The Ever-Changing iOS Gaming Market

Even though it’s not the first iOS game with a pre­mium price point, the recent release of Final Fan­tasy Tac­tics: The War of the Lions (Square Enix) on the App Store for $15.99 has fueled a lot of dis­cus­sion about higher-priced iOS games by big com­pa­nies. Are these pre­mium games here to stay? If so, what does it mean for the over­all iOS mar­ket and espe­cially for indie devel­op­ers? In this post I take a brief look at the his­tory of game pric­ing on the App Store and spec­u­late on what’s pos­si­ble to come in regards to iOS games.

 

Race to the Bottom

 

The App Store has been known almost since its incep­tion for the many qual­ity games avail­able for extremely low prices, free and $0.99 being the most com­mon. This “race to the bot­tom” phe­nom­e­non has been heav­ily crit­i­cized for sup­pos­edly dis­cour­ag­ing the cre­ation of games with more of an AAA-quality sim­i­lar to what’s com­monly seen on con­soles and PC or even hand­helds. It also makes it harder for many devel­op­ers to increase the price of their apps because of the skewed per­cep­tion of value by many users and the inevitable com­par­i­son with cheaper games that offer hours and hours of content.

Angry Birds is the quin­tes­sen­tial $0.99 iPhone game. This is a game that sold mil­lions of copies thanks to great game­play, fan­tas­tic art style and invit­ing price. It cemented $0.99 as a pur­ported per­fect price for iPhone games, low enough so that it could be an impulse pur­chase for most users. Once upon a time, before in-app pur­chases, top-grossing lists were dom­i­nated by 99-cents games and it seemed like you couldn’t go wrong by choos­ing this price point.

The truth might not be so straight­for­ward, though. For devel­op­ers, pric­ing their apps this way can be prob­lem­atic since it requires more sales to break even, thus increas­ing the risks asso­ci­ated with devel­op­ing for the plat­form. With a $0.99 price there’s also no room for maneu­ver and the app can’t be dis­counted (aside from becom­ing free for lim­ited time). On the plus side, the lower prices allow users to pur­chase more apps, shar­ing the pie with more devel­op­ers instead of con­cen­trat­ing sales only among few big developers/publishers.

Freemium vs Paid

The “Pre­mium” label in the chart refers to any game that is not free.

In-app pur­chases allowed a new model to reach the App Store: the free-to-play (F2P), microtransaction-based game. This is a model that had already proven to be extremely prof­itable on the PC, mainly with Face­book games. To notice that, one just has to look at Zynga, the most famous case. Zynga became a bil­lion­aire com­pany with Face­book games that boast dozens of mil­lions of play­ers every month. The F2P model also proved suc­cess­ful for iOS and soon replaced $0.99 as the most lucra­tive model for the platform.

If $0.99 games sought to lower the entry bar­rier, F2P games basi­cally got away with it entirely, trust­ing on their abil­ity to hook play­ers so that they’ll even­tu­ally pay for some­thing in the game. When done right, F2P can be great both for the devel­op­ers and for play­ers. For more of my thoughts regard­ing the F2P model, take a look at my pre­vi­ous iDe­vBlo­gA­Day post.

 

The Other Side

 

While there were cases of premium-priced games before, a more gen­er­al­ized trend rever­sal began with the launch of the iPad. The iPad saw releases with higher prices both of exclu­sive, pre­vi­ously unre­leased games and also of more expen­sive ver­sions of iPhone titles. The new device allowed devel­op­ers to release their apps as uni­ver­sal bina­ries, work­ing natively on the iPhone and iPad, yet another rea­son for a higher price on release. The enor­mous suc­cess of games like Epic Games’ Infin­ity Blade, Rock­star Games’ GTA: Chi­na­town Wars and Square Enix’s var­i­ous games (Final Fan­tasy III, Chaos Rings) demon­strated the via­bil­ity of the iOS pre­mium model. Since these pre­mium games were gen­er­ally closer in design to tra­di­tional PC and con­sole games (many being ports of games pre­vi­ously released on these devices), they gar­nered atten­tion from hard­core gamers and more tra­di­tional game media out­lets, allow­ing the exter­nal world to see the iOS plat­form as a viable hard­core gam­ing device.

Revenue of Portables

Soon, the pretty heavy dis­tinc­tion between smart­phone and hand­held gam­ing that used to exist started to fade away. While their portable nature could nat­u­rally sug­gest lighter, snack-sized games, the $30-$40 prices of hand­held games meant they were seen as more pol­ished, focused efforts against their cheap smart­phone coun­ter­parts and for some peo­ple it looked like many of the bet­ter hand­held games had no place on smart­phones. Nowa­days, with increas­ing rev­enues of smart­phone games, there’s even been spec­u­la­tion about the death of ded­i­cated portable game con­soles. While a few years ago it was unimag­in­able that a com­pany like Nin­tendo would release its games for the iOS, this doesn’t seem so absurd right now and in fact, there are peo­ple inside the com­pany appar­ently push­ing for that.

Mobiles vs. Handhelds (Penny Arcade)

These days might be gone.

 

The Future — More Big Names?!

