David Barnard, of AppCubby, writing in The Sparrow Problem, where he competently works out that the sales and income numbers for Sparrow were not enough to sustain the team, and therefore the business, concludes:

The age of selling software to users at a fixed, one-time price is coming to an end. It’s just not sustainable at the absurdly low prices users have come to expect. Sure, independent developers may scrap it out one app at a time, and some may even do quite well and be the exception to the rule, but I don’t think Sparrow would have sold-out if the team — and their investors — believed they could build a substantially profitable company on their own. The gold rush is well and truly over.

Craig Hockenberry predicted this in 2008 in an open letter to Steve Jobs in ringtone apps:

The problem now is funding those products.

We have a lot of great ideas for iPhone applications. Unfortunately, we’re not working on the cooler (and more complex) ideas. Instead, we’re working on 99¢ titles that have a limited lifespan and broad appeal. Market conditions make ringtone apps most appealing.

The argument that you can make up for the low price of iOS applications in volume sold has proven to be specious, as predicted by Craig.

Look, the cost of making a great iOS application has not gone down. But with hundreds of thousands of “ringtone” or el-cheapo apps, the odds of making it into the top 100 where you’ll get noticed and the real money is have become exceptionally low. And even if you do have a few days in the top 100, and make enough to pay off the development to date, where do you get the money to fund ongoing development?

I think David and Craig are both right, you may be able (if lucky) to pay off the cost of developing an iOS product, but you need either VC funding or to sell out to sustain yourself as a iOS developer.

Or the business model needs to change.