Comment - Full Analysis of iPhone Economics - it is bad news. And then it gets worse

I recently re-tweeted this article and I commented on the post but wanted to bring the discussion here to see what you think.

Full Analysis of iPhone Economics - it is bad news. And then it gets worse

http://communities-dominate.blogs.com/brands/2010/06/full-analysis-of-iphone-economics-its-bad-news-and-then-it-gets-worse.html

I promised to return with the full analysis of the iPhone App Store economics analysis, from every angle, with all data I have managed to find. This blog intends to paint the most accurate picture of the specifically Apple related iPhone App Store market economics - and lessons from here should apply to most other smart phone app stores as well. The one final piece of the puzzle that had been missing, that we desperately needed to ge the full, honest picture, was the Apple official revenue number, which we finally got a few days ago, at $1.43B total revenues generated over 2 years, and thus $1B paid to developer. Now we can do the full analysis. But first a few general comments.

Here’s what I wrote:

It does make for interesting reading and I think there’s a few factors that mean iPad will improve the changes of indie games and major publishers alike. iPad enables the game authors to have 2 target platforms now, which must broaden their reach and increase sales, maybe not now but in the longer term this should improve as both platforms increase in volume.

I really hope for game developers sake that the prices don’t drop too far as people race to the bottom and try to compete on price as it’s a one-way trip and dangerous long-term game. Sadly, since the barrier to development is so low we’re competing against cheap bedroom developers across the globe so this is always going to be a problem.

Market saturation is also a problem on iPhone, every new game/app is a drop in a massive ocean and it’s very difficult to gain awareness to get you promoted to peoples app store lists. It takes a concerted effort to make it out of the pool and I know that there’s a lot of great games that just get missed. After all, there’s a finite number of people buying games and a seemingly infinite choice of games.

So, I think iPad is a great opportunity for devs to make a bit more margin but it’s not going to last long. As always, the gold rush will soon run out of gold.

Devs need to think of new ways to make money, 59p isn’t too far off ‘free’ so it needs some thinking on how you’re going to make the leap. Godfinger is a good example (which is pretty much Mafia Wars biz model).

I think we can draw parallels with the GB->GBA->DS->DSi->3DS progression too, although the barrier to development is significantly higher than on iPhone.

All in all, new platforms increase our audience, which should increase sales & revenue for little increase in dev costs.

What do you think?