Leave it to a company as cocky as Microsoft (NASDAQ:MSFT) to dictate prices in a sector over which it has no control.
The software giant wants mobile software developers to forget the $0.99 price point that Apple's (NASDAQ:AAPL) App Store is championing, as it gears up for the fall launch of its Windows Marketplace for Mobile.
"You make more money selling applications than selling your application in a dollar store," Loke Uei Tan -- a member of Microsoft's Mobile Developer Experience team -- told developers this week. "Ninety-nine cents? Come on. I think your app is worth more than that."
He may be right, but that doesn't matter. The marketplace has spoken, and you can be sure that Apple's iPhone wouldn't be as popular today if it wasn't for the proliferation of $0.99 and free ad-based programs that can be seamlessly downloaded to the smartphone. Other smartphone players such as Research In Motion (NASDAQ:RIMM) and Palm (NASDAQ:PALM) are realizing that now. If the phones aren't cheap and the data plans are costly, free apps are the best way to lure consumers.
Microsoft isn't just thinking about the developers, naturally. It has its own pricing to protect.
The growing variety of $0.99 casual games available through Apple will never match the engaging complexity of a $60 video game, but Microsoft knows that its Xbox 360 will feel the pinch if gamers are pulled in infinite directions for their finite playing hours.
One can even argue that Microsoft's bread-and-butter operating system and Office productivity suite are threatened by the existence of dirt-cheap apps. Now that Google (NASDAQ:GOOG) is readying an Android-powered laptop, computing software will compete against ad-subsidized freebies and $0.99 downloads.
The digital revolution has repositioned the value proposition of CDs and DVDs, so why not actual software?
As of this morning, the costliest App Store program among its 20 most popular applications is priced at a mere $4.99. The more common price point is that dollar-store price tag of $0.99.
Microsoft knows this. Its Xbox Live Marketplace is loaded with $5 and $10 downloads, and it's lowered the prices of its impending Windows 7 and Office 2010 releases.
Kidding developers about the notion of jacking up prices is preposterous. Leveling the playing field -- as digital delivery has done -- inherently empowers developers to offer insanely low prices just to get noticed.
Microsoft may not see what it likes when it peers into Apple's App Store, but it's really only looking at the grim reality of software pricing's future.
Some other lessons from Apple's App Store:
