that amount in licenses, I might be able to make an OK living on that one title, but you would then have to factor in extra hours of support and other costs associated with having thousands of users. Much of the rest of the year would be spent supporting the users and running the business of actually selling the product (as opposed to programming other apps) so 100 hours of programming turns into a half-year or more of work on the business side.
Looking at it from the other side, I’d have to have at least 3 1000-customer titles per year to make a decent wage. Since I’m self employed, that $60,000 actually isn’t really very much since I have to pay for all my own benefits and insurance as well as the costs of running my business. Additionally, having 3 1000-selling titles is harder than it sounds.
So what is my software worth (assuming it performs a somewhat valueable service for my users)? $25? $50? How do I price it given the time I have to spend and the amount of money I need to make to continue working for myself?
Developers have to walk that fine line between “I need to make a living” and “I want to provide good software at a reasonable price to my customers.” There is also the danger that if I underprice my software, my customers might perceive it as having less value (or it ruins the market for other software [that I or others may sell], as in the ArtRage example).
So, answering the “what should it cost” question is actually pretty hard. If customers like my product and want me to continue developing for the platform, they should expect to pay a reasonable price for my time.
Off the shelf utilities in a big box software store tend to run around $50 at the low end. If my product performs a similar service, should I expect much less than that just because I’m an independent?
It’s hard to say, but $20 - $25 does seem to be a pricing sweet spot for independent developers with a small to medium sized app. If you know you’re bound to sell thousands of copies, you can afford to be more flexible on pricing. Look at Ambrosia—with only a couple exceptions, they sell most of their products in that $20 range and appear to do pretty well, but not everyone is as successful as Ambrosia.
I know how much it shoudln’t cost.
LOL!
OMG haven’t you read about Open Source articles like Eric Raymond’s? http://en.wikipedia.org/wiki/The_Cathedral_and_the_Bazaar Software should be Free!
Really My Problem with shareware and proprietary software comes when the company goes out of business, or company/individual cannot update software or even just update in a timely manner(QuarkXpress) This has happened to me too many times. I used to comfort myself by noting the old prices of software before PC developing became commonplace: often in tens of thousands of American dollars. But is $15 for a program that isn’t well supported and may not work with the next OS or Java update really such a good deal?