This may be true for mass-market apps, but we have had a lot of success selling high quality, useful, niche-market apps priced $5 and up. The App Store makes it insanely easy for people to buy something that seems useful to them, whereas they would at least think twice before paying for a webapp subscription.
Somewhat in the same vein... a friend of mine teaches ESL classes for foreign US university students. He made a pretty basic app - it's not polished but it's perfectly functional - to help his students study vocab/tenses/etc. I forget now if it was free or $0.99, either way he didn't actually have that many downloads since it was only designed for his class.
That said, the students loved it. And, he could also update the app as the course went along. Finally, although he only made enough through App Store sales to maybe go out for a nice meal, it translated into promotions, bonuses and the like. So ultimately, it paid off.
My main point is: in addition to selling niche apps at a premium, there's also the opportunity to develop cheap/free apps that otherwise help you move ahead within a niche market.
