iOS Developer Reminds Everyone That IAP Isn’t Actually Destroying the Games Industry

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This was an exciting weekend for folks who like debating the merits of in-app purchases on Twitter, particularly as the more “mainstream" games media started to figure out just how aggressive EA’s monetization methods in Dungeon Keeper (Free) turned out to be. If you haven’t played it, much like EA’s The Simpsons: Tapped Out (Free) the game’s tutorial not only pokes fun at the fact that you need to spend premium currency, but it doesn’t feel like you’re barely even scratching the surface of the game before you’re slapped with four hour timers for simple actions like digging a tunnel to the next nearby gold mine. Additionally, Dungeon Keeper is chock full of all the flavor of the week free to play elements, leaning heavily on several mechanics straight out of Supercell’s Clash of Clans (Free)

Understandably, anyone who even had the vaguest fond memories of the original Dungeon Keeper has found themselves incredibly disappointed by EA’s new highly social free to play twist on the classic Dungeon Keeper formula. The disappointment has spread across our forums, both in the game’s thread as well as several spin-off threads such as this one by Aventador which discusses a trend he has noticed regarding the App Store “devaluing the destroying old classics."

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It didn’t take long for the discussion across the internet to shift course from “EA ruined Dungeon Keeper" to “IAP is destroying gaming, full stop." This brought me to a particularly great editorial by Austin-based iOS developer Drew Crawford which argues that similar gameplay elements actually even predates computers, specifically when it comes to ancient mechanical arcade games released in the mid-60’s which in adjusted 2013 dollars cost roughly $1.80 a pop to play.

…IAP is not a new model. It is a very old model, the model that started the industry, that everybody forgot about. It’s hard to imagine now, but according to Steve Kent there were some 400,000 arcade street locations in the United States. Compare this with only 121,000 gas stations or 190,000 grocery stores. That is a lot of interest in video gaming under a pay-to-play model.

Crawford goes on to discuss the very unique problem that the App Store is facing, in that we’re involved in a market with more games being released on a single platform than ever before at a rate that makes it quite literally impossible for anyone to play them all. In fact, he bases his example off of there being 150,000 games on the App Store, when in actuality as of this writing there are over 190,000.

The fundamental problem with selling games is that you have 150,000 games that you could play instead. If you think you have a unique game, you probably don’t. And even if you do, it doesn’t matter, because nobody will ever find out–they’ll just play whatever game is in the top list or that their friends saw in the toplist, because nobody is playing any appreciable fraction of 150,000 games.

This is, basically, a problem that is unique to the games market. If you want to take notes on your iPad for example, there are maybe 25 apps that realistically will do what you want. And so you if you are really motivated you can try all those apps for yourself. Or you can look on the internet and find an article where somebody’s done that for you. But nobody’s playing 150,000 games. Not me, not you, not IGN. Nobody. Nobody’s even going to play 1,000 games, which is well under 1% of the games market. And this is why marketing games is very hard. (You’re beginning to discover why I’m not a game developer.)

His point about the top lists particularly hits home on a week where Flappy Bird (Free) and the same developers’ other two games are glued to the top of the free charts, seeing millions of downloads a day. Essentially, the App Store is a market that all conventional rules of how to develop, market, and sell games need to be rewritten, so attempting to apply any conventional logic on how things should be based on how things used to be just doesn’t work.

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Comparisons are often made to the shareware world, but as Drew found, the Internet Archive barely even indexes 2,400 items which includes all shareware, not just games. Additionally, as vast as console libraries seem, the slightly over 1,000 Xbox 360 games in existence aren’t even a drop in the bucket compared to the world of iOS. The best part of the whole piece, however, and the most widely disregarded point of any argument against free to play is how well the model manages to solve the insane segmentation that not only comes of the ridiculous amount of games available, but also the massive variety of both backgrounds and spending potential of modern gamers.

See, the trouble with gamers is that they are non-uniform. Kids in elementary school play games. Your wife in the checkout line plays games. And these people–well, they have vastly different spending power.

The magic of IAP is it allows a software developer to segment its market; to take in the $.10 in ad spend that the elementary school kid can pay, the $5 that the college student with a side job can pay, and the $100 that the suburban housewife can pay. In fact, something like 51% of all revenue is a transaction over $20.

The true problem, is no one has been able to propose a better alternative to survival on the App Store outside of free to play models. The requirements for this solution, as Crawford points out, are as follows:

  • No loss in revenue for game developers.
  • Ability to segment customers and make more money from richer customers.

The shareware model on the App Store where you get a free taste than a single payment to unlock the rest simply doesn’t work, and developers who have tried it in the iOS world have actually gone homeless doing it. Slapping a price tag on your game automatically puts you at a 90% handicap to everything else on the App Store. With a limitless supply of games, no gatekeepers outside of a bare bones approval process and $99 yearly fee, we come to the following conclusion:

The only thing you can do is draw as many customers in as possible and then once you’ve got them in the door bleed them for whatever they can afford, and that’s why we’re here.

Actually there is a third possibility: iOS games could go the way of flash games, where it’s more of a hobby than a viable business. Some 70% of flash game developers are only part-time, whereas only 36% of iOS devs are moonlighters. So there’s a very sobering outcome that we should consider in our analysis: we should consider that there may not be a business model for mobile games that works at all.

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So, is IAP destroying gaming as we know it? No. Gaming is just evolving, and getting a little different in the process as developers are forced to get more creative to keep the lights on in their studios. Like all things, we’ll eventually fall inside of a natural state of balance, and what we’re experiencing right now are the two sides of the pendulum swing, between EA’s hyper-aggressive monetization in Dungeon Keeper, and the relatively hands-off approach that other developers like NimbleBit take in their free to play titles. Taking a hint from ArsTechnica, if you made it this far and want to discuss this story in the comments mention bananas somehow. Every market out there has forces of good and bad in it, and the App Store isn’t any different.

Hopefully we eventually wind up with a business model that works for developers, and monetization methods that don’t offend gamers, but if there’s one thing that’s my favorite about the App Store is that it’s always changing. The existence of Dungeon Keeper as an IAP-ridden timer game doesn’t mean gaming is ruined, the market is just trying to figure out what to do next- So save your doom and gloom and focus on the massive amount of incredible games on the App Store instead of getting so upset with the few that aren’t.

[via Sealed Abstract by Drew Crawford]

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