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The idea to have new features exist as unlockable extras actually is an advantage to users: if they don't need it, they still get updates for the feature set they bought.

So all that's missing is a way to give customers of "date X or later" unlockable features as part of the baseline sale.

Except the developer takes a hit there, too. Given that not everyone needs every feature, users end up subsidizing each other's desired improvements as part of a major upgrade. On top of that, not all features have clear lines that can be drawn around them, technically or marketing-wise.

It's a great model for games and certain specific types of apps (Paper is very clever). But to push all apps onto this model is highly unrealistic.

I'm not sure if the developer necessarily takes a hit. Say I have $15 to spend on a video editing app. $10 for the initial app and $5 for the only premium feature I want results in me giving $15 to the developer (less Apple's cut etc). However if the developer adds 5 new features to the app and I have to choose between buying features that I mostly don't want and can't afford or not spending the money I'll most likey give $0 to the developer.

Similar situation with luxury features on cars: it makes business sense to sell them individually.

If you wanted/needed the feature badly enough (ie, it was a mission-critical tool), you might pay much more for an update that included your desired feature in addition to stuff you don't need (or even stuff you might not yet know that you want). Also, the extra "wasted" revenue helps pay the developer for the thankless but necessary task of under-the-hood improvements, whose costs have to absorbed elsewhere.

I'm not saying the model can never work, but it's not a good fit for every product. The developer should be able to create the relationship with their customers that they think fits best; sometimes that will be IAP, sometimes subscriptions, sometimes upgrades. There will never be "one business model to rule them all", or else we'd see all marketplaces naturally converge in that direction.

For the developer, now they need to re-sell every single feature of their app. Why would anyone choose that over just bundling them together?

1. It's an easy way to charge for new development on platforms that don't have paid upgrades.

2. It can turn be much more profitable as long as you don't just take the price you'd charge for the upgrade and divide by the number of features. Games are leading the way with this business model.

For example, IIRC League of Legends is insanely popular right now. (I want to say it's the biggest game at the moment, but I could be misremembering. Anyway.) It's free to play, but unlike most games, you don't get any permanent characters or upgrades when you start. To unlock a character, you have to buy them. Buying all the characters with money would cost almost a thousand dollars. And if you want to customize your characters so they look cool – well, that can cost several times more. Suffice it to say, Riot Games is doing pretty well for itself by unbundling as much as humanly possible.

Why lower the price of the initial purchase? Just keep it simple: basic app is $10 forever. The basic version of the app comes with some basic useful features. Premium features become available via in-app-purchase as the developer makes them. Users can choose to use the premium features or not. Bug-fix updates are just free as they should be IMO.

Using a theoretical video editor as an example: $10 gets you basic clip cropping, placing clips next to each other, background music, importing, exporting and titles. So a basically useful app. Later the developer updates the app with a few bug-fixes and a premium "transitions" feature that's available via IAP. This update is of course free to download. So existing users get the bug-fixes for free. Anyone who want the premium feature just unlocks it and uses it indefinitely.

It creates a lot of ill-will from customers which translates into bad reviews:

"I bought this app for $9.99 and then I found out that all of the good features require in-app purchases - 1 star for you!"

I think you misunderstood. He's suggesting that instead of releasing v2.0 on the App Store, you release an in-app purchase option in the original app that upgrades it to v2.0. A similar idea would be to release new features a la carte as in-app purchases instead of releasing new numbered versions. I'm not sure if the marketing hit would be worth it, but it is one way to a consistent revenue stream.

Diner Dash follows this model. They update the app periodically and add new content available via in app purchase.