App Store Economies

Before I start writing about economies and/or economics, let me put up a HUGE disclaimer: I don’t actually know what I’m talking about. That is, I have no training in economics whatsoever. What this post is based on is observation and thinking; sometimes that can be better than training, and sometimes it’s far worse. I won’t decide for you, but keep that in mind when you read on.

Now, I’d like to talk about the economies or markets that are created by what I’ll name app stores. The obvious examples for such stores don’t just cover apps, but other sort of media.

There’s Apple’s iTunes for mobile apps, music and videos; also, there’s the app store on iOS devices themeselves. There’s Android Market. There’s Amazon’s Kindle Store for eBooks. There’s Valve’s Steam for desktop computer games. There’s the PS3 Store for PS3 games. The list goes on.

It strikes me that these store fronts do not just create markets that previously did not exist, they also shape those markets into different forms than traditional markets we know. And in some cases, that shape is decidedly unhealthy.

Before I go on, I urge you to read — or skim — through a few other articles and blog posts. In 99 Cent Books the author argues that all eBooks will eventually cost $0.99. I don’t necessarily agree with that sentiment, but I am afraid he might be right.

In Developing Original IP for the iPhone Market Today, the author tries to outline a strategy for succeeding in selling stuff in one of the app stores I mentioned.

Lastly, GQ Magazine has a great article on how Inception is not changing the movie industry, despite it’s massive success.

The first two articles are good examples of the sort of reactions you get from content creators when they contemplate the state of the “app store”-style market they are active in respectively. You’ll find much the same repeated over and over on the intarwebs these days.

The last is a glimpse of an industry in a terrible, terrible state. Hollywood isn’t the only industry in this state, though — one hears similar complaints from the music industry, book publishing industry, and, albeit with a different slant, the newspaper/-magazine publishing industry.

That leads me to thinking…

Publishing

Make no mistake, in all cases of appstoritis, we’re talking about publishing markets. Maybe it’s useful to take a look at how traditional publishing works before we continue.

Publishing markets all involve a number of parties: content creators, publishers, shops, critics and consumers. They all have a role to play in the success or failure of products. Also, there are more parties involved than the ones I’m listing; it is, for example, fairly obvious that books would not be sold without printers and logistics companies, but in a sense the printing and distribution efforts are subsumed in the publishing effort. In making my list, I focus less on activities as I focus on roles and their interaction, and I think those five are the most important.

To help with that, I’ve made a series of slides. Click on any of them for full size slide show.

The basic relationship isn’t one that strictly speaking needs to involve publishers, shops or critics, but is really a relationship between content creator and consumer. For all intents and purposes, either would be happiest if they could easily interact with each other directly. In the traditional market, the biggest hurdle here is that production is a speciality skill that your average content creator does not necessarily possess. So they go to publishers for help.

While this intermediary role is generally helpful, it disconnects content creator and consumer. That is, it becomes harder for the consumer to find content they know they want.

  • Andy

    Interesting post. I actually read the GQ article in the magazine which I get delivered to home. That’s a separate discussion about the movie forecast though.

    One thing you don’t mention that is an issue for me on the Apple App Store is that content is essentially controlled by one man, who acts as the gateway between producers to consumers. This is very different from the Android Market app store which is much more a free market system in comparison. This is one of the reasons I don’t use Apple kit, I don’t like the idea that one decides for me what I can and cannot use on my gadget.

    Very thorough article though, quite an educational read for us lay people.

    Andy.

    • http://www.unwesen.de/ unwesen

      Oh, the gatekeeper function exists in all App Stores. It just is exercised differently, depending on who runs it. On Android, Google doesn’t so much care what gets published, but will pull apps that don’t conform to its policies. I much prefer that second approach; it’s a lot less patronizing to consumers.