E-book Market Predictions 2011

The e-book market is finally arriving in a big way. Amazon hasn't released sales figures for the Kindle, but they have admitted that it's their best-selling product ever. Even beating out Harry Potter... and Kindles are a tad more expensive. Barnes & Noble reports the Nook is their bestselling product ever. Meanwhile, Borders edges closer to bankruptcy. Here's some relevant info:

Forrester Research expects U.S. e-book sales to total $2.8 billion in 2015, up from nearly $1 billion in 2010. The research firm projects the number of e-readers and tablets in the U.S. will soar from more than 15 million in 2010 to nearly 60 million in 2015.

And I think those numbers are conservative.

• Regular book sales drop, e-books continue explosive growth. There's an easy prediction for you. I might as well start off with a no-brainer. B&N is selling more digital books online than physical books. With physical bookstores going out of business, it's clear which way the trends are going. Physical books will tend to be more for certain types of books (like coffee-table books), and popular fiction will inevitably for the e-book.
• E-book readers hit $99 or less. This is already happening, but expect it from the market leaders (I'm looking at you, Kindle) with a resulting jump in sales. When the e-reader is less than 3 or 4 hardback books, it's harder to resist. When publishers finally get smarter and lower e-book prices more, sales will jump even further. If they don't, authors will step in. Lower prices are inevitable in a friction-free distribution network; publishers should get ahead of the trend instead of being rolled over by it. Sadly, very few if any will.
• Explosive growth in the tablet market contributes to e-book sales growth. Tablets are eating into dedicated e-reader market share, too. The Kindle has a 47% share, down 15 points, while the iPad has a 32% share, up 16 points. The Nook and Sony's E-reader are hanging in around 5%, though I expect the Nook's numbers to improve. It looks like the iPad sold about 13 million units in 2010; Apple is expected to at least double, and maybe triple that number in 2011.
• More companies spring up offering a la carte services to authors; big publishers lose some big names to self-publishing. These two things are related, of course. The easier it gets for authors to publish their e-books themselves, the more authors will do it.
• Magazines finally crack the e-reader market in a big way as Apple makes it easy to buy subs. This one is dependent on Apple and magazine publishers reaching some sort of agreement on revenue splits. Publishers don't want to give up 30% of their sub fees to Apple, and Apple doesn't really want to go to the extra effort of negotiating with everybody. I'm hopeful Apple will do something to really help magazines out, but I fear they won't. Eventually magazines will be viewed on tablets, but getting to that point will be difficult for the businesses. Current iPad versions of magazines are individually priced and difficult for the magazines to produce well, since they take different skill sets. I foresee many magazines having trouble until subscriptions to tablet versions become easy, and magazines get more adept at crafting them. Maybe Google will add this capability to Android before Apple gets around to it; if so, a big win for Android. Hey, Google, if you really want to make an inroad on the iPad's market share, cut a deal with textbook publishers before Apple does.
• Android tablet version finally appears; Android tablets boom; e-book sales zoom faster. It may happen late in 2011, but it will happen. The opportunity is huge and Google won't pass it up. Prices will drop as competition roars. Maybe we'll even see a two-page tablet at a reasonable price.
• Apple introduces iPad 2, drops iPad prices, sales zoom. Yeah, it's inevitable. People are so focused on the new iPad that they forget what Apple does with old technology... they drop the price. So even more iBookstores will open up.

All in all, it will be a great year for e-book authors. The only downside is that marketing e-books will get tougher due to the increased numbers of titles. Authors will need to make sure they've done their marketing properly. Persistence is a key virtue; if you don't do something correctly at first, figure it out, fix it and continue.

7 Smartphone Gaming Predictions For 2011

Smartphones 2011... Produced by Photoshop.

The tech industry basically shuts down between December 25th and January 2, and so the usual spate of news becomes a trickle. What's a blogger to do except make predictions? That's how I intend to fill things out this week, with a series of prognostications for 2011. If nothing else, this will set me up for a retrospective one year hence where I can laugh at the foolishness of my younger self. Until then, here's my take on what's going to happen in the Mobile Gaming Market in 2011.

• Smartphone games continue double-digit growth. Not a hard prediction to make, but let's go a little further: Smartphone games will pass handheld games sales numbers. There was about $1.6 billion in US sales for mobile games in 2010, and about $2.1 billion for handheld console games in 2010; with the trend lines smartphones can pass them up, if the 3DS and the PSP2 don't spawn massive software sales (which I don't think will happen). The battle is over, and smartphones have won. Handhelds just haven't figured out they're dead yet.
• Smartphone games become a bigger market than PC games at retail. PC games were about $2.1 billion in US sales in 2010, and that was down about 19% from 2009. I expect space at retail for PC games will shrink, not expand, so smartphone games have a good shot at passing them up. Not only that, smartphones will become a bigger market than PCs this year, worldwide. We're looking at over 500 million smartphones sold in 2011, if predictions are correct. Now that's a market worth being part of.
• Verizon adds iPhone. The rumors have reached a fever pitch, but I really start to believe when I hear from suppliers. Apple is now looking at selling around 20 million iPhones or more in 1Q, which looks like a truly astounding number for the entire year. Throw in some iPod Touches to that mix and Apple will likely more than double its iDevice installed base in one year. Whoosh.
• A new iPhone model arrives. Have I heard rumors? Nope, just educated guessing. Apple has generally introduced a new model every year or so. Sure, they'd love to slow down and bank more profits, but the fevered pace of the smartphone business means if you're only running, someone is sprinting past you. I think Apple has to keep pushing new phone tech out there in order to keep sales up. Probably this year will see less technical innovation than the iPhone 4. I expect a faster processor, maybe more memory for the money, and reduce the price on the older technology. Oh, and a redesign to fix the antenna problem (though that seems to have been mostly forgotten). The new iPhone model probably won't arrive until summer, just in time to push the old model price down and boost sales going into the last part of the year.
• Android outstrips Apple in units sold; Apple continues to make more money for developers. This will happen despite Apple vastly increasing its sales due to the addition of Verizon (see above). There are just more and more Android phones out there, and the competition will continue. Another release or two on the operating system will help. And I sure hope Google gets around to making in-app purchasing work, because that will be the best thing they can do for developers. But there's more than that going on: New chipsets will make smartphones even more affordable, with retail prices under $100 without a carrier subsidy. That's for a smartphone looking a lot like a Droid, and you'll be able to find them by next summer for around $75.... without a carrier subsidy. Oh, yeah, there will be a lot of those sold... and the buyers will be looking for apps.
• Blackberry and Nokia will continue to lose smartphone market share, only faster this year. These poor companies will continue to flounder around, denying that there's a problem. Their new widgets will fix the problem... and then they come out and no one cares. The Blackberry Playbook? Will anyone even remember the name by next summer? Nokia will continue to try to get their online store moving, but will seem to forget that it won't matter unless they can sell a lot of hardware. Meanwhile developers will keep busy with their iOS and Android projects, and only if they have time on their hands worry about other markets. Which they won't.  Meanwhile, we see Windows Phone 7 and Palm making inroads in the market; they will likely eat up share from Nokia and Blackberry.
• Data plans get cheaper. Virgin's offering a $25/month plan off contract. T-mobile has $10 a month plan. AT&T has a $15 a month plan. As the networks get built out, and carriers compete, prices will continue to drop. Tablets will only accelerate this. Cheaper data plans will be good for apps, and good for developers.

