Whether the marketplace is profitable to a developer at their level is not always directly correlated to how popular that marketplace is. If the the App store is so competitive as to require a lot of up-front money to see a worthwhile return on investment, but other markets do not have that same problem, it may may sense to focus on those other markets.
Competitive is a question of demand versus supply; you can have super competitive small markets.
You have 1 yellow marble, 5 blue marbles, and 10 people. 5 people want a yellow marble, and five want a blue marble. Blue and yellow marbles are just as popular, but the competition for yellow marbles is much more intense.
Given that we're discussing the supply side of things, I think your example is backwards. But even if you changed it to competition for supplying the desire of yellow marbles, I still don't think it's relevant. It's certainly true that there's an incredible supply of cheap/free games on iOS (typically of very low quality, or chock-full of F2P mechanics or ads). But there's a very low supply of high-quality serious games being sold for more-than-a-cup-of-coffee prices. I think there's certainly a market for those games, the problem is just that you can't rely on the App Store for discovery (but you never really could do that anyway). So it seems the real problem is just that Jeff Vogel doesn't know how to market his stuff, and rather than actually figuring it out, or, heck, hiring someone else to do it for him, he's just giving up on the market entirely. Which is a real shame.
You're assuming he doesn't know how to market it. It's entirely possibly he's run the numbers, and found that for the required outlay the expected return isn't worth it, keeping in mind that his time and ability is finite, and that there may be other opportunities that are better investments of his time and money. In fact, he basically says exactly that.
In the beginning, the App store was popular (people used it), but was not competitive (there weren't a lot of apps, comparatively). Thus, many apps earned quite a bit of money than now because they got a larger percentage of the available consumers.
Even if we assume the App store today had the exact same number of consumers, there's many more apps competing for those users. The marketplace is very competitive, and the percentage of available users is less per app (on average).
My guess is that the reality is that the App store has many more consumers (or consumer dollars which is what we care about), but the number of apps has increased much more rapidly than consumer spending (e.g. supply increased much faster than demand).
The "gold rush" mentality was always a bit of a myth. There were a few apps that really did strike it rich, but the App Store has never really been a place where you could submit an app and watch the money roll in. That's not true now, and that wasn't true when it launched either. It's just a fantasy that a lot of people have.
Whether there was a gold rush or not is irrelevant for my argument. This isn't about being the random popular app, it's about the marketplace, supply and demand.
How many flashlight apps were available 6 years ago? How many are available now? How has the average price changed? Given roughly equivalent ratings, how much research does the user have to do to figure out if one is better for their needs than another? How likely are they to do this? Are the per year proceeds of the average flashlight app higher now or back then? Even if we limit it to apps with a high ratings, how does it look? Are there other app store segments where the outcome is better or worse?
I don't understand your argument. Flashlight apps? There was a brief flurry of flashlight apps, and fart machine apps, and Apple then declared that they would stop accepting trivial clones of existing trivial functionality like flashlights / fart machines. But that's not really relevant, especially as the average price for those apps was generally $0. Those apps existed because they were easy to make, people who made them thought it was fun / funny / a learning exercise / whatever, but it was never a money-making category of apps. Ever.
I thought it was fairly self evident that I used flashlight apps as a stand in for any specific segment you want to isolate in the app store.
That said, here's something to think about: I myself have paid real money for a flashlight application for my smartphone. Why? Because I wanted a flashlight app that didn't take three screens and button presses to get to light, and I also was a little leery of what the ad supported apps were really using the network for, so I wanted one that didn't require network access. This was a few years back and on Android, but I think the point is applicable, what you think you know about a market on a cursory review may not turn out the be correct upon deeper inspection. Some people made money on these apps, either through advertising or through the initial app price.
Flashlight apps may have been a poor choice on my part, but I think the original point stands. How does the market for tower defense games look? What about platform games? Do you think the average developer in these markets markets makes as much as they did 5-6 years ago? Do you think the advertising cost is the same?
I can readily acknowledge that some people made some amount of money on flashlight apps. I expect that research would indicate that it was in fact "very few people" and "very little money" (relatively speaking, at least; I'm sure it's so cheap to develop a flashlight app that practically any money would offset the cost).
As for your original point, I'll grant that you have a point, but I don't necessarily agree with it. I'm finding it hard to speculate about markets where I have no actual data, but my hunch is that the market for tower defense games is larger today than it was 5-6 years ago (i.e. I think the genre has grown more popular). I don't know whether that correlates with increased revenue for developers of tower defense games, or whether the number of games has outstripped the demand for them. Although I think it's fair to expect that there are a few developers making lots of money, and bunch of developers making a moderate amount of money (that may or may not offset the cost), and a bunch of developers making very little money. It turns out the App Store in general has a very steep revenue curve, with most of the money going to relatively few developers. But I think it's always had that curve, we just didn't used to have the data available to see it as well as we do today.
I think the more important question with regards to the App Store is not "how much money are developers making?", but "how easy is it for a new entrant to make money?". And I don't know the answer to this either, but I would be interested to find out.
I think you're right about the revenue curve, I think our whole discussion has been about whether the slope has changed over time. I've heard a lot here from developers that mention that it's harder now than it was, but that's obviously not a rigorous way to go about figuring the truth of the matter.
