Why Mobile Game Pricing Can Only Go Up

We're in a period of overall technology disruption. In history, whenever this paradigm occurs better capitalized players can afford to undercut weak holders in the industry and dominate the market by exhausting the resources of their lower leveraged competition.

No matter what business you're in- right now is a period that breeds much uncertainty on account of so much advancement in mobile technology and cloud storage. Just look to print publishing and how many news papers are folding trying to keep up with paying the pensions of past employees based on the premice of perpetual advertising and subscription based revenue.  

But for mobile games and indie developers specifically, one has to wake up and recognize the current strategy of large corporate players which is to price so low that smaller studios can't possibly afford to stay in the game. Advances in game technology and mobile has provided for so many indie developers including myself, the opportunity to compete with large studio titles such that games are now as competitive as the art, music, film or book publishing markets. One thing for certain, the biggest mistake any game developer can make is to focus just on one platform, even if it's the iPhone. 

While console sales and their respective game sales priced within the $50 to $60 are being priced out by mobile's abundance of free casual games played on less expensive smart phones and tablets, the freemium revenue model is being pushed as the 'holy grail' of sweet spot app pricing on game developers, but where is it heading? While housing, food and equipment aren't 'freemium' based, many developers are going to burn out their passion and resources if they fall prey to the brainwashing of the 'freemium' model with ads or freemium with in-app purchases. 

Consider how Napster changed consumer expectations with free music downloads which opened the opportunity for iTunes to charge $0.99 or $1.29 per song. An acceptable price point for a single song since CD albums used to cost $15- $20.00, but had 12- 15 song tracks on each album. Who wants the whole album anyway? Yet e-books are still priced within a comparable range to print books despite the fact that the cost of inventory, distribution and print no longer exists and most books are usually written by one person and not a team as is the case for most games. 

Why then is mobile game pricing being driven down according to the value of a song and not according to the value of an ebook? VentureBeat covered the rising costs of mobile user acquisition in February and more recently in an article titled 'Rising costs of marketing iPhones games scares developers'.

The latter article cites that bigger players are willing and able to pay $7 for each new user acquisition of a mobile game. Which inevitably drives the price up for mobile advertising. If $7 is the cost for each new user of a game title which is priced at $0.99, then obviously the larger player will be introducing other in-app purchases or monetized content within that title either immediately or down the road. 

Games are entertainment and they compete for time space with television and film. While many consumers find the cost of console games too high, I would suggest that game pricing for content should be more in line with purchasing an iTunes movie at about $15. Keep in mind a limited rental is still $4 or $5. 

In any event because of basic marketing and development costs- mobile game pricing at $0.99 or free is not sustainable for any studio big or small. Inevitably the price and the quality of top mobile games will increase over the next 2 years and word of mouth referrals will be a significant driver of sales.