2011 looks to be a huge year if you're an app developers. But the extreme growth will probably mean little attention being paid to details like helping developers market their apps. It will be even harder to find apps in 2011, not easier, and marketing will be even more important.

The Nintendo 3DS: Bad For Kids, Officially

Beats a poke in the eye with a sharp stick... or does it?

This has got to make things a little bit more difficult for Nintendo marketers: The Nintendo 3DS is bad for kid's vision, and should not be used in 3D mode by children under the age of 6. Nintendo has issued this warning because the way 3D works on the 3DS can harm children's vision as it develops. Nintendo will put a parental lock capability on the 3DS to help keep nasty 3D away from kids.

Sony has said the same thing about playing 3D games on the PS3, but Nintendo has traditionally sold very well to younger kids, so this is more of a problem for them. Plus, the whole point of the 3DS is, you know, 3D. It's certainly wise for Nintendo to be up front about problems before lawsuits start getting filed, but this is still not the optimal way to begin your marketing campaign for new hardware. Not that there were going to be droves of 6-year-old kids throwing down $300 for new game hardware, but still.... "This game device can ruin your vision" doesn't have a great ring to it.

I think the larger problem Nintendo has is the smartphone/iPod Touch. For about the same price or less than a 3DS (we still don't know the official price, though $300 is how the Japanese price translates right now) you can get a device that plays thousands of games, as well as video and music, accesses the internet, takes pictures and videos, has hundreds of thousands of apps, and can be used to send and receive messages by email, text, voice or video. And when you want a new capability, you just download it. That will be the difficult hill for Nintendo to climb. And first they have to admit that it's in their way...

Tablet Wars 2011

It's gonna get ugly for the hardware manufacturers. It'll be a bonanza for software developers. The tablet boom is coming to 2011.

Some analysts are estimating up to 75 million tablets will be sold in 2011, and Apple may sell half of those. Let's look at each segment of the market.

Apple: Expect a new iPad 2 this year, probably announced by April. Rumors suggest a higher resolution screen, thinner and lighter, and including front and rear cameras. My guess is that Apple will reduce the price of current iPads to make room for this new model, and boost sales even further (while fighting against the massive competition heading their way). I still expect Apple to cut some kind of deal with textbook publishers; the market possibility is huge (student signs up for classes, downloads all textbooks into his iPad... goodbye heavy backpack!). The gaming possibilities will expand as AirPlay allows iPad games to be viewed on an Apple TV-connected TV screen... with iPhones as controllers... we're gonna see some amazing games, especially if the new iPads have even faster processing than the current ones.

Android: The number of Android tablets heading to market is huge; we'll see a slew of them at CES soon. The big deal, though, will be the release of a version of Android crafted with tablets in mind. Google hasn't made any official announcements on this point, but there's plenty of speculation. Some point to the Chrome OS as Google's  reason for holding off on Android for tablets, being afraid that Android make make Chrome OS dead on arrival. I think Google will ultimately go with whatever sells, and right now the demand all seems to be lining up for Android. In any case, Google has to sort out the situation before Android tablets really take off. Even so, there is a wave of Android tablets headed to market soon.

Microsoft: Don't count them out of the tablet race. CES will see the introduction of a new variant of Windows designed for ARM processors as Microsoft aims to grab a slice of this fast-growing market. Still, they've failed miserably in the past to make Windows-based tablets sell; adapting Windows toa finger-based interface has been awkward and slow at best. Can Microsoft reinvent itself sufficiently to succeed? Certainly they've managed to do so with Windows Phone 7, so maybe they can pull it off after all. I think they have a very tough race ahead of them, though.

HP: Here's the real dark horse, with their PalmOS slated to become the basis for a new line of tablets. Certainly HP has the size and manufacturing capability to handle this task; can they be innovative enough? No announcements so far, but the rumors are pointing to a product introduction or several in 2011.

Developers will have multiple targets for tablet products. Gaming will be a major part of all of these platforms, if not the biggest part. It's going to be a wild year.

PSP2's Touching News

Still my favorite mockup... I hope the PSP2 looks like this.

More information on the PSP2 is leaking out from Sony, as the release date gets closer. Now Kaz Hirai is talking about touch screens and how they are pretty spiffy as an interface for playing games, and having one would be really useful in competing with Apple. But standard game controllers are useful, too, he hastens to point out.

Reading between the lines, it's pretty clear we should expect a touchscreen to be part of the PSP2, as well as the usual controllers. I'm guessing they're going to include dual analog controllers, as an inexpensive way to add a useful gaming feature not shared by the competition. Certainly the PSP2 is going to need all the nifty features it can get in order to compete with the 3DS and the smartphones.

Sony is playing it cagy with release dates and other information, but I expect we'll be hearing a lot more about the PSP2 in the next few months... especially as Nintendo ramps up its PR blitz for the 3DS. Sony will naturally want to piggyback on Nintendo's publicity, and maybe get some people to hold off spending their money on the 3DS by touting the PSP2's features. I don't really think that will work unless the PSP2 release date is fairly close to the 3DS, which seems unlikely for a piece of hardware that hasn't been officially unveiled. I expect we'll see the PSP2 in detail at E3, with a summer or fall release date.

And don't forget Sony's PSP phone that is supposedly coming out from Sony Ericsson... though I'm not sure if this is a coherent strategy or just another example of Sony's divisions running amok. Rumors continue to leak out that Howard Stringer's days are numbered as Sony CEO, and they may be ready to go with Kaz Hirai. The PSP phone will purportedly run Android 3.0, and feature PS One level games and perhaps some existing PSP titles... it just leaves me wondering how this would get in the way of the PSP2 launch. Is Sony just going to throw everything against the wall and see what sticks?

Usually that just makes a mess.

Microsoft Promises Windows 8 = Gaming

Yeah, right. No, no, Charlie Brown, I won't yank that football away this time. Really. I promise. What's that you say? Microsoft is promising that Windows 8 will be a relaunch of PC gaming, putting gaming back at the forefront of the PC universe. Wait, haven't we heard this promise before? I seem to recall hearing this for Windows 7... and Windows Vista... and Windows XP... and Windows ME...

Microsoft has relaunched their Games for Windows marketplace, but it's a far cry from what Steam has become. I'm not sure if Microsoft is hoping to restore sales of PC games at retail, or recognizing that goal is a lost cause and the future lies in digital distribution.

It's probably not a coincidence that Apple is launching their Macintosh App Store this January, where you'll be able to find full retail versions of all kinds of Macintosh software. Which will probably boost sales of such software significantly, and not incidentally boost sales of Macintosh hardware. This is a good thing at a time when laptops and desktops alike are forecasted to begin losing significant market share to tablets. That's the market that Apple currently controls, and the one where Microsoft apparently has no clue of how to compete. Is anyone looking forward to a Windows tablet?

