Predictions for 2014: Game Developers Caught Between a Rock & a Hard Place

As we head in to February 2014, I’d like to offer some predictions for the new year, specifically in the mobile game development space where I live, sleep, eat, and breathe. I know we’re already one month in, but hey, better late than never!

At the highest level, I am predicting a massive shakeout of tier 2 and 3 mobile game development companies in 2014. The mobile market for games is larger than ever and still growing rapidly, but unfortunately, game developers are facing a confluence of negative circumstances that are sure to thin the herd, as weaker companies admit defeat and sell their catalogs to "roll up" studios.

The Rock

The mobile app revolution has trained smartphone owners who would not think twice about paying $5 for a cup of coffee to think that they should never pay more than $1 for a mobile game, no matter how much effort or investment went into making that game.

With so many great games out there competing for users, many developers have been forced to move to a free business model, where their main source of revenue is in-app purchases or ads. Unfortunately, mobile ads have not proven to be valued by advertisers, particularly in games. Games that catch lightning in a bottle and gain mass acceptance are monetizing well, but like all other content industries, the winners are vastly outnumbered by the losers.

The Hard Place

It's not well known in the mobile apps industry, but in 2012 the US Federal Trade Commission (FTC) passed an update to the child protection law known as COPPA. This law went into effect in July 2013, but as I’ve noted in previous blog posts, very few game developers comply with COPPA.  There are a variety of reasons why so many developers aren’t complying with COPPA, but one of the biggest is that the law forces game developers into a complicated personal relationship with every parent of a child who might play their game. 

As written, the new COPPA law has the potential to kill the entire mobile game category. While there are efforts underway to streamline COPPA compliance for the industry, simply complying with the law could be the "straw that breaks the camel's back" for many game publishers.  It adds adoption friction to a business model that relies on massive levels of engagement (see above).  What’s worse, the fines for not complying can easily put a developer out of business - up to $16,000 per child user. Implementing a solution that follows the law hasn’t been easy, which is why my colleagues and I started AgeCheq – to make COPPA compliance easy for developers to implement and seamless for kids and parents to use.

Some might say that a thinning of the game development ecosystem is a good thing for the industry… Like a wintering herd of deer, the ones that survive the winter will be stronger, fewer in number, and better able to thrive.  However, with so many great indie games developers out there, I think it’d be a shame to see any of the decent developers fall by the wayside just because complying with the law is a hassle. With that in mind, I’m hopeful that the consolidation I expect in 2014 leaves room for the best and most creative independents to focus on innovation while leaving the headache associated with adhering to COPPA compliance to services like AgeCheq.

If you'd like to educate yourself on COPPA, here's a page of history and links we've created for game developers at AgeCheq. To learn more about COPPA directly from The Federal Trade Commission, check out this list of answers to frequently asked questions: http://business.ftc.gov/documents/Complying-with-COPPA-Frequently-Asked-Questions