Update: I made a mistake about Instacast's support for notifications in the original draft of this article. Please read my corrections at the end. My apologies, readers. --Rich

The release of Instacast v2.0 ruffled some feathers recently. Vemedio, publishers of the popular podcasting app, have taken the unusual step of switching business models with the new release. The old version of the app cost US$2.99; now it's $0.99 for the basic version, with an in-app purchase (IAP) to upgrade to Instacast Pro for a further $1.99. However, several features that used to be in the v1.0 app, like push notifications (update: see note at end of post) and the ability to re-order podcasts in the list, have moved to the Pro version. This means existing customers who upgrade to the new releases have to pay again to access them. (I'm going to dub this tactic the Instacast Maneuver.)

Unsurprisingly, this hasn't gone down too well with some longtime customers, who feel they are being unreasonably double-dipped. Angry one-star reviews for the latest version are accumulating in iTunes -- although, to be fair, they are far outnumbered by positive reviews by people who like the new interface.

I think this is an interesting story, and it ties into something I've been meaning to write for a long time about the non-intuitive meanings of "ownership" in our increasingly on-demand all-digital world.

"It's only two bucks!"

One of the most common reactions to the criticism is that it really isn't much money and, basically, people should stop whining. As accurately stated by Harry Marks, we spend more money than this on bad coffee without blinking. Software upgrades of OS X cost $29, and Windows or Photoshop (amongst many others) can cost hundreds of dollars -- does two bucks matter?

Certainly, I think it's absolutely fair to say that it's not a lot of money to anyone who can afford an iPhone or even an iPod touch in the first place. We're talking about devices that cost hundreds of dollars -- thousands when often-mandatory cellular contracts are added on. But...

Between my iPhone and iPad, I have at least 250 third-party apps. Many of those were free, but if just a fifth of my apps dinged me $2 via the Instacast Manoeuvre, I'd be looking at $100. That's not chickenfeed to me and it probably isn't to you either. So it's my contention that even if you think $2 for Instacast 2.0 is fantastic value, there's still a debate to be had here about value to the end user. If, like Seth Clifford, you don't love Instacast but merely think it "sucked the least of all the [podcasting] apps"; well, then that conversation takes on a different tone.

"Support the devs"

A similar argument commonly advanced to silence critics is that Instacast is a written by a small dev who needs the money; if you like the app, is it going to kill you to pay a little more for a new version? This is the angle the Vemedio company blog takes and it's certainly one I have some time for. Instacast isn't a top-tier app; many iOS users don't care about podcasts and most of the those who do are satisfied by Apple's built-in support. By definition of what the app does, Instacast is chasing a quite small niche of users and it shares those users with a number of high quality competing apps.

So Vemedio needs to establish a regular income stream, hopefully enough to support the firm and permit future development of the app. Presumably, the users want that, so surely it's churlish of them to complain about being asked to chip in a few bucks?

The problem is that many of them feel ripped off. Firstly, Vemedio took the unusual step of moving existing features into the extra-cost Pro version of the app. That's a questionable decision. Secondly, because of the App Store rules, there's no way for Vemedio to charge upgraders a reduced fee; it's all or nothing. Which brings us to...

"It's all Apple's fault!"

The App Stores both Mac and iOS restricts developers to well-defined ways to make money from their software: charge upfront, charge via In-App Purchase for add-ons, and/or charge subscriptions for ongoing services. Notably missing, as veteran Mac developer Wil Shipley of Delicious Monster has written extensively, is any sort of paid upgrade option.

Imagine you're GadgetSoft and you've just released WidgetThing v1.0 to great acclaim. All ten of its main features are popular. You have some great ideas for how to expand and improve it, but it's going to take a good chunk of time and effort to do so. At the end of that effort, you'll be able to release WidgetThing v2.0 with five new features in only one of two ways: as an in-place upgrade, meaning all your existing customers get it for free. Or as an entirely new app, in which case your existing customers have to pay all over again.

Economics theory tells us that WidgetThing v2.0 should be priced for new customers according to its 15 features, but priced for existing customers according to the extra five features it has over v1.0. It has different values to those two groups of customers, so should have different prices too.

Apple, for whatever inscrutable reason, doesn't let app makers do this. Charging longstanding customers full whack for upgrades is likely to be perceived as gouging; giving them upgrades in perpetuity for free is no way to run a business. Inevitably, some app makers simply won't bother. Chances are there are some fantastic v2.0 or v3.0 apps that have never left the drawing board because the developers simply couldn't justify it economically.

But why is it so bad to just give updates away for free? Isn't that a bit greedy? The answer is...

The race to the bottom

We only have ourselves to blame.

Picture the dawn of the App Store back in 2008 as a group of users in the middle of a big circle of developers. No-one knew how much to charge for anything; these were untested waters, an entirely new business model for consumers and creators. Nervous developers stepped up and pitched price points and users started buying apps. The savviest developers watched each other like hawks, nudging prices up and down in response to each other -- but mostly down, and down, and down.