Hey, it's great that Microsoft wants to try once again to make gaming more important on PCs. But other companies have been doing that for them (like Blizzard and Steam), so if they fail (as they have so many times before) it won't make much difference to the marketplace as a whole. Not so great for Microsoft, maybe, but they are still searching for their lost mojo. Right now their most promising areas seem to be the Xbox 360 and Windows Phone 7, so maybe a push to bring the PC games into the spotlight would work. I could see the synergy between the three areas, and if Microsoft can make the connections on a deep level this could be a strong counter to the enemies at the gate (or Gates...).

Sony's Getting Real Profits, Virtually

Sony tells us that their virtual world Playstation Home has hit 17 million registered users, and is profitable with 7,000 high-margin virtual goods and 236 games you can play. They are hoping to expand the user base (there are 50 million registered Playstation Network users, and only a third have signed up for Playstation Home) and thus the profitability. The coolness factor is another reason, plus it's something different than what you find on the Xbox 360 or the Wii.

Interestingly, most of the games on Playstation Home are free-to-play, with Sony making their money from the virtual goods. They are planning to try and bring in more indie developers, too. It's a way for Sony to take part in the new business models without messing up their standard business of retail packaged goods. One wonders if this area could grow to swallow up more of the business... it will be interesting to watch. If you're a developer, it's another place to get your game out there (if you've got some virtual goods in your design).

Meanwhile, Sony's got another reason to get a PS3 coming out. Their new Music Unlimited service debuted in the UK today, and is rolling out in the US and other countries next year. For a subscription price you get streaming access to a library of 6 million songs through your PS3 (or a PC or your Bravia TV). Sony's trying to move away from the iTunes model of buying songs, especially since iTunes has such a lead in that area. An interesting idea, but it remains to be seen if users go for it. A lot depends on the subscription price, which hasn't been mentioned yet.

Apple's poised to offer some sort of streaming music service, too, according to the rumor mill. Which could crush Sony's fledgling effort if it launches around the same time, or even if it launches well after it. Still, it's nice to see Sony trying harder, and their PS3 sales are certainly looking up. If the Wii doesn't reduce its price soon, I wouldn't be surprised to see the PS3 pass it up on a regular basis.

Video Game Design, The Sad Reality

More true than not, unfortunately...

Apple TV, Windows Phone 7 Sell A Million

Apple's bid for family room domination hasn't exactly set the world on fire, but it's not doing too badly either. This week will see the new Apple TV hit one million units sold, which is not too shabby. At this point the new Apple TV doesn't offer a whole lot besides Netflix viewing and buying iTunes content... but according to Apple, users are renting or purchasing over 400,000 TV episodes per day, and watching over 150,000 movies per day.

Windows 7 has a similar adoption pace; they've shipped over 1.5 million units to retailers. Which may not seem like much compared to recent iPhone or Android sales numbers, which are doing those kind of numbers in a week. But it's not bad for a brand-new phone operating system. Microsoft says they've lined up 18,000 developers so far, which means they'll be seeing a lot of apps at some point.

What I'm waiting for is when both of these devices have a major impact on gaming. Apple TV needs to throw the switch and start selling Apps... maybe start offering a version with more storage for that purpose, or allow the user to plug in more storage. The AirPlay introduction is so new the impact hasn't been felt yet, but it will be... you can play your iPhone or iPad games on your TV through Apple TV, and that can be amazing. Scrabble on the TV? Infinity Blade on your TV? This won't be as significant as actually downloading those apps to your Apple TV, but it's still cool.

Windows Phone 7 has Xbox Live integration, and it remains to be seen how far Microsoft carries that. I'd like to see more than just access to your account; let's see Apps cross over into your Xbox 360 space. Reduce the demands for putting games in the Xbox Live Arcade down to the level of Windows Phone 7, and watch the market explode. Will Microsoft do it? They'll have to deal with angry retailers, perhaps, but the potential is there.

It would be nice to see more than just an iPhone/Android competition in the mobile space; I'm hoping Windows Phone 7 and PalmOS can make it a lot more interesting. (Blackberry? Nokia? Well, I suppose they are still around... but their trajectory is in the opposite direction, and unless they do something dramatic they will cease to be smartphone contenders in the next year or so.)

It seems clear to me that smartphone adoption will continue at a blistering pace in 2011 and beyond. This will expand the market for games of all types, as well as for e-books and other digital content. Tablets will also grow rapidly, and the combination means that more and more people will have a computerlike device with them at all times. We're just seeing the beginning of how these devices will transform gaming and book reading. The marketing of games and books is also changing rapidly, and there's no standard path to success. All I can say for sure is that developers and authors need to pay a lot more attention to marketing, and build it into their plans even before they create their content.

Package Copy Fun 2010

It's time for this year's crazy packaging winner. After painstakingly reviewing thousands of new toys and games (Really! I volunteer at Toys For Tots every year), I found this gem. Ah, a remote-controlled toy truck and trailer, you think, looking at the photo at the top of the package. The title is vaguely wrong: "Remote Control Summer Fun". Well, I guess it applies to going on summer vacation... but then it says "Safari & Sporty Car". I don't think most Americans go on safari for summer fun... and probably not in a sporty car, if they do. But we do get bullet points!

• Forward
• Reverse
• Turns In Reverse
• Use 2 Penlight Batteries (Not Included)

As bullet points go they are less than overwhelming... I'm not sure that "Turns In Reverse" is a must-have feature. But "Penlight Batteries"? I believe that term dates from the 1970's. In any case, I don't think I'd put Not Included as a major bullet-point level feature designed to get people to buy my toy.

There are some more things to call your attention to with this package. Let's look at the top:

See, there are two different versions of this toy... and the vehicles are Interchangable! I believe that means Mr. Chang, clearly the man who wrote the package copy, can switch from vehicle to vehicle.

If we look at the back of the package, the selling points of the toy are made even clearer:

OK, maybe they just repeat the bullet points from the front. Why work harder to translate additional text? My favorite part, though, is the middle (non-bulleted) feature: "Collect Them All! (2 Assorted Styles)" Using the word "All" when referring to a group of two seems a bit overenthusiastic. Similarly, "assorted" seems a bit much to refer to two different toys. I wonder how many children have been motivated to collect them all?

There are two more remarkable things about this toy. First is the illustration in the lower right corner of the box:

I guess when you are going on a safari for summer fun, it's traditional to shoot a tiger and mount its head on the spare tire... which is located on the hood according to the main photo. The only tough part would be locating a tiger while on safari, since a safari takes place in Africa and tigers are found in India.

The part I like the best is when you take a close look at what's pulling the sailing vessel:

Yes, I believe that's supposed to be a Porsche 911, judging by the shape (and the subtle clue of the 911 on the hood). A fine, powerful sports car... though I don't think it does a very good job of towing 25' sailboats. At least that makes cornering less responsive, I'm sure.

When you go to create a new package, try to remember this one... and avoid looking like it.

Console Market Shrinks, Social/Mobile Gains

Total spent on games in the US in 2010: $24.7 billion.

This study just released  by Newzoo has some very interesting data. They show the overall money spent by US consumers on  games to ring in at $24.7 billion, just 2% less than 2009. (Yes, I realize this isn't counting paper games... but that category is going to amount to just a percentage point or two on this scale.) Console game sales dropped 29%, which accounts for the grim faces of the major console publishers. Still, it's not as if those gamers just disappeared; they just started spending their money on other types of games. Yes, boxed retail PC games dropped, but every other category grew... and substantially.

