Pricing Games on the App Store - Premium isn't Dead, Freemium is Here to Stay, and it's Everybody's Fault

Ah, the Great App Store Pricing Debate. For years people have been arguing over the cost of mobile games. What constitutes “too much?” Where’s the line when it comes to free-to-play monetization techniques? Should developers have deep discounts and temporary giveaways? Should consumers simply expect everything to go on sale and wait accordingly?

The recent Dungeon Keeper debacle is a good example of this. Gamers and critics alike have railed against it for using various monetization techniques and associating itself with the classic PC strategy series, and many point to it as an unpleasant indication of where the video game industry (especially mobile) is headed. It’s an issue that’s almost as complicated as the initial Freemium vs. Premium debate; so let’s take a closer look at everything and try to make sense of it all.

A Matter of Perspective

We’re all familiar with the coffee excuse; “This game costs less than a cup of coffee, just buy it already!” The idea is that you’re paying as much or less for something that is far less fleeting, and as such it would be foolish to pass up on the opportunity. On the surface it’s a fairly sensible argument. The thing is, a mobile game isn’t coffee. Show of hands, how many people here will download a game for their iOS device (full price, free, or on sale), maybe play it for a day or two, then forget about it? Conversely, how many people will buy a cup of coffee, take a few sips, then throw the rest away? And there you go.

Another thing to consider is the platform itself. Like it or not, mobile games are typically best suited for quick play sessions - such as while on a break or traveling. While it may be refreshing to see RPGs with dozens of hours worth of gameplay and ports of Grand Theft Auto, the likelihood of the average gamer hunkering down with their phone to play them for hours on end is actually pretty slim. And if they happen to be at home, they could easily play something even more complex on a much bigger screen.

Of course at the same time the value of mobile games - as seen by the average user - has been steadily declining. Michael Schade (former ceo of FishLabs) points out that, “the perceived value of mobile games seems to be even lower than of a music track.” Which is hard to dispute, really. And having such a low perceived value would mean that the coffee excuse would carry very little weight with most App Store shoppers.

For a Limited Time Only

There’s also the question of whether or not the near-constant sales and deep discounts do more harm than good. On the one hand, paying full price for a game only to have it drop down to half - or even worse, to go free - can be seen as a pretty big slap in the face to consumers. They’ve supported your game from the beginning and this is how you repay them? It doesn’t sting so bad the bigger the gap between the game’s launch and the sale gets, but regardless it’s the kind of thing that’s influenced many an App Store shopper to simply “wait for a sale.” Or at least claim that they plan to. As Michael Schade says, “Sales have worked really well in the past. Actually, they worked so well that almost every developer had to go for the race to the bottom.”

On the other hand, sales drive, well, sales. As Lorenzo Linarducci (Software Developer for Smugbit Studios) says, “Sales are just a way to get more people playing your game. Usually they're done to boost slumping downloads or so developers can cross-promote a new, full-price product.” In other words, it’s a good way to advertise with little to no upfront cost. He goes on to say, “Either way, the sale price or discount given is largely inconsequential when the per-unit cost is basically zero to devs.” He makes a good point. Selling a game digitally costs a developer practically nothing (or exactly nothing) but has the potential to significantly boost sales. And I imagine most developers would prefer selling thousands of copies of their game for $0.99 instead of maybe a couple hundred at $1.99.

Emeric Thoa (creative director for The Game Bakers) makes a similar case for sales, although he views them as more of an unfortunate necessity. “The fact that the revenue comes mostly from sales has two bad side effects.” Thoa says, “One, the developers are tempted to increase the launch price. And two, only the biggest fans pay for the game at a higher price, at release.” Of course things get more complicated when you consider that more downloads tends to equate to more exposure in the App Store, and that, as Thoa puts it, “Some people only look at the sales categories or dedicated apps.”

Linarducci offers up another view of the situation, however. “As a consumer, if I was completely willing to pay $X for a game yesterday, then the price today really shouldn't matter,” he says, “However, it may make me reconsider purchasing the next game from that developer at full price - and rightfully so.” It’s another valid argument; one that I’ve dealt with myself on a few occasions. Most recently when XCOM: Enemy Unkown went on sale for half-off. Some might have taken issue with the sale, but I’d had my copy installed for quite a while and had absolutely no qualms about paying full price.

The thing is, there are about as many reasons to support the issue of sales as there are to condemn it. Developers could certainly throw consumers a bone by holding off on sales for at least a couple of months, but consumers could also give developers a break by being more supportive on launch day.

Paying for Premium

Opinions can vary wildly when it comes to premium price points. $7.99 might be a no-brainer for one person and a deal-breaker for another. But is it because the game is “too expensive?” Or is it something else entirely? Emeric Thoa elaborates, “I feel that the increasing number of freemium apps has had more impact on the premium games than the sales themselves,” he says, “The simple fact that there are tons of free apps (freemium & giveaway) makes it harder to convince a player to spend money up front for your game.” His statement makes a lot of sense when you consider just how many free games there are on the App Store at any given moment. Michael Schade agrees that, “this strategy probably won’t keep you alive if you release an original, high production mobile game only.”

