{"id":320,"date":"2013-09-16T17:12:29","date_gmt":"2013-09-16T16:12:29","guid":{"rendered":"http:\/\/www.economic-truth.co.uk\/?p=320"},"modified":"2013-10-21T13:29:33","modified_gmt":"2013-10-21T12:29:33","slug":"racing-to-the-bottom","status":"publish","type":"post","link":"http:\/\/www.economic-truth.co.uk\/?p=320","title":{"rendered":"Racing to the bottom"},"content":{"rendered":"

How much was the last app you bought on your smartphone? \u00a0It’s very likely that the answer to that question is less than a pound, no matter how complex or detailed that app was. \u00a0When Apple launched the App Store in 2008, the average price of apps was significantly higher, with games such as Super Monkey Ball selling for \u00a35.99 and Crash Bandicoot Nitro Kart at $12.99. \u00a0Over time, the huge competition has led to games dropping prices to 69p, or even free, with new revenue streams being established through advertising or\u00a0<\/span>additional\u00a0purchases. \u00a0Along with this fall in pricing, many firms have found that it’s not profitable to spend time developing complex games and applications, leading to a proliferation of match-three and simple physics puzzlers.<\/span><\/p>\n

Competing away all profits is not limited to application development; in standard microeconomic theory, in perfect competition all companies will reduce prices until they are making no excess profit, with the only return being that which is needed to retain a viable business. \u00a0The App Store has gone beyond this, with companies needing to seek out alternative revenue streams in order to survive.<\/p>\n

Earlier this year, Google announced<\/a>\u00a0that it was closing its Google Reader service. \u00a0Google tends to not charge consumers for its services, but instead relies on revenues from advertising placed alongside the services. \u00a0Google Reader was increasingly used with third-party applications which meant that this revenue stream was unavailable. \u00a0In its place, many alternatives are available<\/a> – but these are almost all free of charge, as this is what consumers have come to expect. \u00a0One of the most popular RSS readers, Feedly, ran a survey<\/a> to find out whether people would be prepared to pay for the standard features, and found that in order to charge for the services, there would need to be significant additional benefits – explaining the launch of Feedly Pro<\/a>.<\/p>\n

We frequently see prices being pushed down due to competition – but consumers are reluctant to let them rise again.<\/p>\n

Competition doesn’t just impact consumers and pricing. \u00a0International finance has traditionally clustered in key cities around the world, such as London, New York and Tokyo. \u00a0However, over time the stranglehold these cities hold over finance has diminished, and there are fears this trend may accelerate in the future. \u00a0This is not purely caused by the desire for local funding; instead, governments looking to increase the activity in the financial sector in their countries are reducing regulation and making the cost of operating in their cities lower<\/a>. \u00a0Financial markets are more sticky than consumers, but the race to the bottom of regulation and compliance costs can only increase the numbers of transactions based elsewhere.<\/p>\n

However, as app developers have found, attracting custom by pricing yourself out of the market is not a good long-term strategy. \u00a0New financial markets may find that they are left catering for small risky homogeneous firms – the match-three games of the business world.<\/p>\n","protected":false},"excerpt":{"rendered":"

How much was the last app you bought on your smartphone? \u00a0It’s very likely that the answer to that question is less than a pound, no matter how complex or detailed that app was. \u00a0When Apple launched the App Store in 2008, the average price of apps was significantly higher, with games such as Super … <\/p>\n

Continue reading “Racing to the bottom”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[7],"tags":[19,12,31],"class_list":["post-320","post","type-post","status-publish","format-standard","hentry","category-commentary","tag-competition","tag-pricing","tag-value"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p28ZxV-5a","_links":{"self":[{"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/320","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=320"}],"version-history":[{"count":7,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/320\/revisions"}],"predecessor-version":[{"id":442,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/320\/revisions\/442"}],"wp:attachment":[{"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=320"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.economic-truth.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}