Social games grew the most, by 66%, followed closely by PC downloadable content at 60%. (That must account for why League of Legends publisher Riot is looking to hire 100 people.) Mobile games grew 46% (note that the numbers for DS and PSP are counted under consoles, not mobile devices.) Growing 46% is a lot of smurfberries in one year.

The interesting lesson here is that yes indeedy, gamers will get their groove on in different ways. Console gamers are getting more picky about spending money on console games when they see interesting choices appearing on their PC, on Facebook or on their smartphone. All of those things are direct threats that the console game publishers need to deal with.

Some publishers are pushing into those spaces through acquisition; some are building their own titles or working with partners to get some traction in these new areas. Unfortunately, some are insisting that everything's fine with their current business model. If you're not concerned about the future of the gaming industry, you're not paying attention. Games aren't going away, but how consumers spend money on them is certainly changing. Design and marketing need to follow that money.

One thing marketers should think about: Social games can take advantage of a mobile client, and mobile games should have a social component (at least to their marketing through social media).

Google TV Not Ready For Prime Time

It looks like Google has figured out that Google TV isn't ready for its debut yet; they've asked TV makers to delay their introductions of Google TV, which were planned for the CES show next month.  Google wants time to refine the software, which has gotten rather poor reviews. This would also give Google more time to land some deals for TV content, which have so far eluded them.

The downside of this is that Google has caught their TV partners by surprise right before a major trade show, which is not the way to build good long-term relationships. It's no fun scrambling to try and redo your CES presentation at the last minute. Google will have some work to do, not only in fixing their software problems.

It's kind of sad, really, that Google isn't able to capitalize on some of these opportunities faster. Apple has shown there's a huge demand for tablets, yet Google hasn't been able to create a tablet-specific version of Android yet. Which gives Apple many months free of effective competition. Looking at Android designed for phones on tablet size screens makes the iPad look very good indeed.

Granted, Apple TV is still pretty limited. But it does have a very easy to use interface, which is a base Apple can build on. Someday apps will be offered through Apple TV, and then the device's true potential will appear. Maybe Google TV will beat them to the punch, but this latest move isn't very promising. We may have t wait another year before these giants get their acts together, which gives Microsoft and Sony and Nintendo a little breathing room.

Wii at $99? If Only...

Pressure is growing on Nintendo to do something, anything about the Wii. Nintendo seems incapable of admitting there's even a problem, even though the Xbox 360 outsold the Wii handily in November despite the $100 or more price differential. EA's CEO is complaining publicly about the Wii's price point, practically begging for a $99 Wii. Of course, third-party publishers are less than happy with Nintendo's support, which mostly consists of benign neglect.

Check out the chart from Silicon Alley Insider, showing how the Wii's sales have been tanking this year. Analysts are looking for a price cut, or a Wii 2/Wii HD, or something to ignite sales. Nintendo basically shrugged and said "We're happy making our smallest annual profit in six years." It's nice that they're trying to revive the DS line with the 3DS, but that's not going to do anything for the Wii regardless of how well it sells. A price cut is the obvious move while marking time to a new console; at $99 the Wii should zoom to the top of the charts again, and maybe revive some interest among third-party publishers in doing a Wii title or two.

The longer term problem for Nintendo is what exactly a Wii successor would do. Sure, they could add HD output, and a faster processor... but then all you have is a closer competitor to the 360 and the PS3, without any of their advantages (like a hard drive, a robust online service, advanced motion control...). Nintendo will certainly want to have something different up their sleeve, more than just horsepower. Perhaps the delay in creating a Wii successor means Nintendo is having problems coming up with something they think people will like, at an affordable price, that gives them an edge in game development like motion control once did.

I'd like to see innovation in the business model, with a revolutionary jump in their online store, to outpace their rivals and get ready for the Apple TV onslaught. But given Nintendo's track record, they will be slow to innovate on the way they do business.

Digital Distribution Latest Numbers

NPD has surveyed gamers to see where they are buying games, with some interesting results. This study looked at over 3700 buyers from October to November, and found that 71% of the games acquired in the last 3 months were physical... so 29% of the games acquired were digital. Of those digital games, 47% were acquired through a service like Steam.

Obviously physical games are still the standard way to get new games, but customers are increasingly comfortable with buying digital game content. Especially with the number of different ways you can get it, from app stores or Xbox Live or from Steam. This is following the same pathway that music did; at first people had trouble with the idea of just buying a download instead of a CD. Now the situation is reversed; you have to have some special reason to buy a CD since downloading is so easy and commonplace. That shift didn't take very long once the technology was widespread; and with it as a precedent, I think the shift for games will happen faster.

Games still have the file size problem, though. Many big releases are gigabytes in size, which can take a long time to download (especially for a mobile app; the release of Riven for iOS is over 1 gigabyte in size). Plenty of games don't have this trouble though, and if ever we ever get the bandwidth that other countries are getting (hello, Japan!) the digital distribution model will be adopted even more swiftly.

Digital Distribution Is Puzzling

The whole concept of digital distribution is strange, confusing and even frightening. That is, if you're Sony. Here's what SCEE head Andrew House said:


“Digital, for me, still has a challenge in that it doesn’t have the equivalent of that. Browsing is a little overwhelming and too confusing, and that’s the challenge that makes me think there’s a strong role for physical media for years to come.”


He also said that retail's been around for thousands of years because it works really well. OK, I get that... but maybe digital distribution hasn't taken over for retail thousands of years ago was because setting up an online store was really difficult prior to the widespread introduction of iron. Or the invention of electricity.


I have to say it seems like that attitude is more than shared by Nintendo. Ooh, digital stuff is scary. Kaz Hirai of Sony said he feels a digital-only future is at least 10 years away. Actually, I'll go further than that, and say that people will always be able to buy stuff in stores. Radio and newspapers are still around, right? (OK, maybe the newspapers may go away soon...) The real question is when does digital distribution become the majority of sales for games. The answer to that is considerably less than ten years; more like one or two depending on how you look at it.


Sony and Nintendo need to find some people who can figure out digital distribution. Microsoft gets it, though they need to improve the Xbox Live shopping experience and finally go all the way with a full range of titles available online. Avoiding digital distribution merely leaves a gaping door open for Apple, Google, Steam, and others. Worried that the retailers might abandon you? You mean those same retailers who are busy selling used games you don't get any revenue from? Smart publishers are looking at subscriptions, DLC, F2P, and all the other new business models that are booming.


It's a new game in town, and you have to play if you want to win. Being stuck in the old business models is a bigger and bigger risk as time goes on.

Alternative App Market Overview

This article has a good overview of non-Apple app markets, including the Android Market, Nokia's Ovi market, and GetJar. It's worth noting some of the key differences between app markets. The most important one is that developers are making far more money right now from the iOS app market than all of the other put together. That situation is something that annoys the hell out of non-Apple app markets, as you might expect, so they are working hard to change it.

