[falcolas]

And yet the new purchaser ends up spending more under this model than they would under a paid upgrades model. New user pays $40 for features X, Y, and Z. User of a previous version, containing X and Y, would pay $10 for the new version.

Under the in-app purchase model, both customers have to pay $50 for X, Y and Z, which provides a high barrier to entry, a poor customer experience, and poor reviews for the app.

There are ways around this scenario, but none of which are as user friendly as allowing previous owners to purchase new versions at a discounted price.

[msbarnett]

I'm not following.

Say the app is originally $10.

A year later you push out the "2013 feature pack" for $10 more.

Existing customer pays $10 ($20 total over lifetime) for upgrade. New user pays $20 at once ($10 base + 2013 pack).

A year passes, 2014 pack comes out, existing user pays $10 ($30 over lifetime), new user pays $20 ($10 base + 2014 pack (which subsumed all features of the 2013 pack)).

The existing user is always getting an at-the-moment discount.

Now, yes, the existing user pays more over the lifetime than the new user, but this is no different than conventional upgrades. If you've religiously bought every Lightroom upgrade you've paid more than the guy who jumped in at Lightroom 4 over the lifetime of the product, even with the upgrade discounts.

[kklimonda]

Hmm.. this actually looks like developer is going to start making less money the moment they release the first feature pack. To make things fair to users [1] you have to start selling base version for less money at some point to ensure that the full price of the application stays the same, but if you do that you have no guarantees that people will buy "feature packs" - actually it's guaranteed that not everyone will buy those so you will get less money than you would if you could just stop selling version 1.0 and start selling version 2.0 for the same price (and provide an upgrade path for existing users)

EDIT: clarified a bit

[falcolas]

Except, the new user isn't paying $20 at once, they pay $10 to the app store to buy the app, then they have to pay $10 at a later point inside the app to enable new features.

Same problem. The new user has a poor experience, and essentially pays twice for features that were bundled in the app to begin with.

Of course, at the $10 price point for initial purchases and upgrades, it's simpler to just release a separate app.