MacRumors.com

While the iTunes App Store has been a huge success in terms of iPhone app distribution, there have been lingering complaints that the current structure encourages a "race to the bottom" with massive competition dropping the price of apps towards $0.99. The most vocal complaint about the current system comes from Craig Hockenberry who published an open letter to Steve Jobs on the issue:

As an iPhone developer who's been in the App Store since its launch, I'm starting to see a trend that concerns me: developers are lowering prices to the lowest possible level in order to get favorable placement in iTunes. This proliferation of 99 cent "ringtone apps" is affecting our product development.

Hockenberry claims that these $0.99 "ringtone apps" prevent developers from working on more substantial and creative applications, instead trying to cash in on the latest fad.

Jesse Farmer of 20bits, however, disagrees with Hokenberry's letter and distinguishes that while the App Store is a very good distribution channel, developers should not rely on it as their only marketing channel.

Distribution and marketing aren't one and the same, and this tension is why developers are feeling pinched.

Distribution is the "how," as in, how do you get your product to your customer? .... Marketing is the "why," as in, why do your customers want to buy your product?

Farmer suggests that developers should look for creative ways outside the app store itself to stimulate demand. He points out that lower prices aren't what convinces people to buy Beyonce's album, but instead the multi-million dollar marketing campaigns surrounding the brand.