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So getting back to the publishers again, the ones who are actually trying to make money at this, the ones I sell services to and who need to make enough money to actually pay me. Let me explain what's happened to them in iPhone-land. First of all, they all dove in immediately because their investors wanted them to, and for a while, they actually believed they were making money. Development cost is a fraction of supporting any other mobile platform, you don't need to "pitch" your product, there's no porting, everyone gets a direct deal, there are no certification fees, and you make 70% of retail--what's not to like? Dare I say, they started trashing the carriers publicly and heralding the iPhone as the savior from cellular phone tyranny. The walled garden had finally tumbled and they were partying in the streets.
They all knew that unless pricing was in the sweet spot, the big download numbers wouldn't come. So they priced their products at half what they would sell them for on the carrier decks and held their breath. (What sells on Verizon for $2.99 per month with eight month retention is termed a "rip off" when presented on the iPhone at a one-time download price of $1.99.) They slotted into new releases and made money hand-over-fist, for about seven days. They extrapolated those sales onto their Excel spreadsheets and went racing back to their investors with the good news. Just in time to fund the next title.
Because they knew they were gonna get rich (because everyone was getting rich selling iPhone apps, right?) they jumped right in again. Since they didn't make money the first time but everyone else was (right??), they assumed they just had a bit of bad luck or bad timing, so they tried again. After all, it only costs $5,000--OK, maybe $15,000 to build something nice.
But there's a problem. The bar is set too low. Anybody can play in the iPhone space. All it takes is an idea and few thousand dollars to pay someone to build it. The entire process, from idea to launch, takes only six weeks.
In my world--the Sprint, T-Mobile, Verizon, AT&T world--a game costs $50,000 to build and $100,000 to port. And you still haven't made the BlackBerry versions, or the Windows Mobile versions, the touchscreen variants, etc. Nor have you paid for QA or certification. Now you're up to $250,000. Sidekick version? Android version? You want to take it to Vodafone? Latin America? There are only a handful of companies that can actually do all that and none of them are profitable. You can see why publishers don't mind throwing $50,000 to get four or five apps up on the iPhone, even just to test the waters. But frankly, it's not working.
Which brings me back to my point. The iPhone is not going to save mid-tier publishers. I know that the largest game publishers are doing reasonably well with branded titles and excellent placement, but that's only a dozen players, and it's not huge money, especially when you factor in the number of users and reported number of overall downloads. So what about everybody else?
In the short term, the most lucrative play is back with the carriers. With the economy and iPhone distraction, much less product is flowing into the carrier system than a year ago. So there's less competition on deck and a warmer reception from the content buyers.
That's not enough, unfortunately. The carriers do need to change the fundamental business model to make themselves more attractive to the publishers. They need to increase the user penetration rate and decrease costs to launch titles. They desperately need to change some outdated rules and re-approach their management of the content business. I'll lay all of that out in my next article, but for now, I again proclaim that profit-seeking, consumer-oriented mobile publishers need to focus on the broader market of mobile devices and operating systems in order to succeed. Don't dumpster your J2ME handset library just yet.
Konny Zsigo is a 20-year veteran of the wireless data industry. His company, the WirelessDeveloper Agency, creates and executes mobile Web marketing campaigns to directly increase content sales and drive users to action. WDA also supports mobile publishers with North American distribution, licensing and production of mobile content (video, games, apps, ringtones, wallpapers, themes and more).
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