Apple (NASDAQ:AAPL) is giving you a new way to buy apps.
With the update to iOS 8, Apple is allowing developers to bundle apps together and sell them as a package. Users will be able to download a whole bunch of apps for a lower cost than buying each of them individually.
However, Apple is only letting developers bundle paid apps, and the apps must all come from the same developer. Apple may be looking to spark paid app downloads with this feature, but the current setup seems to favor large developers. Ultimately, that could hurt Apple's App Store, as smaller developers weigh their options on App Store priorities.
No love for the little guy
In 2010, Jeff Rosen of Wolfire Games launched Humble Bundle. The company bundles games and Android apps together in a pay-what-you-want platform. It's been a massive hit, with bundles bringing in hundreds of thousands of dollars for three to 10 games, and higher-profile bundles bringing in millions. Dozens of other bundle sites have popped up since, and the indie development community has thrived on the computer platform Steam because of the ability to bundle.
One of the biggest advantages to offering bundles is that if a customer is looking at an app in the App Store that's part of a bundle, Apple lets that customer know. This is classic upselling and could lead to additional App Store revenue for Apple.
But a lot of small developers have only one app for sale, and they're essentially locked out from bundling. Even though there might be thousands of other developers in the same situation, they're unable to take advantage of the potential benefits of bundling. Single app developers have no way of benefiting from cross-promotion of each other's apps.
The big guys getting bigger
The flip side of the argument is that big-name developers are able to bundle their apps, breathing new life into old titles and capitalizing on the popularity of their biggest hits. Companies such as Electronic Arts (NASDAQ:EA), Warner Bros., Rovio, Rockstar Games, and Square Enix are poised to capitalize on the new feature.
EA has dozens of original titles as well as licensed content from Parker Brothers. A couple of its Parker Brothers titles have made it into the top 100 paid apps, and capitalizing on the popularity of Monopoly and Life could help EA sell all eight of its Parker Brothers titles and get more of them in the top 100, helping them sell better individually.
EA could also benefit from bundles with The Sims, Spore, and most of its other paid titles in some form. Warner Bros. is capitalizing on its Harry Potter Lego games, Rovio is bundling Angry Birds apps, and you can buy all seven Final Fantasy games from Square Enix for just $69.99, which is a $28 discount. Rockstar Games has yet to bundle its Grand Theft Auto games, but I wouldn't be surprised if it did. These moves should ultimately lead to higher App Store rankings and more downloads
Is this good or bad for Apple?
In the short term, bundles are certainly a benefit to Apple's App Store. It's something that's been indirectly possible in Google Play for a while now, and it could easily lead to higher sales numbers in the App Store through upsells.
In the long term, it's not as clear. If smaller developers feel the big-name competition has even more of an advantage now, they may abandon the typical iOS-first approach for Android. But the risk probably doesn't outweigh the potential benefits.
The reason developers flock to iOS first is that the iPhone is easier to develop for, and its users spend more on apps. Additionally, advertising is much more lucrative on iPhones than on Android. As a result, the return on investment on the iPhone is significantly higher than developing an original app for Android. Porting a successful app to Android is a much more profitable option.
The big names might limit small developers' success on iOS but are only slightly less capable of limiting success on Android. iOS remains the easiest way for small developers to reach a big audience.
The app bundle benefits consumers, Apple, and big-name developers, but smaller developers -- particularly those with just one app -- will feel some pain.
Adam Levy owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.