The Android Market is planning to remedy its biggest failing, lack of in-app purchasing, "soon." This will be an important step, at least for those developers who have figured out how to take advantage of in-app purchases. Aside from that, the Android Market lacks the mysterious Apple approval process. You read the Android Market's guidelines, pay $25, and post your app (as long as you don't do something forbidden in the guidelines). Since the Android marketplace is growing even faster than iOS, this could be the biggest moneymaker for developers in the future. So it's definitely one to keep your eye on.

Nokia's still trying to get its Ovi market into competitive shape. They boast of a huge market of 675 million devices... of course, that's hundreds of different hardware platforms mooshed into one lump. Good luck getting your application working on a good fraction of that number. They have sales in 190 countries and are supporting 30 different languages. Which is great until you have to try and develop for that... it gives you a headache just thinking about it. Nokia's trying to make the Ovi store more attractive with a couple of ideas in closed beta testing now: In-app purchasing and in-app advertising. Meanwhile, Nokia does offer the option for carrier billing for purchases, as opposed to just credit-card billing (the way the iTunes store works).

The standard revenue share seems to be 70% for the developer, 30% for the store. But  GetJar has a very different approach. Anybody can put a game up there, as long as its free. So there's no revenue, and no revenue split. Developers can make money through in-app purchasing that they implement themselves, or advertising. GetJar makes its money by offering in-store advertising opportunities to developers. You want better placement for your game? Pay for it. This does offer a way out of the vast wasteland of the iTunes store or the Android Market, where your app could wander forever without seeing a buyer. Still, you'd better be pretty sure you can make money from your app if you're going to be spending money to advertise it. GetJar supports over 2300 smartphones, though only across open platforms (no Windows Phone 7 or PalmOS). They do list iOS games, though all you get is a link to the file on the iTunes store rather than the game itself (though they do host all of the information about the game).

GetJar's problem is getting people to know about GetJar. They do have deals with about 60 carriers globally to carry GetJar links. Really, though, they see GetJar as an additional distribution outlet to things like the Android Market or the App Store. It's easy and free to get listed on GetJar, so you might as well try it out.

I expect more distribution options will be forthcoming, especially for the Android Market. There's a huge business opportunity here for some company to make it easy to find apps. Imagine an Amazon-style recommendation engine, well-policed comments, ratings... hey, Amazon! Over here!

Designing Digital Covers For Digital Products

When products existed as a physical item sold in a retail store, you'd need to design a cover. Whether it was a book, a CD case, a box, or something else, the external appearance, artwork, and text were important. A good cover would attract a customer, get them interested enough to look closely, and then provide enough information to convince them to buy (or at least help with the process).

Digital products, whether an ebook, an app, or a downloadable game, still need a "cover." Ebooks need a compelling cover page for display on the e-reader screen (which can be seen by other people occasionally) and in the online stores. Apps need a compelling icon. Downloadable products need some sort of icon and title combination.

Let's get one thing out of the way first: A good cover won't turn a bad product into a bestseller. But a bad cover can keep a good product from selling really well. Make sure your product is the best you can make it before spending significant time on the cover.

With that said, how do you approach creating a good cover? Start with some good artistic talent. If you're not an artist, hire one. Bribe one with a great dinner. Do whatever you can to get some good talent in graphics and artwork helping you out.

A good artist is not the same as a good cover designer. Unless someone is experienced at this highly specialized art form, they will need guidance. Even the specialist will need some info from the product creator. You have to tell them who the target audience is, and what the core experience of the product is. Is your product a grim killfest in an urban wasteland? Then the cover shouldn't have a happy bunny frolicking in a meadow.

Here are two key things to make sure your cover has:

Strong Visual. The cover should not be muddy, confused, or have too many elements. You should be able to glance at it from a distance and get an immediate impression that represents the product. Don't have a dozen soldiers doing a variety of things; use one soldier in a closeup. (You can have a scene with many elements, as long as there is one element clearly emphasized and everything else is background... but make sure the foreground element stands out sharply from the background.)

Strong Title. Sometimes the title can be the cover graphic... many novels use the title itself, with special font treatments, as the graphic. (Sometimes with a minor artistic touch, like a bullet hole or a rose or something evocative of the story within.) If the author's name is the biggest selling point, that may even be the biggest thing on the cover. Good titles are brief, memorable, and evoke the nature of the product.

Apps are somewhat different. These elements are important on your description page and your web site for the app. The app icon itself won't have a title; it will be a pure visual (with maybe the briefest of text actually in the app icon). An app icon has the additional challenge of doing these things without text in a very limited number of pixels. Your title has to be really brief, and you get no ability to choose a font... so make sure you've picked a good name.

Try out some early versions of your cover on friends, especially those that fit the target demographic. See if they can tell you what the product is on a quick glance. If they can't, you probably need to make it clearer. If you have to explain it so they get it, your cover isn't doing its job.

I used the cover art for the current bestselling game Call of Duty: Black Ops as an example of what I'm talking about. There's a single person on the cover, even though this is a multiplayer game. The title is clearly readable even in a small size. The artwork clearly says gritty, gun-totin' action, so it's accurately evoking the nature of the game. You can glance at this cover and know what the game is about and what the mood is like. Plus if you are already familiar with Call of Duty the name ropes you in to see the latest game in the series. (In this case I don't think the cover is making much difference to the sales, but you certainly wouldn't want a poorly done cover that might hurt sales.)

One final note: My suggestions here are purely from a marketing point of view. I'm not an artist or a designer. I'm a marketer trying to create art that sells products. Keep your artist focused on that; they aren't creating art to hang in a gallery, this is art that needs to work at selling a product.

Angry Birds Are Angry About Android Payments

Rovio, developers of the smash hit Angry Birds, are attempting to fix what they see as one of the big problems with Android applications: Android payments. Rovio is producing the Bad Piggy Bank in combination with Finnish network operator Elisa, in order to process in-app payments for (naturally) more Angry Birds material. Angry Birds is free on Android because getting Android users to pay for apps is so difficult. This new payment plan, which Rovio hopes will be adopted by other developers, allows charges to be put on your monthly phone bill.

The idea of mobile phone billing is nothing new; many companies in Europe and Asia are used to getting money from customers by billing their mobile accounts. For many countries, that's how you pay for things online, since credit cards are not widely used in their culture. Rovio's trying to make this easy for game developers on Android, since Google has failed to do so. Especially in the fast-growing realm of in-app payments.

We'll have to wait and see if other developers jump on this. Or maybe Google will get its act together and start streamlining its payment process and promoting it, or buy another payment processor and build on that. This is the Achilles Heel of the Android platform. Getting more phone activations than Apple is interesting, but it's not making up for the fact that developers are making seven times as much money from the iOS platform as they are from Android.

Developers see the Android numbers and smell profit potential, but the road is not easy. Rovio's hoping their new payment processing will pave the way to profits for developers. And a nice piece of change for them, too.

The Dark Side Of In-App Purchasing

Who knew Smurfberries were so mothersmurfin' expensive?

