OK. I usually bite my tongue when I come across this old, tired repetitious debate/complaint. But, all of these usual answers are completely wrong, even the truthful bit about TDM being a lot harder to develop
As someone that sells an RTAS+TDM version of all my plugins for exactly the same price, all for under $100, I think I have a credible opinion and don't have a vested interest in justifying my competitor's pricing policies. So here goes...
Let's start with some historical perspective. TDM is one of the oldest audio plug-in standards. TDM plug-ins have always been "expensive". And, their pricing range has been very consistent since they were introduced to the market. RTAS and other "native" plug-ins came to market much, much later. Emphasizing again, TDM plug-ins have been priced roughly the same all along. Mysteriously, this somehow translates into a conspiracy theory.
Those sneaky, greedy plug-in companies are not to be trusted! How could they dare be so predictable and consistent!?
It should be obvious that the question posed is fundamentally flawed. It's inverted. "Why do RTAS-only plug-ins cost so much less?" is the genuinely fair question to be asking. Looking at it historically:
1. TDM plugins came first, and owners of TDM plug-in companies set a price for the product that would sustain all the various expenses of the company.
2. Additional TDM plug-in developers entered the market and emulated the pricing range of existing developers. Like with any business, they understood that the going market value was a proven indicator of how to successfully price a product and run a company.
3. TDM pricing has not shifted significantly until the last couple of years or so, meaning that the market demand has keep pace with the number of new companies entering the market. Most TDM plug-in companies are small, modest operations. These facts support my assertion that the market system has set a "fair" price for the product.
4. When the RTAS/LE market initially emerged, it was very small and extremely budget-conscious. Existing TDM developers had a few options if they wanted to cater to this market:
A. Sell only one product: A TDM+RTAS version at their pre-existing TDM-only pricing.
B. Sell two products. An RTAS-only version targeted at the LE market, and a TDM-only (or TDM+RTAS) version targeted for the TDM market. Additionally, let's assume they would be priced equitably, amortizing the costs across all users evenly based on the product they purchased.
C. Forgo this new market altogether & not sell an RTAS version at all.
A. was obviously a stupid, unrealistic choice. Consumer LE users absolutely could not afford the pre-existing professional TDM pricing. Companies would sell zero additional copies of the product after all that hard work.
Considering option B., here's a rough breakdown of the costs (time) for creating a plug-in. This is very ballpark -- mostly for illustration:
Core development: 60%
TDM: 20%
RTAS: 10%
Again, we assume the developer wants to be completely equitable and amortize the business costs across all customers -- because they are really worried about people ranting endlessly on forums about their pricing structure :) The above breakdown means that the RTAS-only version should sell for about 70% of the TDM+RTAS version. So, if we have an $800 TDM plugin, then the RTAS version should be priced at $560. But, you say: "Now they can drop the price altogether because they'll be selling more products!" OK, well, they still need to cover the new development and maintenance costs. But, fine, I'll run with that: In the early days, TDM customers easily outnumbered RTAS customers 10-to-1. So, they should have dropped the price to about 90%, because of the increased customer base: $800 x 90% = $720. That means the RTAS would be priced at $504. How many RTAS plugins would a developer expect to sell in the early "001 days" of the LE market, while being priced at $504? Probably about the same as case A: zero. Then, they would have lost 10% of their revenue because of that TDM+RTAS price reduction. Simply put, "Equitable pricing" would not have worked.
So, that only leaves option C: not sell anything to this new emerging LE market. Well, that's pretty stupid too. So, developers leveraged the one great thing about software. It's cheap to duplicate and distribute. They realized they had option D: Sell the RTAS-only version at an artificially reduced price. And, that's exactly what happened across the plug-in market.
5. Time has moved on. The native market has grown considerably. A lot of native-only developers have entered the market. But, they are generally much smaller, 1 to 2 man, operations and do virtually no marketing (low expenses). They are typically selling at a much, much lower price-point, which exacerbates the perception that TDM is "way overpriced". But, nothing much has shifted in the TDM market. The user base is fairly static at this point, perhaps even dwindling. The old-school TDM developer's landscape still looks the same. They still sell to the same professional customers. Sales of their native plug-ins probably aren't great, but they absolutely cannot drop their RTAS-only pricing which would only infuriate everyone further.
So, in short, there are two marketplaces: The professional TDM market and the budget-conscious LE market. If you want a professional customer base, and stay in business, you have to price high. And, if you want to exploit the power of numbers and sell to the LE market, you have to price much lower. TDM developers then also sell an enormously discounted RTAS-only version to pick up a few more sales, but the TDM sales are absolutely what keeps the lights on. TDM customers are not getting ripped off. In effect, they are being subsidized by those RTAS-only sales.
Steven Massey
High-end plug-ins for Pro Tools