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Higher Prices for Phone 7 Apps Will Be Encouraged

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Even with hundreds of new features built into an upcoming update of Windows Phone 7 and new device partners, Microsoft seems to understand that it's all about the apps. After the software giant showed off its Mango update this week, an executive said the company will encourage more developers to create applications for the Windows Phone Marketplace by allowing higher prices.

"I'd rather developers sell fewer than a million downloads and get to a million dollars," Brandon Watson, director of an apps developer program for Microsoft, told Bloomberg News during an interview in Helsinki. "If we can support a higher price point, that's good for developers."

How Do They Compare?

A report last year by the Dutch research company Ditsimo, which studies the app market, found that, based on October data, the average cost of Windows Mobile apps was more than $5, with the top 100 most popular apps costing more than $6. The average cost of all paid apps for Phone 7, the successor to Windows Mobile, was about $2.50 as of November, the report said, while the average cost of the top 100 most popular apps was more than $6. The average app for Apple's iPhone cost just more than $2, with the top 100 costing about four bucks.

For Android, the average cost was just under $5 for all paid apps and about $3.25 for the most popular 100. The Windows Phone Marketplace also had the lowest share of free apps at 22 percent, compared to 57 percent for Android, Ditsimo said.

Watson also told Bloomberg that Nokia will release its first Windows Phone 7 devices in the fourth quarter. He added that the Finnish hardware giant and Microsoft are encouraging developers who make programs for Nokia's Symbian operating system to create Windows apps as well.

Handsets running Phone 7 made by Samsung, Dell, HTC and LG are currently trailing Apple's iOS, Google's Android, and Research In Motion's BlackBerry devices in market penetration, but in addition to jazzing up its operating system, Microsoft has also made new hardware deals with Acer, Fujitsu and ZTE.

A Trade-Off

Since customers rate the user interface high on their list of priorities, Microsoft is looking at a trade-off in trying to attract sexier apps while raising the cost of ownership for phones running Phone 7.

"It is hard to imagine, with current market turbulence and low consumer confidence levels, that there are many people in the U.S. who are in the market for a new mobile phone/device are going to consider a device that will cost them more in the long run," sad Jeff Burstein, CEO of Miami-based developer Mobile Application. "While portions of the market are driven by the 'WOW' factor, many more consumers are looking at the purchase and operating costs -- data, voice and SMS plans, along with app budgeting."

He also questioned whether developers will invest the time to make better apps for a relatively small customer base.

Analyst Charles King of Pund-IT said it's a risk for any company to have a development strategy that is different from Apple's.

"But I personally believe it's wise for Microsoft to offer developers as much latitude as they and the company can support," he added. "At the end of the day, the developer should be the judge of the commercial value of his or her app. If that notion is incorrect or unsupportable, the market will let it be known soon enough."

King said Microsoft's assumption is likely that Phone 7 owners "are dedicated users of other Microsoft products and would be willing to pay a premium for any synergies between Windows mobile apps and those other platforms."

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