It hasn't taken long for the dark side of in-app purchasing to emerge. Of the top 10 highest grossing apps in the App Store, 6 of them are free to download... and make their money from in-app purchases. Capcom's The Smurfs' Village was the highest grossing app shortly after its release a month ago, even though it's a free download. The secret? In-app purchases. You can buy Smurfberries to help you play the game, and in fact you can buy a wheelbarrow full of them for $59.99 if you want to. Who would be crazy enough to do that? Perhaps a 4-year-old child who doesn't really understand the idea of money, and all it takes is two taps to buy things. In the AP story on the link I posted, one kid racked up over $66 in a short time, and another hit $140.

Wait, isn't there a password protection to prevent unauthorized iTunes purchases? Yes, but there's a loophole: If you tap on another purchase within 15 minutes after entering the password, you're not asked for the password again. So if you use your password, then hand your iPad or iPod to your child, they can merrily buy Smurfberries until your credit card freaks out.

Well, but that loophole should only occur in a very limited number of cases, right? Apparently the 15 minute time limit doesn't work all the time... some parents are reporting they hadn't used their password that day and the kids are still able to buy things without re-entering the password. Not good, Apple.

On the positive side, Apple has been very good about providing refunds. And you can lock out in-app purchases using the settings menu. But there's an issue with publishers providing games with seductive in-app purchases aimed at children too young to be deciding on purchases. Wait, here's Capcom's response: Capcom spokesman Michael Larson says "Smurfs" is no different from other games in this regard, and the bulk purchasing option is useful to adult "power players."


Adult power players? For a Smurfs game? What kind of bullsmurf are you trying to hand out? Here's a general marketing tip: Try to avoid obvious flights of fancy when talking to reporters.


Of course, it's not just Capcom that's doing this. Four of the six top-grossing apps are kid-oriented games. Mixing in-app purchases into games aimed at children seems like a recipe for problems. Sure, you might make some serious money for a while, until the angry hordes of parents descend on you with tar and feathers.


In-app purchases are a very powerful tool... and like all power tools it's very dangerous if mishandled. Marketers need to tread carefully in this area.

Game Sales Up

For the first time since 2008, game sales have actually gone up over the previous year's sales. The NPD figures have arrived (perhaps smuggled out from behind their pay wall by heroic resistance fighters) and reveal that November sales were up 8% over last November... they even made it to the level of Best Sales Month Ever, ringing up $2.99 billion. Software was up 4%, hardware was up 2%, but the big winner was the accessories category, which was up 69%. Thank you, Kinect and Move.

Sales were also helped by Call of Duty: Black Ops, which in one month has become the 7th best-selling game ever with 8.4 million units sold. Sales were so good that overall sales for the year are now down only 5% instead of the 8% it was at last month.

Looking more closely at the data we find some sore spots. Portable hardware and software was down over last year. So Nintendo's troubles continue. The Wii was outsold by the Xbox 360, which is impressive especially when you consider the price differential. (Sales data put the 360 at 1.37 million units, the Wii at 1.27, and the PS3 at 530K.)

The disturbing part is that the joy was not widespread. It's not like sales were up for everything; take away Black Ops and the Kinect and the picture looks pretty dismal. This does not look like a resurgence in the game industry; it looks like a couple of new products did really well. Which doesn't mean that the industry is looking at a good 2011.

Smartphones Sales Zooming, Android Ad Sales A Winner

Remember when Google was claiming an astounding 200,000 Android phone activations per day? Well, that's old news... now it's 300,000 per day. Poor Apple can only muster 270,000 iPhone activations per day. That's about 9 million Android phones per month, and about 8 million iPhones (with iPads and iPod Touches, I guess, being on top of that).

If only Android was a better moneymaker for developers... but here's some evidence that you can make money on Android. It's just not by getting people to pay for your app; you can make a lot of money selling ads. Rovio sells Angry Birds on the iPhone, and has done very well with that (over 6.5 million copies at a buck a pop isn't bad). Rovio doesn't sell Angry Birds on Android; they give it away for free. How do they make money" Advertising... AdMob is using Angry Birds as their poster child for advertising with them, as Angry Birds is bringing in $1 million a month to Rovio through selling ads. Not a bad income for a free app.

When Google finally gets it together and makes in-app purchasing in Android as easy as it is in iOS, there will be some serious money made. That is, if your game is designed around in-app purchasing... you have been thinking about that, haven't you?

The big loser in all of this is the handheld console. No in-app purchasing, no ad sales... you start looking at the list of what a 3DS can or can't do compared to a smartphone, and it's rather sad. Remember when the N-Gage came out and everyone laughed at the idea of playing games on a phone? They ain't laughing now. Dedicated handheld gaming devices are looking to line up a slot in museums right next to pocket calculators. The saddest part is that it's not so much the hardware that killed them, it's the business models that they couldn't adapt to.

Update: Oh, and if you were wondering about Blackberry? Fuhgeddaboutit. As example of what's happening to them, in the last year on Verizon Blackberry went from 90% share to less than 20% as Android phones ate their lunch. You think that's bad? Wait until the iPhone hits Verizon... Blackberry who? Those guys can have a nice chat with Nokia about what could possibly have happened to them.

Downloadable Revenue For EA Hits 20% Of Sales

Electronic Arts CFO Eric Brown's been talking about the company's download revenue at conferences lately, and he's released some facts and figures. So far in 2010 EA has raked in $750 million in digital sales, compared to $430 million last year. Brown expects digital sales to account for 20% of revenue this fiscal year, and to be a major factor in future sales growth.


That's not surprising given how regular game sales have been for the past couple of years industrywide. It looks like 2010 will end up being about 8% lower in sales through traditional channels than last year's sales (which were down from the previous year).


EA expects to bring in as much as $100 million this year from full-game downloads. Which no doubt causes a little heartburn for GameStop and other retailers, which is why they're not losing any sleep when publishers complain about used game sales. Really, though, if EA didn't sell full games via download, then Steam would just take more of that audience. Digital sales are inevitable. Blizzard must have done quite well with Cataclysm sales via download, as the lines were down substantially at retail stores over expectations. Which is not great news for the PC market at retail stores, but Blizzard probably doesn't care.


The interesting thing about EA's experience is that much of their sales come from digital add-ons, like the FIFA Ultimate Team mode where players can buy trading cards that let them add players to their team for a few games. Some whales (borrowing the gambling industry's term for big spenders) spend up to an astonishing $700 on these card packs. FIFA 09 brought in $15 million from these trading cards, and FIFA 10 brought in $30, and FIFA 11 looks to bring in $40 million. The cost of developing those cards is a million or two, so this is a very profitable area for EA.


We can see the relentless advance of alternate monetization schemes continues. All of the high-growth areas of the game industry are in non-traditional areas; the classic console game is in the second year of lower sales, and 2011 doesn't look any different. Opportunities are expanding for small developers, but taking advantage of those opportunities will require new ways of doing business.

3DS, PSP2 May Lose To Smartphones

This is not a picture of the 3DS.

Here's the proof of what I've been saying... the smartphones are taking over the handheld gaming market.


Money quote: "The report, "The Phone Gaming Revolution: Do the DS and PSP Stand a Chance?," found that 43.8% of the phone/DS/PSP gaming market plays games on phones, which represents a significant 53.2% increase over the past year. At the same time, Interpret says that the proportion of those who play on the DS or PSP has fallen by 13%." 

