Really? What's the source of that claim? How many developers have said this is why they don't give out updates? Seems like a utterly retarded thing to display reviews of old versions of the app on the front page. All it will do is misguide people into thinking a problem exists in the app where as it was actually resolved in the latest update.
The overall rating reflects the performance of the app much better, an app that had problems previously but not anymore generally only takes a little time to get back to good ratings.
What about an app with thousands of ratings and a fantastic score? Why should a developer take a risk in updating it? Most people arent going to rate it again unless its a major update. You know whats really stupid? You open up app store and see that angry birds has very little ratings, a beginner might think its some small time app.
Here goes your source,
"Another developer suggested that some app makers might be fearful of making their existing app ratings and reviews invisible by issuing a brand new update for iPhone 5. Apple's App Store reviews system now makes a point of only showing you reviews for the most current version of the app as a default, so if a particular app has some phenomenal reviews for an older version, the developer may be hesitant to start "anew" with a fresh slate."
Where are all the iPhone 5 app updates? | Ars Technica
I absolutely agree with the idea of showing ratings for the current version but it should only be an extra piece of information after you click on an app and not the default rating on the front. The play store needs to show this info but it certainly does not need to change its default system.