iPhone Games -- Hits vs. Hype

As the president of a casual games company I get asked approximately 5,683 times a day why my company isn't developing iPhone games yet. And while we are in fact plugging away on an iPhone version of our popular title Spliterature, I thought I'd open up about why iPhone games are a scary proposition for mid-size game developers like me.

The current iPhone developer lore goes something like this: A young , down on his luck geek manages to create a game for $47 while living in his mom's basement and subsisting on a diet of Ramen Noodles and Red Bull. After releasing his game with no promotion, it instantly sells 500,000 copies. He now has a yacht on order, is dating a model and is fielding offers from all the major studios for his game's film rights.

In reality, here's how it looks. While the iPhone is no doubt a phenomenon, Blackberry still beat Apple's sales in Q1 and Q2 of this year. All told, there have been approximately 45 million iPhones and iPod Touches sold, 54 percent of which are in the U.S. One of the most -- if not the most -- successful game app ever, Flight Control, sold 1.4 million units according to the developer. Considering the developer keeps 70 percent on an average sale of .99 cents, that's nothing to sneeze at, but let's dig a little deeper. When we break this number down, we're looking at a 3 percent conversion rate. So far so good, 3 percent is in the top range of downloaded casual game titles. But here's the catch, the majority of game apps -- the 5,000 plus that never see the light of day -- are converting nowhere near 3 percent. My guess would be that the average conversion rate for an iPhone game is less than .25 percent, maybe lower.

Now let's talk competitors. Depending on whose numbers you trust you are looking at anywhere from 6,000 to 13,000 game titles to compete against. With the number of apps literally doubling month over month there are more competitors on the iPhone than in any other game platform. And we're only at the start of the device's lifecycle. With it becoming nearly impossible to get your title to stand out, the iPhone has quickly devolved into a hit driven business with fewer indies and more franchise titles in the top 25 every day.

The final analysis? At a development cost of $20,000 -- $50,000 it's very difficult for a developer to recoup their costs unless they have a hit on their hands. The iPhone is fantastic for consumers, less so for game app developers. This may be the reason why you see big game developers dipping their toe in the water with their most successful franchise titles but not making a wholesale change to their business models.

Think about it, EA would need to sell close to 5 billion iPhone games to match their 2009 revenues -- iPhone needs a lot more hype and a lot more sales before I see that happening.

Follow Jessica Rovello on Twitter: www.twitter.com/ArkadiumGames

Comments

[lokol13]

I feel this is a very very partial, poor argument about the market for casual games via Apple / iPhone (and related products, like the iTunes store which sells games for download to laptops, desktops or for use on the iTouch). While the casual games via iPhone market may not resemble that for console games in size, even if you limited the comparison to one gaming platform (Wii, for example) the revenue to cost comparison isn't so bad. If I was an angel investor in your casual games company, by the way, I'd want out right now. Why? You chose to air this opinion -- which could cause a negative relationship between you and a dominating mobile player -- via your very public HuffPo blog. It's bad journalism, even for an opinion column. But it may prove even worse business.

[daser]

here's why you've already failed

"At a development cost of $20,000 -- $50,000 it's very difficult for a developer to recoup their costs unless they have a hit on their hands."

There is never a sound reason to release a mediocre product. If you feel that creating an app that will possibly fail is a a good business model, then perhaps you're in the wrong business.

Simple, useful, elegant design, ease of use are qualities that should not be reserved for hit applications. They should be reserved for every application that you intend to release to the public.

If an application works and works well, they will always be used and purchased. Blaming the market for poor innovation and design unfortunately has become the rule, rather than the exception.

[jayburd]

Your reasoning rings hollow. You already have an advantage over the indies. If you develop good games for the iPhone and market them well, they'll sell.

[Jeremy Davis]

A. B. C. Always. Be. Closing. ALWAYS BE CLOSING!

You're not cut out for the iPhone market. You're not willing to take risks. Not every game costs $.99, in fact most don't. Get your figures straight.

[Kenny Rosenblatt]

Excellent post Jessica. I couldnt agree more. While the iPhone seems like a huge, new, blue ocean opportunity, its looking more like a big, scary, red ocean of competition.