A couple of months ago, I wrote about how the state of iPhone gaming was changing with an influx in bigger studios with smaller and smaller pricing margins.
Things have gotten even more competitive since with Gameloft and other studios drastically cutting their prices on older games down to $0.99. While this is good for consumers in the short term, the long term effects are potentially more troubling. There is a constant debate on TouchArcade as to these long term effects. One camp says that the App Store must sustain higher priced games in order to promote more quality titles. The other camp disputes this. I’m with the former camp, as is id Software’s John Carmack. In an interview, he said:
If [iPhone] games could have a reasonable shelf life at $9.99, you will start seeing multi-million dollar development budgets as the market continues to grow. But if it turns out the only way you end up being successful on the iPhone is games that cost a couple dollars, you’re never going to achieve that parity with the other handhelds.
One major effect of this $0.99 economy has been seen by EA’s announcement that they have created a micro-studio within the company to produce casual $0.99 iPhone titles. These titles are going to be in development just a short time (a month or so), presumably to recreate the success of some of the most popular games in the App Store, which also happen to be $0.99.
Let’s think about that for a second… EA is putting resources into low-risk casual $0.99 games. But imagine the flip side to this: What if EA had announced they were creating an division just to produce high quality iPhone original titles? Imagine big-budget original iPhone games with the resources of a major studio behind them.
Could it happen? If there was enough money in it, I’m sure it could happen… but it’s not going to happen at a $0.99 price point.
Now, I don’t blame consumers for buying $0.99 games, nor do I blame studios for following the money. But I do think the long term effects are going to result in a market of two types of games. 1) inexpensive casual titles and 2) inexpensive ports from other devices. Meanwhile, deep, high quality, iPhone original titles will become more and more scarce. Of course, the market will balance itself out over time, and opportunities will appear for developers to fill the gaps. I do expect downloadable content will result in more episodic apps with level packs and add-ons.
Indie developers are also going to be squeezed out further. There are only 100 spots in the top 100. Flight Control, Pocket God, Fieldrunners and Koi Pod pretty much have permanent spots. There are a few Chillingo titles that are on $0.99 sale that take up another 3 spots or so. A few major titles, a few novelty apps, and now EA’s $0.99 game of the month, and you’re down to fewer and fewer spots that you are really competing with.
Meanwhile, Apple is the only one with the power to really change the dynamics of the market through changes in the App Store rankings… but I’m not sure if they will. It’ll be interesting to see where things go from here.
Normalkid 
Just wanted to say thanks for continuing to blog at normalkid.
Good stuff.
I was just discussing this topic over lunch today (like I pretty much always do), but I wanted to add something to the table that isn’t discussed very often.
I was thinking about looking at this situation from Apple’s perspective. While Apple does make 30% off app sales, Apple’s primary objective is to sell hardware. The App store has added a ton of value to the iPhone and iPod Touch. Now, when a consumer purchases an iDevice for $200-400, they are also getting access to tons of great software for an extremely low price.
Wow, accidentally hit submit way before I was done with that comment:
Continuing:
The fundamental reason it has become standard for Apps to be priced at $0.99 is not directly related to consumer buying habits, it’s because Apple’s Top Paid lists are ranked by units sold and not revenue. So, as you know, a game like DOOM for $10 would to sell over 10x the amount of units that a $0.99 game would to rank the same spot on the charts. Since the Top-Paid lists is a huge source of attention, this makes for a very strong pressure for developers to keep prices low.
Okay so, I was thinking, it seems very possible that Apple is intentionally keeping prices low so that they can boost the value of the hardware. Then, it occurred to me that Apple is actually known for this already. I’m not saying I agree with this one way or another, but I’ve heard Apple being accused of forcing iTunes song prices low to make the iPod hardware more attractive. Could this be what’s going on with the iPhone?
Again, I should say that I’m not sure this is a bad thing. There’s not enough data to know if a game like DOOM would sell more or less than 1/10th the units at 1/10th the cost.
Hey Josh,
I don’t know if Apple really is thinking it through that much. I feel like the decision they made to rank based on units sold seems a pretty reasonable initial decision that I don’t know if they could predict how it went.
While low priced apps are nice, a true “killer app” (game or otherwise) would also be a pretty good driver of hardware sales too.
Anyhow, I guess I’m not convinced it’s a conscious decision on Apple’s part, just the way it was set up.
arn
I have to agree with Arnold on the final point of these little debate. It just turned out this way.
I don’t think that the new titles coming to the iDevice are really going to be persuading more buyers to get the device. There is already enough variety in the AppStore for people to satisfy their new gaming needs.
However, it is becoming quite concerning to the indie developers and big developers alike. With the market becoming over saturated with $.99 games, both of low and high quality, it will become very challenging to make a profit.
The result of this would be the talented developers seeking a new way to create a profit and the remnants will be of low quality “junk games” that just earn a few sales a day.
It is obvious that even EA is concerned with the premium title market for $9.99 games as they have made the business decision to create $.99 games.
Arnold, keep us up to date with your inside knowledge as this story unfolds.
Most developers, including me, would not like this $.99 price point as it takes huge amount of money to develop premium games.
If Apple decides to keep its ranking system as it is, many developers will come up with ways to make up thier losses(?) for instance by introducing micro billing systems within their games while keeping the price of their apps as low as $.99.
