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by tomgallard 5159 days ago
Really? Are you talking gross or net profit?

I would be surprised to find many software products where the gross profit margin would be less than 50%.

2 comments

Why shouldn't we talk about net profit? Taking 30% off the top can quite easily mean the difference between viability and not, quite easily, when you factor in employees, rent, marketing, legal fees, and absolutely everything else. Isn't this precisely what the discussion should be about, whether it makes non-viable a lot of businesses that provide value to people?
Dropbox isn't a software product; it's a service. What's more, it's a service that needs to be priced to compete with Apple's own iCloud.
And it being charged 10 or 13 dollars a month doesn't make much difference, if it offers a compelling service.

Software and service prices seem mostly arbitrary to me anyway.

How else Aperture went from $300 to $100, Lightroom the same, BBEdit shed 70% of it's price in one day, etc etc... Same, why was iWork a $99 package and now it's 3 components are $10 each on the Mac App Store?

I haven't looked at Aperture or Lightroom, but iWork's price change isn't quite as dramatic or inscrutable as you think: the retail package was $80, and the 3 App store components are $20 each. Apple likely lowered the price as an incentive to push users into its App store, where it gets a cut from every piece of software sold. Dividing the components and selling them individually probably brought in quite a few new users such as myself who didn't want to pay $80 for the full iWork package since it's only Keynote I'm interested in.

Services are more deeply and negatively affected by price changes than software, though. A price change that seems insignificant to you can drive many users away. Look at the fiasco with Netflix last year; they changed their prices by about $6 and subsequently lost about a million subscribers within a few months. Some users see price increases as an indication of a service's instability in the marketplace (and therefore a cue to jump-ship). Most users have lower tolerance thresholds for price differences when comparing services than they do when comparing one-time purchases (like software).

Regardless, now would be a really bad time for Dropbox to increase their pricing. Many Mac & iPhone users are watching iCloud closely and realizing that it could make Dropbox redundant for them. A price increase, even one as small as a ~$30 a year change for their 50+ plan (corollary to your $3 a month change), could push enough users away from the service that Dropbox is better off sticking to its guns.