<p>Since payments to app developers are denominated in USD it does make sense to raise prices. The pound sterling has decreased in value relative to the USD by about 30 percent since May 2014, which I'm selecting as the arbitrary peak for comparison. So if they kept the same prices as before the recent slide, an app would make about 30% less relative to 2014. Even relative to Jan of 2016, the app would make about 14% less in USD. </p>

<p>As I'm involved with a few IT projects I can tell you that the marginal cost of production is never zero for a "finished product". In technology there is no such thing as a finished product. You can't put it in a box and deliver it and then say to the customer that it's their problem now (well you could but it wouldn't keep you in business very long).</p>

<p>I think it is perfectly reasonable to adjust app prices to reflect what appears to be a new normal exchange rate.</p>

<p>Edit 1: 
On the marginal cost of an Apple Store app:</p>

<p>The question states that the cost of one additional sale is zero for an app. I disagreed in my above answer, but much too strongly and incorrectly.</p>

<p>The marginal cost of some apps is equal to or close to zero. Usually, these apps take the following pricing structure: a free version with advertising, and a paid version. Then there is another class of apps that benefit so strongly from economies of scale and maturity that their MC is near zero (Facebook, Spotify, ect.)</p>

<p>They do make up the vast majority of apps. This means that for all intents and purposes, the marginal cost of an app is zero.</p>

<p>But I would argue that some apps with small but enthusiastic user bases likely do have some marginal costs and set their prices near zero anyways because of consumer expectations. Each user generates bug reports, which generates cost, and small development teams are disproportionately affected by this situation. </p>

<p>It is one reason why pricing software is so difficult.</p>

CC BY-SA 3.0
2017-02-28T19:06:19.120Z
2017-02-28T19:39:20.607Z
2017-02-28T19:39:20.607Z
Sean Lambert
<p>Apple have recently announced an increase in app store prices, ostensibly due to the weakening of the pound following the Brexit vote and its fallout.</p>

<p>Why has apple done this when the marginal cost of production of an (already developed) app is zero? Will this not reduce income for these apps?</p>

CC BY-SA 3.0
2017-01-17T23:23:41.473Z
Very interesting underlying question. How does the British demand function for Apple apps react to the weakening of the pound?
Giskard
<pricing>
Why has Apple increased app store prices in the UK?
James
# Why has Apple increased app store prices in the UK?

(Asked by: username_0 on 2017-01-17)

Apple have recently announced an increase in app store prices, ostensibly due to the weakening of the pound following the Brexit vote and its fallout.

Why has apple done this when the marginal cost of production of an (already developed) app is zero? Will this not reduce income for these apps?

**Tags:** pricing
> **Comments:**
> **username_1**: Very interesting underlying question. How does the British demand function for Apple apps react to the weakening of the pound?  

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## 1 answers

### Answer by username_2 on 2017-02-28. Score: 1

Since payments to app developers are denominated in USD it does make sense to raise prices. The pound sterling has decreased in value relative to the USD by about 30 percent since May 2014, which I'm selecting as the arbitrary peak for comparison. So if they kept the same prices as before the recent slide, an app would make about 30% less relative to 2014. Even relative to Jan of 2016, the app would make about 14% less in USD.

As I'm involved with a few IT projects I can tell you that the marginal cost of production is never zero for a "finished product". In technology there is no such thing as a finished product. You can't put it in a box and deliver it and then say to the customer that it's their problem now (well you could but it wouldn't keep you in business very long).

I think it is perfectly reasonable to adjust app prices to reflect what appears to be a new normal exchange rate.

Edit 1:
On the marginal cost of an Apple Store app:

The question states that the cost of one additional sale is zero for an app. I disagreed in my above answer, but much too strongly and incorrectly.

The marginal cost of some apps is equal to or close to zero. Usually, these apps take the following pricing structure: a free version with advertising, and a paid version. Then there is another class of apps that benefit so strongly from economies of scale and maturity that their MC is near zero (Facebook, Spotify, ect.)

They do make up the vast majority of apps. This means that for all intents and purposes, the marginal cost of an app is zero.

But I would argue that some apps with small but enthusiastic user bases likely do have some marginal costs and set their prices near zero anyways because of consumer expectations. Each user generates bug reports, which generates cost, and small development teams are disproportionately affected by this situation.

It is one reason why pricing software is so difficult.


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