Just wanted to say my 99c worth.
Almost all of those 99c apps are casual games. And I’m afraid to say it, but video gaming future is all about the casual market. The DS and the Wii proved that.
And now it’s hitting the iPhone. Now don’t get me wrong, I’m a hardcore gamer myself and I love my PSP and DSi, but they don’t end up in my pocket quite nearly as often as my iPod Touch.
The problem is, from the consumers point of view, the iphone is a casual gaming platform. It’s “what can I play while I’ve got 10-15 minutes to kill” .
Not enough people will spend $10 or more to fill this need. They would rather buy 10 99 cent games that are quick and simple to master. they play them until they are bored with them, then move on to the next one.
As an indie developer, I don’t really mind the $0.99 price point. I think it is actually one of the few competitive advantages we have over the larger studios. I also think that the largest market for iPhone games IS the casual gamer. Most people pick up an and play these games for a few minutes at a time and don’t necessarily want a huge immersive game with many hours of gameplay. People have other means to obtain that kind of entertainment; tv, game consoles, computers, etc. Of course, there are folks that do want these experiences on the iPhone, but I’m willing to bet they are a small piece of the pie.
Josh Rosen: “So, as you know, a game like DOOM for $10 would to sell over 10x the amount of units that a $0.99 game would to rank the same spot on the charts.”
I don’t think that’s what you meant to say. The $10 game would have to have ten times the dollar amount in sales to rank in the same spot. Same number of units.
Keith, though the $0.99 price point has its advantages, it can ultimately cause a detriment to many independent developers releasing small-budget titles in the App Store. Consumers naturally compare between products they want to buy; and if EA are selling their games for $0.99 what’s to stop the consumers from buying EA-branded games rather than the indie-developed games? I’d assume most consumers would dive in and buy an EA game before they do a Studio12AB (fictional) game if both are priced for the same meagre value.
Chillingo’s Return To Mysterious Island just had a sale, dropping its price to $0.99. In such a case, I doubt that the low price point will hold any competitive edge whatsoever for indie developers against the big boys if they (EA, Chillingo, ngmoco, etc.) decide to compete in that price range. The only thing that’ll keep indie developers afloat would probably be innovation and overall quality of the game because if EA decide to drop all of their games to $0.99 — small time developers will not be able to compete.
With that said, Harbor Master is doing really well because of just that; it’s overall high quality. Imagine if Harbor Master was a shoddy rip-off of Flight Control with poor mechanics and sloppy visuals. Even if you price it at $0.99; I doubt they’d be many sales made.
@onscrn
Actually, it’s pretty well determined that the top 100 list is based on # of units sold, not dollar amount earned.
That’s pivotal to this whole situation – that’s really the reason why everyone is dropping their price to the 99c, the bare minimum. They want to get up on those lists and gain visibility.
If top 100 lists were based on revenue, they would look very, very different from how they look now. And developers wouldn’t be dropping their prices like this.
Natalia, that was exactly the point I was making. Same number of units to get same rank, irrespective of price. The person I was correcting had said that the more expensive game would have to sell 10 times the UNITS to tie the cheaper one in the rankings. I said “same number of units.” Which means 10 times the dollars.
Hey Jeff, thanks for the response. I think that making it as an indie has always been difficult and it will continue to be so. We have to compete with what other folks are selling for $0.99 and provide an equal or better product to survive. That is tough for sure, but it can be done. The cost for an indie to produce a small casual game is going to be less than what it takes a larger studio to build the same game. Therefore we don’t need to sell as much to turn a profit. That’s definitely a competitive advantage.
The move by some of the bigger publishers dropping their prices is interesting, especially on the larger bigger budget titles. I have a feeling that some of these titles were having trouble turning a profit at their higher price points. Now they are testing the waters to see if they can do better with a lower price and making up the difference in volume sales.
The problem is that you need to sell a ton of games at $0.99 to make back the development costs of a large budget title. There are only a few games on the app store from any publisher that have sold over a million units. At $0.99 that is still less than a million in revenue, which for some of these larger budget games, might not even cover development costs.
I’m sure this is why we are seeing developers like EA starting to focus on smaller games with 1-2 month dev cycles, which doesn’t really worry me any more than existing big company players in the casual market. Ultimately, I still think that we can provide equal or better quality / gameplay, and still do it cheaper / faster because we have less overhead.
@Natalia
That’s a great point. However, the problem with allowing for revenue earned as the means to get on the Top 100 list would be that new and relatively unknown games would not be able to compete in the market.
Enough said.
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as far as a change in the app store to help high budget games out.
I suggest this. Either catagories such as $3.00 & below and .99 Will help along with a search by price filter. I know that would at least help us find them. I mean come on, I look in the most popular paid app section and I find a moron test for .99 at the top, Now How does that app even rate? It actually rates higher than doom or myst simply cause people with an odd sense of humor had a buck to spend. I wasn’t even looking for any stupid kiddy joke apps. I would suggest .99 cent apps be given a categorey entirely to them selves. Also ratings should only appear by reviews and not number sold. I mean I could by a 1.00 app ten times and doom only once with 10.00 so cheaper apps are getting a higher rating simply due to the mathmatical outcome of how much do I have in my pocket.
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