Hardware’s Impact on Software Pricing

There has been a lot of discussion lately on app prices and the ability to price sustainably in the App Store. Michael Jurewitz has a nice 5-part series on the basics starting here, Marco Arment discussed it (and I rebutted), and Ben Thompson wrote about subscriptions (where I also added my two cents).

I have been contemplating another factor, though, in average software prices: the price of hardware. When systems cost thousands of dollars, spending a few hundred per title was no big deal. In those days, I believe, Lotus 1-2-3 was somewhere around $400. But as the systems dropped in price so did software prices. The Office suite went from $200 per app to $200 for four apps, and then the basics (Word, Excel, Powerpoint) were available for  $100 (Home and Student edition).

The same is true for mobile software. When devices were $500-1000 spending $30-100 for a software product was no big deal. But now smartphones are free to $200 (user perspective, with contract). The expected price of software also dropped. Now high end prices are $4.99. Furthermore, I believe this effect is only pertinent for traditional software purchases, those one-off buys that made up the software world all those years. Other models may be immune.

There have always been very expensive software packages as well, mostly because there was either limited competition or aimed at a niche that would pay or both.