Brian Greenstone, founder and president of Pangea Software, has been around the block more than a few times since releasing his first commercial Mac game 20 years ago, but even he had no idea how big the App Store could be when it launched in mid-2008.
"I thought it had potential," he said in an interview, "but I grossly underestimated just how much potential that was. It far exceeded my expectations."
Mr. Greenstone estimates he has sold several million copies of his eight iPhone games, with Enigmo and Cro-Mag Rally clocking in at one million-plus each and Bugdom 2 and Nanosaur 2 selling in the six figures. Pangea did US$4.3 million in overall app sales last year, which he said "was better than any year we had with our Mac game sales," despite the fact that the App Store only existed for half of 2008.
The Games Business: Mac vs. iPhone
Pangea dropped out of the Mac games business after the release of Pangea Arcade in 2006, a decision Mr. Greenstone said came out of being "tired of doing games and wanting to do something new. The whole iPhone thing got me interested in doing games again." He said he doesn't pay much attention to Mac gaming anymore, characterizing that part of the industry as one where "most games being produced are casual games which are being done by companies none of us old-timers have even heard of."
Asked if the success of iPhone gaming could give Mac gaming a boost, he responded: "I don't think there's any connection between the two at all. iPhone games are just so different than Mac games that there's not too much room for overlap. I'm sure that this has brought some PC people into the fold who might be now looking at doing some work on the Mac, but I think most iPhone game developers are mostly focused on the iPhone."
One area of overlap, however, has been the ease of cutting distributors and retailers out of the chain, with Apple serving as the only middle-man in iPhone game sales. "I hated dealing with distributors and retailers back in those days," Mr. Greenstone remarked. "Later, I ditched all retail sales and went with a direct, online system which was much better for us. Our sales volume dropped in half, but our per-unit profits were around three times higher, so overall we actually made more money selling direct on the web site than through retail, and with none of the stress."
He added: "The App Store is the same thing: there's no hassle, and Apple is a very easy middle-man to deal with. They just take their 30 percent cut, handle all the customer interaction and send the money every month. It's great. Granted, it is much more difficult to get seen on the App Store. In the old retail days you could just shell out $15,000 and buy an end cap on the games aisle. No such option on iTunes."
Avoiding the Race to the Bottom
The App Store is still a brave new world for mobile software sales, and Mr. Greenstone said of the still-booming business: "I think we'll have to wait another year before we'll know where this is all going to settle down to. We need a consistent baseline to measure against, and we haven't quite reached that yet."
A lot is still in flux at the App Store, including the so-called "race to the bottom" where some companies price their games at $0.99 in order to win as many sales as possible. "It's very frustrating, and I'm not playing that game anymore," Mr. Greenstone said about the phenomenon. "Last year you had to play the price war game to get into the Top 100 list, but now it's so hard to get into that list that it really doesn't matter. I'm setting our prices at what I think the games are worth, not what I think will get the best ranking."
He added: "The $1 thing is going to drive a lot of big developers away, so my suggestion to all the developers out there is to stick to your guns and charge a realistic price. Most of our bigger apps are now $4 and they're still selling well at that price."
Questions, Questions
The question of competition between larger publishers and smaller ones is also still far from settled, Mr. Greenstone pointed out: "I certainly thought that the big companies would dominate from day one. However, it seems that the big companies are so bloated with so much overhead that it is more difficult for them to make money on the App Store.
"The smaller, more efficient developers are the ones making the real money on the iPhone. But that's a statement in general about the big companies. They're all having difficulties right now because they've gotten too big for their own good, and it's hard to make money when it takes 100 people three years to make one video game."
Another still-to-be-resolved issue: the fact that OS upgrades are free for iPhone users but cost money for iPod touch owners. Given the many significant features in iPhone OS 3.0, what happens when developers make games that are compatible only with that version? "I know for a fact that we've lost some sales because of Enigmo's 3.0 requirement – I've gotten emails from customers about it," Mr. Greenstone said. "However, I think it's a very small minority, so it doesn't concern me much. All of our stuff going forward will require 3.0, but updates to old games will probably still be for 2.2.1."
As other handset makers launch their own answers to the App Store, what does the future hold? "Very hard to say," Mr. Greenstone replied. "The App Store is such a dynamic thing, but the quality of the apps has definitely improved and I bet it will continue that way.
"The other mobile platforms are so far behind the iPhone that it's not even a fair comparison. The only mobile platform worth working on is the iPhone, and I suspect it will be that way for a very long time."