I'm curious what people think is the solution here. Users see the scenario differently... they see that they spent $300 - $1,000 on a device (even if subsidized by a data plan) and thus paying a buck or two for apps is all they're really willing to pay for an app... and oddly look at anything over $5 as expensive!

I think a subscription model can make sense but sadly not through apple or other vendor's storefronts. The value has to be that you have an online service with ongoing fees... AND it enables a mobile app... with collaboration etc.

Having a mobile app be the sole income generation of a company just simply won't cut it.

Consider this. If you have a 2 man team making an app that you sell for 99c you need to sell 140,000 copies every single year in order to make a $50k salary each. (and that's with $0 spent on marketing)

Developers need to understand that profits from a mobile app can help compliment their salary but unless you hit the lottery of insanely popular apps you can't live off of mobile app sales alone.