About nineteen metaphorical seconds later, the nervous circle had turned into the bellowing hustle of the NYSE's trading floor, with everyone hollering lower and lower prices until many apps hit rock bottom: $0.99. The average price of an app today is $2.00, and the modal price is surely the dollar-store low water mark. Look at the initial iTunes reviews of any app costing more than three bucks and someone will inevitably call it expensive.

We know that many apps lose money; I have my doubts about the survey those results were drawn from but I think the general conclusion that only a lucky few devs make serious money from the App Store is a pretty common sense one. The race for the bottom -- the race we all subconsciously encourage whenever we held out to buy a $1.99 app in case it goes down to $0.99 in a sale -- means devs of even moderately successful apps are often left struggling for revenue.

Is it any wonder developers need to resort to every method they can think of to make ends meet?

The workaround

Surely this is all a storm in a teacup. Why can't existing users of Instacast v1 simply not upgrade to the new version?

Well, Apple doesn't make that very easy. There's no way to mark a specific version as "unwanted" in the App Store upgrade screen. If you accidentally hit Upgrade on that app just once, there's no way back -- unless you have manually extracted a backup of the older version of the app from iTunes, which is less likely than ever in this era of iCloud-powered backups.

Worst of all, you have to resign yourself to never again using the Update All button. If you don't have many apps, it might not be that much of a bother to manually upgrade, one by one, every one except Instacast. Other people, however, have hundreds of apps (I'm one) and receive dozens of updates a week (yo). Particularly given the App Store app's baffling habit of kicking you out to the home screen after each press of the upgrade, it quickly moves through tedious and into downright irritating.

The bigger picture

So far I've mostly been talking about Instacast, but the issues I'm describing affect more than just that one app.

Consider Tweetie, Loren Brichter's beloved Twitter app. I paid for Tweetie twice -- once for version one and again for version two, at a cost of $2.99 each time. I was delighted with each purchase, as Tweetie was easily the best-of-breed Twitter client at the time. Until, that is, Twitter bought it, relaunched it as "Twitter for iPhone", and eventually "blessed" it with dubious UI decisions and ads (later withdrawn) and more ads. From the second I upgraded from Tweetie to Twitter, the app I'd cherished and paid for (twice!) was gone, with no easy way to get it back.

For another example, consider the recent rumors that Rock Band for iOS would be shut down. EA claim this was "an error", although how that's possible is yet to be explained (particularly given this entry in the company FAQ which has since been removed).

Looking beyond iOS, EA is also famous for disabling online support in its console games, sometimes for games as little as seventeen months old. Once the servers are turned off, the entire online portion of the game stops working. The game you paid for is gone for good.

These tricky issues of ownership aren't even just about software. Sony removed the OtherOS feature from PlayStation 3 consoles after it emerged that people were using it as a jailbreak vector. A firmware update appeared, and boom -- just like that, my PS3 could no longer run Linux (and unlike many people, I'd actually installed Linux on my PS3). I could refuse the update, as long as I never wanted to play another game online. Not a great choice.

There are almost endless examples of these, and things are only getting more complicated as companies think of new ways to use and abuse the power that over-the-air updates and digital downloads give them over consumer purchases. Sooner or later, someone is going to push the envelope too far, and we're going to have some juicy class-action lawsuits over it. Until then, caveat emptor.

But let's return to the matter at hand -- the Instacast Maneuver. I think it arose from the limitations Apple has imposed on the App Store combined with the sometimes precarious finacial situation that some app devs can find themselves in. Vemedio are far from the only developers in this situation, so I am sure other app devs are watching how this goes closely as they ponder if they will follow along this path.

Overall, though, I have to come down against Vemedio on this one (update: please see the update below.) Not for the use of In-App Purchase itself; I think that was a fairly reasonable way around the lack of paid upgrades on the App Store. What I can't get away from the moving of features, including big ones like push notifications, away from the normal version and into the Pro. I've already bought a version of Instacast that does push. I don't think it's right to charge me, or anyone else, twice for that feature.

Update: I have accidentally propogated a common misunderstanding about Instacast, for which I must beg your forgiveness, reader. V1 of the app didn't have true Push notifications; it used local notifications only for some basic alerting. As several of my commenters below and Raphael Fetzer on Twitter have pointed out, the more dynamic Push notificaitons in Instacast Pro are genuinely new. I am grateful for the correction. Vemedio has also announced since this post was drafted (but before it went live) that the forthcoming Instacast v2.0.1 will make Smart Playlists available for free, i.e. in the base-level, non-Pro version of the app. Finally, the In-App Purchase upgrade to Instacast Pro is currently on sale for $0.99.

In light of these changes, I humbly withdraw -- and apologise for -- my criticism of Vemedio above.

Instacast pricing raises hackles: are apps bought or rented? [Updated] originally appeared on TUAW - The Unofficial Apple Weblog on Thu, 17 May 2012 12:30:00 EST. Please see our terms for use of feeds.