Good Advice On App Pricing

This reminds me of some other game... wait, don't tell me... 

There's nothing like some real-world data to inform your decisions. One app developer, Appy Entertainment, took to wondering how their app might do if they made it free, and relied on in-app purchases to bring in money. The story is told in an interview with Pocket Gamer, recounted in this article. Their app, Trucks and Skulls, normally sold for 99 cents. When they added a freemium store to the latest release,revenue jumped 150%. When they got a promotional opportunity from Free App A Day, they went for the free pricing... and downloads jumped 5,000 percent. The game was downloaded more than 100,000 times on July 3. They brought the price back to 99 cents to see what would happen, and basically revenue returned to the previous level.

The data have convinced them that straight pricing is the inferior business model. (Though they call 99 cents premium pricing, which sure doesn't sound premium to me.) They plan all their future titles for a freemium business model. They do understand, though, that the design of the game has to incorporate that idea from the start in order to be really successful. The game balance becomes critical between paid and unpaid players; you can't make it feel like the only way to succeed is to buy your way to success.

Camel's Nose In The PSN Tent

Free Realms... it's like an online cosplayer convention, I think.

Here's a news tidbit that I filed away, but haven't gotten a chance to comment on yet... Sony has announced the first free-to-play title for the PS3, Free Realms. This is a family-friendly MMO that's done well on the PC, and now it's bringing the freemium monetization model to the PS3. Of course, this would be much more cool if the Playstation Network (PSN) was actually operational right now, but it's still turned off due to a rather nasty intrusion by a hacker. Sony is having to scour their servers to make sure there's no sneaky little code hiding out ready to steal credit card numbers or hack player scores.

It will be interesting to see just how well MMO's can do on consoles, and how well the virtual goods will sell. I'd think the lack of a keyboard would affect the ability to make friends and communicate, but since everything seems to be moving to voice chat anyway perhaps it's not so much of a bother any more.

I do wonder when Xbox Live will take the leap and allow free-to-play, or MMO's for that matter. They risk being left behind when Apple TV and Google TV make the leap to apps in the family room, as you can bet there will be plenty of companies ready to offer free-to-play games on those platforms.

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.

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.