iPhone Games -- Hits vs. Hype

09/05/2009 05:12 am ET | Updated May 25, 2011

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.