Apple Talks In-App Purchases, Game Devs Hear ‘Cha-Ching’

This week, the gaming industry saw a challenger in the portable gaming market grow more powerful, and its name is iPhone. The platform’s upcoming 3.0 software, which Apple previewed, includes new ways for game makers to make money, which may attract even more developers with even more serious offerings.

In other reaches of the gaming universe, it looks like there’s more cost-cutting going on at THQ; Nintendo intends to charge UK vendors more for the Wii, and the economic downturn could lead to longer lifecycles for current-generation gaming consoles.

Game on with the iPhone

With 6,000 gaming applications available from the Apple App Store, could the popular iPhone and the iPod touch be a viable challenger in the portable gaming market?

Considering that there are some 100 million Nintendo DS portable consoles in the hands of consumers, not to mention another 30 million Sony PlayStation Portable (PSP) devices, there is a possibility that Apple could snag a smallish share of that segment, Michael Pachter, a Wedbush Morgan analyst, told the E-Commerce Times.

“With the iPhone at 30 million, the PSP at 30 million and the DS at 100 million, the overlap is probably no more than 5 or 7 million iPhone users who have one of these other devices. So yeah, it’ll have a 3 percent or 4 percent impact on their sales,” he explained.

Though that percentage may be small, Apple’s moving to maximize revenue for its developers — which would, of course, also maximize Apple’s revenue, since it takes a 30 percent cut from App Store sales. In its latest mobile operating system update, iPhone OS 3.0, the company has added the ability for developers to build in-app purchasing option into their applications.

For example, a developer could offer the initial 10 levels of a game for a base price of $9.99. Users who want to go further would then have to purchase additional levels for a few dollars more. In-app purchases could also be used to sell in-game items such as character clothing, weapons, etc.

Spinning Machine

There was more cost-cutting news from struggling game maker THQ. After suffering a US$192 million loss in the fourth quarter and layoffs at its quality assurance and wireless divisions, the company is planning to spin off two of its development studios.

THQ told GameDailyBiz it will undergo a realignment to reduce its operating costs by some $220 million. To reach that goal, the company will need to cut back its global workforce by some 600 people. On the spinoff block and set to become independent companies are Los Angeles-based Heavy Iron and Incinerator in Carlsbad, Calif. THQ has also put it’s Timonium, Md.-based Big Huge Game studio up for sale and notified employees that in the absence of a buyer in the near future, it will simply close the studio.

“The spinoff of THQ, they’re cutting costs because they don’t want to pay their salaries,” Pachter noted.

Long Lives Ahead?

The economic downturn could have a lasting effect on the life cycles of the gaming consoles currently in circulation, according to reported comments made by Eric Brown, chief financial officer at Electronic Arts.

The gaming exec told Wedbush Morgan Securities conference attendees that the functionality of the current generation of consoles, combined with lowering prices, would extend the life of the Microsoft Xbox 360, Sony PlayStation 3 and Nintendo Wii and lead to further price cuts.

“That’s interesting and probably right. People will be buying these consoles later if they cannot afford them now. But they are going to buy them. Prices will come down, and that’ll make them even more appealing to other people. I think the cycle will last several years,” Pachter said.

However, a price drop on the Wii, at least in the UK, is likely a long way off. Nintendo raised the price retailers in the UK pay for the console due to the lower value of the British pound, according to The Wii sells for Pounds 179.99 ($247.93), but that could increase by Pounds 18 to 20.

Too bad for gamers across the pond, but it could be good for retailers stateside. Look for UK buyers to hit U.S. sources if the price goes up too much.

1 Comment

  • I think the in-app buying process is absolutely great. The only thing I would have done differently is allow the in-app purchase process from a free app.

    That would have given an even greater opportunity for the developers. They could have created a free game with 1 level, if customers liked it they could have bought other levels right from the free game. Now, they will have to go back to iTunes and buy the paid game and delete the free game from their iPhone. Those steps could have been avoided.

    I don’t agree with Apple that buying something inside a free application is confusing. Developers will continue using free versions of applications as they provide a good way to get people to try them.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

E-Commerce Times Channels