How To Make Money From iPhone Games [GigaOM]

How To Make Money From iPhone Games [GigaOM]

enigmoLast year, a small Mac game developer called Pangea Software ported one of its titles to Apple’s iPhone. Pangea’s Brian Greenstone didn’t expect to make much from the iPhone version of its arcade-style game Enigmo; he expected that the company might sell 10,000-20,000 units over its lifetime. It sold that amount in a single day, and from July 2008 to January 2009, it sold a total of 810,000 copies, earning a profit of $1.5 million, even after Apple took its 30 percent cut.

Numbers like that help explain the burst of iPhone game/entertainment news here at SXSW 2009, from location-aware fun apps to the Facebook Connect function linking iPhone apps to the social network. But there are also challenges. Those were analyzed at a Saturday SXSW panel featuring Greenstone and three other successful iPhone developers; here are my five favorite takeaways.

Think Handheld Game Console, Not Mobile Platform

Moderator Raven Zachary laid out the playing field: On the market, there are now 17.4 million iPhones and an estimated 9 million iPods (which also run the iPhone OS.) There are 27,000 iPhone apps that have been downloaded a half-billion times; 1 in 3 are games or entertainment apps. While it’s not the most popular phone on the market, it’s easily the most Net-centric, accounting for nearly 70 percent of all mobile-based web usage.

For those reasons and more, the panelists consistently described the iPhone less as a mobile platform than a handheld game console. Stephanie Morgan of ngmoco argued that it’s actually superior to Nintendo’s DS and Sony’s PSP, since the iPhone has better Net connectivity, and unlike either competitor, has finger touch, accelerometer, and location awareness functionality that can be integrated into gameplay. And since it’s also, you know, a phone, owners are more likely to have it on their person than a handheld console.

Keep Budgets Low By Sharing The Risk (And Wealth)

Notwithstanding blockbuster successes like Pangea’s Enigmo or ngmoco’s Rolando, most games get lost in the clutter of so many iPhone apps. Consequently, Greenstone expressed caution on development costs. “We don’t want to invest a lot of money, because we don’t know if we’ll make it back.” To keep budgets low, he doesn’t pay artists and other developers to help with porting Pangea’s games to the iPhone; instead he gives them a cut of the profits when the game sells.

Web 2.0 Marketing Is Key

The difficulty of distinguishing your game in a morass of 27,000 apps was a recurring theme. The panelists recommended building awareness through YouTube, social networks and other Web 2.0 channels. The big goal, they unanimously agreed, is getting your game in Apple’s top 100 apps. Once there, it gains self-sustaining momentum.

Play With Your Price Point

But how much should iPhone games cost? At first, Pangea tried selling titles for $10 each, but found itself in a price war against 99-cent apps. It now prices its games at $3-7 dollars, though Greenstone believes the average price point will trend back up to $10. Morgan said ngmoco is experimenting with introductory low prices, too; panelist Danielle Cassley of Aurora Feint (makers of an intriguing eponymous iPhone MMO) suggested lowering a game’s price to get it into the top 100, then beginning to increase the price. (Rumors that Apple will soon introduce a “Premium App” store, largely for iPhone games, could also help raise the acceptable price point.)

Don’t Worry About Piracy (Yet)

With software success comes piracy; an audience member asked if this was a concern with iPhone games. Pangea’s Greenstone said unauthorized downloads of its games did initially spike, but that it now represents about 5 percent of the total. Stephanie Morgan of ngmoco concurred, calling it a “negligible concern.”

During the audience Q&A, someone who introduced himself as a staffer with Nokia said he was interested in acquiring the rights to the panelists’ bestselling iPhone games, and converting them to their own mobile platform; though the Finnish company still dominates the handset market, none of the developers expressed much interest in the offer. The exchange struck me as an object lesson that Apple’s rivals could do well to learn from. If they have any hope of competing, they must not only contend with the iPhone itself, but the dedication of the app development community that’s sprung up around it.

Disclosure: I was an unpaid advisor for SXSW’s panel selection process.

Image courtesy Pangea