Interpret also said "Gamers appear to be defecting from their handheld gaming devices to phones to get their gaming kicks: a full 27.2% of consumers who indicate that they play games on their phones only (and not on the DS/PSP) actually own a DS or PSP, but do not actively use the device(s)."

So even people who own a handheld gaming device as well as a smartphone are spending more time playing games on the smartphone and leaving the handheld alone. It makes sense; how many portable devices do you want to lug around? You're always going to make sure you have your phone... so the DS gets left behind. As we've seen before, the multifunction device beats the single-purpose device. The PDA got eaten by the cell phone (or what was previously called a smartphone). Who carries a calculator these days? Phones do it. Cell phones are even taking away market share from point-and-shoot cameras... as the cameras in smartphones get better and better. Why carry a camera or a video camera when your phone does a pretty good job?

The prospects for the 3DS and the PSP2 look dimmer. Not that the hardware won't be powerful; the latest reports on the PSP2 indicate it may have almost half the processing power of a PS3. And while the 3DS may have a fairly low-res screen, the 3D without glasses is a neat trick. The difficulty is both of these devices will likely only play games. So you're going to leave it behind if you only have room for one device when you go out, because you always want to take your phone so you can stay in touch.

Another problem for the 3DS and the PSP2 is the parent problem. When the parental units are considering what to buy for their young techlings, the 3DS and the PSP2 will be in the range of $250 to $300. OK, an iPod Touch is $225... and it also plays music, videos, is a high-powered camera and video camera, it surfs the web, sends email, can even make Skype calls. Or for $99 they can get an older iPhone model and make it a full phone, with the data plan. Oh, and games for the 3DS or PSP2 will be at least $30, maybe even more. Versus thousands of free games or games that cost a few dollars.

So it's not about hardware specs; it's about multifunctionality and the business model.  Downloading and installing new software instantly, for free or a few dollars, is far more attractive than having to find a game store and spend $30 and then remember to keep the cartridge around with you at all times.

One more hidden problem: We already know the 3DS will require higher development costs for publishers than a DS, and if the PSP2 has near PS3 level graphics, you can bet development costs will be much higher than for the PSP. Which makes it even harder for publishers to make money, which will make them warier of developing for those platforms, which means not as much software, which means the platforms are even less compelling to buy.

Even at the rosiest assumptions, how many 3DS or PSP2 units would be selling a month? 1 million units would be amazing at those price points... yet iPhones are already cruising at north of 4 million units per month, and Android phones at 6 million per month. And newer, more powerful versions are introduced every few months.

This is a race that does not look good for the dedicated gaming machines.

How could they compete? By opening up to multiple applications and allowing developers to create software as easily as they can for iOS or Android. Have a killer online store for downloading everything, including the latest full game titles you can find in the stores. Have a 3G option to include phone service. Will either Sony or Nintendo do that? Highly unlikely... too difficult and painful for them. I suspect they'll continue to say everything is fine, no cause for alarm, and hope that a massive asteroid strike destroys Apple and Google in one blow.

Google's eBookstore

Google has launched its eBookstore to take advantage of the millions of books it has scanned. And grab some of the revenue that Amazon and others have been raking in as ebook sales finally begin to take off. The eBookstore has some interesting features, of which the most useful is that they intend to help independent bookstores. How? By cutting them in on a slice of the pie... Google's standard terms are 70% for the publisher and 30% for Google. If you're an independent bookseller, you can put the book up on your web site and Google will give you a slice of that 30%. How much? That hasn't been disclosed, because the deals vary from bookseller to bookseller.

An independent bookstore that's cut a deal with Google can put ebooks from Google on its web site, and at least make some of the revenue. Right now there's really no way for a bookstore to get any slice of what Amazon or iBookstore is selling. Google clearly wants to try and enlist some help from retailers who are otherwise left with a shrinking number of physical book sales while Apple and Amazon rake in the money from the fast-growing ebook market.

I'm not sure if more independent booksellers will glom onto this opportunity, or if it will really help them out. But it certainly can't hurt, and it's a glimmer of hope in a dark time for bookstores. I think bookstores will have to push harder on the social aspects of their business; a gathering place for book lovers, coffee drinkers, authors and enthusiasts to meet and share their love for knowledge.

Google's eBooks effort still has issues to deal with, though. Their free Google Books app is not as polished as similar apps, and clearly needs work. Also, their basic concept is that you don't download the book, but keep your copy in the cloud. Which means you can access it anywhere on any compatible device, and take up reading from where you left off, and not worry about losing your file. On the downside, you need an active Internet connection, which is a real negative compared to a Kindle or other ebook reader. (Google does have a way for you to download the book files, though.)

Google is allowing individual authors to put their books in the eBookstore, so this is yet another venue for authors to hock their ebooks (read more details here). It remains to be seen just how strong a sales venue this will be. Clearly the key selling point is that your book in the eBookstore will appear in relevant searches; the theory being that this will result in a lot more sales since people will be finding your book more easily (though this seems to make sense only for non-fiction books; I doubt fiction titles will be found through searches).

One more thing about this is the whole protracted court case over the Google Books concept. There's a settlement that the court has approved preliminarily, and this will allow Google to continue scanning books. There's still more than a few people unhappy with this idea (that books can get scanned in without their prior consent), but it looks like it will be the new reality. Marketers, start your search engines...

Wal-Mart Goes Big On Used Games

Wal-Mart is apparently not just dabbling in used games, they're jumping in with both feet. That's at over 500 stores in the US. Analysts expect them to focus on the under-$20 segment, in keeping with Wal-Mart's position as the low-price leader. Which is good news for GameStop, as they watch Target, Best Buy and others rush into selling GameStop's bread-and-butter product, used games. Best Buy is pushing the used game sales, as you can see from the photo. As new game sales have slowed, retailers are pushing the lower cost used titles as a way to keep gamers spending.

This may be great for retailers looking to goose their sales, but all it does for publishers is make a bad sales picture worse. A widespread availability of used titles means less incentive to purchase the title new. It's not like you can see wear and tear on the pixels; a used game plays just as well as a new one. The only difference is in the packaging; customers who care about that are probably buying Collector's Editions anyway, because they are, you know, collectors.

So what's a publisher to do? Publishers complain about used games, but they're certainly not going to be putting pressure on retailers to stop selling them, when ALL of their big retail customers are doing it. The online play pass is one answer, which seems to be working for EA. Many are looking at subscription models, but the market segment built around subscription revenue is the MMO game, which are busily heading towards the freemium model.

It seems clear to me that used games are becoming more widespread, which is forcing publishers to look even more swiftly to other revenue models. It's going to help keep overall dollar sales down for games, and keep downward pressure on new titles, which is going to make the chance for profitability even lower for traditional titles. Marketers are going to have to run to keep up.

Marketing Android Games

If you thought marketing iPhone games was hard, wait until you tackle the problem of marketing Android games. The same basic problem exists in both markets: There are tens of thousands of games vying for attention, and there's very limited tools built into the app markets for finding your game.