Lorenzo Linarducci believes it actually has more to do with marketing. “The hard part becomes visibility and discovery - which is an ongoing complaint among indies,” he says, “‘In a sea of free games, how can I make my $7.99 game stand out?’ The truth is, it doesn't matter what the industry is - video games or otherwise - marketing and sales are extremely tough. If you can figure them out, then you're on your way to becoming an entrepreneur.” This also makes sense when looking back at some of the more high-profile premium games that have been released. XCOM: Enemy Unkown, Deus Ex: The Fall, and even Terraria had significant brand recognition behind them even before they were available for purchase. How does a smaller developer with a premium app even compete with that?

Schade, however, sees cross-platforms development as the best way to increase a premium game’s odds. “There is no healthy premium market on the App Store anymore. To overcome the pricing dilemma, I would launch a game on as many platforms as possible, which,” he concedes, “is not easy as you have to get controls, session length, GUI, and so on right for each platform.” It means a larger install base, and the potential for more sales, but it’s also a whole heck of a lot of work and may not be cost-effective in the end.

The Model Freebie

Free-to-play games come with their own set of hurdles. Many people who are unfamiliar with mobile gaming only have one perception of F2P, and it’s not exactly positive. There are, of course, some examples that would explain why they may have this perception, but in reality “free-to-wait” and “pay-to-win” style games are only a cross-section of the genre. While titles like Puzzle & Dragons hold your hard-earned winnings hostage unless you beat some incredibly tough odds or pony up real cash, there are also games such as Spaceteam that can be played in their entirety with no ads and only offer extraneous features such as thematic graphics packs as in-app purchases. In other words: not all freebies are created equal.

Michael Schade definitely prefers the latter model. “The least obstructive way is the possibility to buy vanity items as this type of monetization has no effect on gameplay,” he says, “However, it is clearly limited and I doubt you can build a profitable F2P business model purely on vanity items not matter how many fans you get and how much they love your game.” Spaceteam, as previously mentioned, is definitely a good example of this model, as are games like Punch Quest. And yet, he confesses that Dungeon Keeper doesn't really bother him. “The game itself is a really good F2P game and it uses reasonable monetization mechanics,” of course he also says, “If it had a less aggressive monetization curve I would play it more.”

“To me, the best F2P models are those that don't have me thinking about real-life money when playing a game,” says Lorenzo Linarducci, “Sure, I will always know that I can pay a dollar to get a pack of gems that might save me an hour of waiting, but I should be able to make that choice on my own - under my own terms.” There’s definitely something to be said for a game that isn’t pushy with its premium currency. It provides players with a means to support the game and receive various perks without making them feel trapped. Of course, there’s also such a thing as being a bit too accommodating.

“The best F2P model in my opinion is the one that doesn't work at all: the ‘demo model’ where the player can try the game for free, and if they like it, pay for "the next chapter" or ‘the whole game,’” Emeric Thoa explains, “This model is way more beneficial for the player, but for some reason the ratings for apps that do this are terrible (ex: "I played 10 minutes and then I was asked to pay! Unforgivable!”)." The sad thing is I know exactly what he’s talking about. Often consumers view “demo models” as some sort of bait-and-switch, despite the fact that the initial download and gameplay sample were absolutely free to begin with. Then the game’s all-important ratings may suffer for it. Actually making any money from full game unlocks is also a pretty big issue according to Thoa, “The conversion rate is also very low... I don't know any game that has been profitable with this model.“

Then there are the ways it can all go horribly, horribly wrong. I’ve seen my fair share of questionable F2P mechanics - terribly balance wait timers, multiplayer mechanics that give the paying player a ridiculously unfair advantage, unreasonable difficulty spikes that force players to grind for hours upon hours or pay up, and a whole lot more. Many have been using EA’s recently-released Dungeon Keeper as their target of choice, and point to it as an indication of the evils of F2P.

Linarducci has a bit more of an even take on it. “First, there's the overly-nostalgic classic Dungeon Keeper fans, who (somewhat understandably) are upset that their favorite childhood game was changed,” Linarducci says, “Then, there's the staunch anti-F2P activists who are always looking to tear apart the latest F2P game release, regardless of quality.” And in-between the nostalgic camp that’s upset over how much this new game isn’t Dungeon Keeper and the Freemium witch hunters are the people who are either impartial or legitimately enjoy the game.

The ‘casino’ model is Schade’s least-favorite approach. “The worst to me is the casino model where you can find precious rare items in the game that can only be unlocked with certain key items, and the only way to get those is to gamble.” I imagine you’ve played a game similar to what he’s describing, too. You know, a game in which you toil for a while and find a rare loot chest that you just know has something great in it, but requires a special key to open and you don’t possess one. Or, you know, you could shell out $0.99 to open the chest right now. “I wonder when this will be regulated by law?” Schade says. I’m starting to wonder myself.

