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Wednesday, July 22, 2009, 06:05 am PT (09:05 am ET)

Apple suggests App Store redesign in the works

Acknowledging that there is room for improvement in the current offering, Apple chief executive Tim Cook said Tuesday that Apple is looking for new ways to categorize software in the App Store on the iPhone and iPod touch.

With over 65,000 applications currently available in the App Store, it can be difficult for users to find new applications with the current categorization methods. Cook said during Tuesday's earnings report conference call that Apple has "some ideas" on how to improve the experience.

"As you know, today we do it by type of app and also have show popular apps and top-selling apps, et cetera," Cook said. "We realize there’s opportunity there for further improvement and are working on that."

Cook's statement was in response to a question from analyst Charles Wolf of Needham & Co. Wolf also suggested, in his question to Cook, that there is currently a "race to the bottom" in terms of pricing of software.

Currently, many applications receive the most exposure by being one of the top 25 downloaded on the App Store. Typically, the top 25 is populated by software priced at $0.99.

"I’ve noticed that there are an increasing number of $0.99 offerings," Wolf said to Cook. "Do you regard this as a concern and if so, are you taking any steps to enable consumers to separate quality apps from the garbage?"

In response, Cook gave no indication that Apple would interfere with developers' pricing structures. The executive said that each developer sets their own price, and they are going to do what makes the most business sense for them.

"I would think as the installed base grows more and more and more," Cook said, "it makes more and more sense to have a bit lower prices — but that’s totally up to the developers, and I am sure each of them may do that in a little different manner."

In his analysis of Apple's earnings report, Wolf highlighted what he believes is the difficulty the company has ahead of it in restructuring the App Store. He said developers are unsure how to price their applications, and customers need more to tell them whether software is worth their money.

The $0.99 popularity, he said, probably stems from users' expectations from the iTunes Music Store. But the low price point, Wolf said, has created a "wasteland of mediocre applications."

"In some respects, the App Store has taken its place alongside YouTube, where poor taste is the defining metric," Wolf wrote. "More ominously, it has led to a deterioration of the entire pricing structure for iPhone applications. The risk is that developers who hope to build quality applications that have a long shelf life may be discouraged from doing so because prospective development costs exceed the revenues they expect to earn on the applications. In short, this race to the bottom has the potential to degrade the overall equality of the applications sold at the App Store."

Apple's App Store recently turned 1 year old, and the company announced that it has had more than 1.5 billion downloads so far. Cook repeatedly acknowledged the success of the App Store during Tuesday's conference call.

"The App Store is a key strategic differentiator of the iPhone and iPod Touch experience," he said, "and we believe that outstanding software is the key ingredient for a great mobile experience."