The Android app market, though, has bigger problems than just numbers. Here's an excellent blog post on the Android market's problems, which I found via Gizmodo. This developer notes some of the key issues for Android developers, which is that they're just not making much money for the most part. The problems with the Android market can be seen in some very simple things, such as this: Where are the killer apps? If you look at the top apps for the Android platform, most of them are also available on the iPhone. Most of the rest are system-support type things, like anti-virus or system hacking tools. If you've been in the game industry for a while, you know the power of system exclusives. How much has Mario helped Nintendo sell hardware? How much has Halo helped Microsoft? It's hard to even say where Nintendo would be if it wasn't for the little plumber. And if you took away all of the impact of Halo, would the Xbox and Xbox 360 have been very successful?

Yet the Android market doesn't seem to be attracting many exclusives, despite the fact that sheer numbers seem to be looking pretty good for Android.

The latest Comscore numbers show that Android has just about the same market share as Apple in terms of subscribers in the US market. The Android is closing in on Apple as the phone platform most desired by potential buyers, too.

Look at the numbers from Nielsen's latest survey. The Android platform is almost as desired as the iPhone platform among likely smartphone upgraders. Wow, that all looks great for Android developers, right? If only. Revenue for the iPhone platform is many times higher than Android. Why the disparity? It's in the details. The marketplaces are just not comparable in interface or in ease of use. The Android Market is clunky, ugly, and bereft of even the limited ways the App Store provides to find and suggest apps to customers. At least the Android Market has finally introduced a Related tab to provide some suggestions for customers looking for apps. A step in the right direction, but there are still miles to travel. Hot picks? Lots of categories to make it easier to find what you're looking for? Sort by user ratings? No, aside from a few of the top titles, you're going to have to know about your Android app's existence before you go hunting in the Market for an app. This is not designed to help small developers sell products.

Speaking of which, the Android is not helping much with the freemium model. That's the model where less than 2% of the apps in the App Store are generating 30% of the App Store revenue... yet it's not something you can readily do on the Android platform. I know there are plenty of bright people at Google, and surely some are aware of this, but perhaps it's too hard to herd the engineers in the direction of making such improvements.

So some Android developers (or potential Android developers) are looking to get their apps paid for by Verizon or some other carrier and pre-installed on the phone. They may not get very much per unit, but at least it's something. Not a business model that works for everybody, though.

The Android Market needs to get a makeover, either from Google or from somebody else. Perhaps a third party can create a functioning app market where Google doesn't appear to be all that interested. Maybe the Android tablets already swarming to the storefronts will help catalyze the development of a well-done marketplace. Apple needs some good competition on the software and business model end of things, not just on hardware.

Meanwhile, marketers looking at the Android marketplace have to try even harder than on iOS. More social media, more ads, more PR, a better hook. You cannot count at all on the internal Android Market tools to help users find your game. You have to find an audience outside and bring them in.

Tablets Rising, PCs Shrinking

The Gartner Group has revised its estimates of PC shipments downwards for this year and into the future, saying that tablets are increasingly replacing PCs as purchases. They estimate tablets will replace 10% of PC sales by 2014. Other analysts are predicting even bigger growth in tablets; estimates for tablet sales in 2011 now range from 35 million to 70 million, depending on who you listen to. The latter figure includes an estimate that Apple will sell 40 million tablets in 2011. That's a mess of iPads.

What's driving all of this? Several factors. Price, of course, is one of them, though if you want you can certainly get a notebook computer (not even a netbook) for less than an iPad will run you ($499 at minimum). What's interesting is the growth in business users of iPads; just look at Apple's site, where you'll now find a section devoted to iPads in business. That wasn't there when they launched; it was only after business users began grabbing iPads in big numbers that Apple added that. I hear reports of increasing numbers of iPads turning up in meetings, where you need to reference an agenda, perhaps take notes, and maybe look up something on a web site or access a file. These are all things the iPad does very well, being speedy and light weight. No clickety-click either, a plus for meetings. (The big issue my wife identifies is the instant-on capability, where booting up her notebook takes several minutes.)

Around the household, tablets are handy when you feel the urge to hit the Internet, read a book or watch a movie. Or play a game, and that's going to be a bigger and bigger area. The iPad has some pretty good horsepower, though it's lacking in the control interfaces (no joysticks, d-pads or buttons here, except virtual ones). Yet developers are finding their way around those limitations.

Which makes sense, if you look at the size of the market. Anywhere from 20 to 40 million iPads selling next year dwarfs any videogame console (the hottest potential for 2011 is the 3DS, and that would be lucky to hit 10 million). Add in the iPhone/iPod Touch markets (which for most games would be a fairly easy variant) and you have serious potential sales, if you can get around the marketing problem. (Getting all those users to find you is only going to get tougher.)

The flip side of this news is the reduction in new PC sales. Much of that will come in developing countries, where they may shift to tablets or smartphones because they are cheaper than PCs. So it may not be as much of a loss as far as game developers are concerned. Still, it's a fair bet that many of the PC users most likely to buy computer games will also get a tablet, and be spending more time with that. Zynga probably doesn't care so much whether a user plays Farmville on a PC or an iPad, but this may matter to some developers. Particularly if your monetization plans depend on selling a $20 computer game by download rather than a $5 iPad game. Yet another reason the freemium model is gaining ground... it doesn't care what the platform is as long as you can make in-game purchases easily (Google, are you listening?).

It's a brave new future... happening fast.

Mobile Game Revenues Doubling, In-Game Purchases Skyrocketing

Anyone who's been paying attention to the gaming industry has been aware that in-game purchases have become a big business. This report from Juniper (reported by TechCrunch) predicts the mobile game market revenues to pass $11 billion by 2015... which is more than double 2009 revenues. Not amazingly aggressive by some standards; I think growth may accelerate even more than they are claiming (especially if you think of tablets as "mobile game" platforms).

The interesting part is going to be played by in-game purchases. Juniper says that in-game purchases will be the primary source of revenue, overtaking pay-per-download, by 2013. That's two years away, baby. That freight train is moving fast.

Juniper also notes that discoverability is the big problem. Well, yeah, it's all about the marketing once you have a good game put together. There must be hundreds or thousands of good games languishing in obscurity in the App Store because you've never heard of them. As TechCrunch notes, "This is obviously an excellent opportunity for fledgling app discovery platforms such as Appsfire, Chomp, Mplayit, AppAware, Appolocious and, increasingly, StumbleUpon."

Just to back up Juniper's numbers, here's a report on GigaOm about the flourishing of the freemium model. If you look at the top-grossing 100 apps, 34 of them are free to download and make their money through in-app purchases. Analysts think in-app purchases account for 30% of the total App Store revenue. Which is pretty impressive when you consider that freemium apps are less than 2% of all apps in the app store.

Yeah, you read that right. Less than 2% of the apps generate 30% of the revenue. If you're planning on building a game app, and you're not seriously considering a freemium model, you need to reconsider.

Which all highlights how much more work Google has to do with Android. As this article mentions, while Android sales have passed up the iPhone in sheer units, and new Android apps appear at about the same rate as new iPhone apps, in-app purchases on the iPhone are 7 times the amount on Android. Google's got some serious work to do on their tools and the Android Market to close that gap.

Meanwhile, getting your app found is still the basic problem facing developers. More on that in another post.