Thoa finds the shift to freemium rather disappointing, however. “I do feel it's a bit of a shame that a game of this quality uses the freemium model,” Thoa says, “With a premium model, the game's pace would be different and the game would be better.” As for Dungeon Keeper’s freemium model itself, “It's the 2010 version of the arcade coin-op games. Coin-ops were playing on difficulty to make players pay, while sims use time and energy mechanics,” he says, “I honestly don't get the fun people can have with that, but I guess the satisfaction between time spent and development is worth waiting and paying for.”

I’d also offer up that the structure of free-to-play sims tends to mesh well with mobile gaming. When the average player is only able to or interested in starting up a game for a minute or two a few times a day, it becomes harder to take issue with waiting a few hours to finish building something.

Ouroboros

While there’s always the possibility that the availability of free games is the root cause of the potential decline of premium games, I’d like o offer up a different theory: it’s the lack of interest and straight-up unwillingness of many mobile gamers to support premium games that’s both leading to their decline and creating an environment better suited to support freemium games. For example, Final Fantasy VI, arguably the best game in the entire series, was recently released on the App Store at a premium price. And yet despite the apparent reworking of the graphics, the completely overhauled interface, and the act of actually converting all of that source code into something that would run on iOS devices (it’s a lot more work than the average gamer seems to think), there are still a fair number of less than stellar reviews that list the price as their primary - or even sole - grievance. That right there is a big part of the problem.

When asked how they think a premium Dungeon Keeper or a direct port of either of the original games would do on iOS, Michael Schade, Lorenzo Linarducci, and Emeric Thao are of the same mind. Linarducci believes it’s more about the publisher than the game itself. “For a massive company like EA, it's a risky play,” he says, “EA isn't looking for some of the money. EA is looking for all of the money. And that's not because they're evil or out to destroy video games and everything you love - it's because making all of the money is the purpose of their business. And the only way to get all of the money is to cater to the largest audience possible.” In other words, they needed to appeal to the more casual free-to-play markets.

“There’s a 99% chance that it wouldn't be profitable and wouldn't bring in more than $500k (which is for sure lower that the game's development cost),” says Thao, ”A port of the PC title for a high premium price would maybe break even, but that doesn't make sense as a goal for a company like EA.” Schade agrees, “It might work for a port, but that’s surely not good enough for a publicly listed company, such as EA,” he continues, “No matter what kind of premium monetization EA had chosen, Dungeon Keeper would not be able to stay in the Top 100 grossing chart for a long period of time.”

I can't help but agree with them. As much as I’d love to see some classic Dungeon Keeper on the App Store, the probability of such a niche game (don’t kid yourself, it’s not even close to most of EA’s middling properties) turning a profit is incredibly slim. It doesn’t have the same amount of pull as, say, Madden or even SimCity. The small group of faithful fans would of course be absolutely thrilled, but how much money would such a release actually end up making? Whatever the answer, I highly doubt a well made game would be enough to cover the production costs - or maybe just barely push profits into the black.

The Price of Success

So it would seem that there are no easy answers to any of these issues. Should developers continue have deep discounts and temporary giveaways, or are such practices actually more of a detriment to the market? Yes and no to both. Sales do create an environment that perpetuates more sales, which can result into a “race to the bottom” as Michael Schade says. At the same time, digital distribution makes sales incredibly easy and can lead to an overall net gain for a developer when more people buy their game at a discounted price. Unless a developer has brand recognition to fall back on - such as with many AAA licenses or App Store favorites like Foursaken Media and Niblebit - the occasional sale might not be such a terrible idea.

As for premium releases, is it really accurate to assume that they’re no longer a viable business model on the App Store? Plenty of people voice their displeasure about high premium prices, but I believe it might be a combination of Lorenzo Linarducci’s theory on difficult marketing and Schade’s cross-platform development ideas. Marketing is tough, no matter the industry, but having a license spread across multiple platforms can increase visibility exponentially. It's an approach you may have already seen before, without even knowing it. There are quite a few games on Steam these days that actually got their start on mobile and have since branched-out; really great ones too, like Knights of Pen & Paper, Superbrothers: Sword & Sworcery EP, and Hero Academy.

And what constitutes a “success,” anyway? Does a game, premium or not, really have to pull down Clash of Clans money in order to avoid failure? Is the Top 20 Grossing list on the App Store the be-all and end-all indication of whether or not a game has “made it?” I don’t really think so. The bigger the studio, the more money it needs to make in order to break even. The same goes for bigger studios’ tendencies to make games on bigger budgets. Although, as Emeric Thoa has stated, ports can be a better fit for larger development teams as there’s (generally) less work involved. Really, it’s all about recouping costs. Massive teams like those at Gameloft or EA have a lot more employees, and thus a lot more paychecks to cut. A team of one to ten people just doesn’t need to hit the same numbers as a team of thousands, or even hundreds.

Premium isn’t a dead concept on the App Store, and freemium isn’t the harbinger of mobile gaming’s doom. They’re just two different business models trying to make their way in a crazy mixed-up world that can’t seem to make up its mind.