 

While the via­bil­ity of the pre­mium model might attract more com­pa­nies to iOS devel­op­ment, which should pro­vide more qual­ity apps for the plat­form and increase the over­all value of the mar­ket, it might have a neg­a­tive impact on the money dis­tri­b­u­tion. If the aver­age app gets more expen­sive and users keep spend­ing roughly the same amount of money, the over­all num­ber of apps pur­chased per user will nat­u­rally be lower. This could lead to a more hos­tile envi­ron­ment for smaller devel­op­ers in which a few big names would get the big share of the pie and the rest would be left with scraps. This sce­nario could also make it even harder for smaller devel­op­ers to get their apps noticed against the big play­ers, which is already a her­culean effort these days with­out a size­able adver­tis­ing budget.

Another side effect of the likely arrival of more big names on the App Store and the new mar­ket that will result is a pos­si­ble change of per­cep­tion of the sit­u­a­tion of indie iOS devel­op­ers by exter­nal users. While the App Store has been com­monly seen as indie devel­op­ers’ heaven thanks to the many reported suc­cesses, there’s a chance that it will become known as more of a big pub­lish­ers’ play­ground. Regard­less, and even if it will prob­a­bly make things harder for indies/small devel­op­ers, the iOS plat­form should still be viable and offer great oppor­tu­ni­ties for them. In fact, any­one who’s been fol­low­ing the App Store for some time knows that the days of the iPhone gold rush are long gone and it gets harder every­day to get noticed, so this could be just another bump in the road for indies to tra­verse. If this ever hap­pens, the PC plat­form should be a great role model for the iOS, since it remains a fan­tas­tic plat­form for indies even with the many PC AAA games released every month.

 

Prof­itabil­ity

 

As pre­vi­ously said, F2P, microtransaction-based games are gen­er­ally seen as the most prof­itable model in the cur­rent iOS mar­ket and the dom­i­na­tion of the top-grossing lists by these games cor­rob­o­rate the impres­sion. $0.99 games, the for­mer kings of the top-grossing lists, only man­age to occupy a few spots of these lists these days. If the premise of the increase of AAA (or near-AAA) devel­op­ers with more expen­sive titles on the plat­form is true, it’s not unrea­son­able to imag­ine that we’ll see a growth in the num­ber of pre­mium titles mak­ing it to the top-grossing lists. Because of that, I don’t think it’s impos­si­ble for us to be mov­ing to a future in which the major­ity of the most prof­itable titles will be either F2P games or pre­mium games, with niche (not nec­es­sar­ily unprof­itable) titles in-between. The $0.99 price point seems increas­ingly more suited to be used as bait to catch unde­cided users in limited-time sales (a tac­tic mas­tered by EA) than as the main rev­enue model for many games.

Of course, this is way too hypo­thet­i­cal and there’s no sure way of know­ing if any of this will actu­ally hap­pen. It’s not easy to believe in the decline of $0.99 games since this is such an iconic price for iOS games and so many suc­cess sto­ries hap­pened with games priced this way (Angry Birds, Cut the Rope, Tiny Wings). Hell, I even made my game with this price in mind! I do believe that the signs are there though and while there will always be qual­ity $0.99 games, they’ve already been sur­passed by F2P. Why can’t pre­mium games be next?


We’re on to some very excit­ing months on the App Store. The iOS mar­ket is ever-changing and grow­ing and it’s entirely pos­si­ble the near future will bring changes that no one has been able to pre­dict so far. I’m look­ing for­ward to see­ing what hap­pens next! Now that I stated my points I’d like to know what you think. Do you believe in the decline of the $0.99 games or will this price point remain as strong as ever? What are your thoughts on the future of the iOS gam­ing mar­ket? Let me know in the comments!

This post is part of iDe­vBlo­gA­Day, a group of indie iPhone devel­op­ment blogs fea­tur­ing two posts per day. You can keep up with iDe­vBlo­gA­Day through the web site, RSS feed, or Twit­ter.



4 Responses to “ “The Ever-Changing iOS Gaming Market”

  1. Kyle Newsome says:

    Great post!

    I think one fun­da­men­tal thing that we often for­get when think­ing about the “right” price for an app, is the nature of where the device itself lives in your lifestyle.

    That is, an iPhone is your on-the-go device, an iPad is your lie on the couch and enjoy leisure device, and console/PC is your more hard­core ‘get it done’ kind of device for both util­ity and gaming.

    The nature of the device dic­tates the value that users will place on the soft­ware avail­able. $0.99 and F2P on iPhone has been such a famously suc­cess­ful price point because it respects the nature of the device and how major­ity use it, that is, at a glance for small burst peri­ods of time.

    Of course, the app itself must also respect the nature of the device and how it is used. Tiny Tower is everyone’s favourite exam­ple these days and rightly so. They hit the nail on the head when it came to under­stand­ing how we use the device.

    Cheers!

  2. Leon says:

    Hmm, from my expe­ri­ence the suc­cess of your iPhone game is not a func­tion of price. It’s a func­tion of mar­ket­ing. Even free games go under with­out good PR.

    • Leon,

      Even though the price of the game is def­i­nitely not the only fac­tor or even the most impor­tant fac­tor in its suc­cess, I still see it as a very impor­tant attribute and a wrong price can be def­i­nitely hurt­ful. To see that, just look at recent games that had to change their model to remain alive (e.g., Lord of the Rings Online, Heroes of New­erth). Thanks for the comment!

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