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Apple Stops Treating Mobile Games Like Second Class Apps

Summary

Apple’s latest announcement about their app store policies should be seen favorably.

The company’s policies were detrimental to the development of quality games.

The biggest segment of apps for generating revenues is mobile gaming with 75% of total revenues.

The subscription method encourages a much better system for quality apps to be built and maintained.

Some developers have gotten so excited they get carried away - don’t fall for that.

Apple (NASDAQ:AAPL) recently announced their plans to make major changes to the way their app store functions. Some of the changes should give investors a solid case for optimism as they represent a fundamental shift to a more sustainable and intelligent business model.

The App Store

The Verge recently had an interview with Apple's senior VP of worldwide marketing, Phil Schiller. Their article included the following update:

"Part of that energy has been channeled into figuring out how to sell developers on subscription services, and not only that, but how to keep them keeping on with those subscriptions. Previously, only apps classified as news, cloud services, dating apps, or audio/video streaming apps could sell subscription content. Now it's open to all product categories."

The old system, which limited the genres for subscription sales, was downright terrible. The largest genre for app sales is games and it isn't a close contest. 75% of all app revenue came from games. Apple had a major shortcoming in the way they approach the app store by disadvantaging the most effective genre. If Apple wants to grow revenue from their services segment, then they will need to become friendlier to game developers.

Subscriptions Are The Future

The nature of a subscription is inherently more sustainable than an app designed to generate a single sale. An app designed to generate a single sale has a very minor incentive to worry about the long run usage of the app. The biggest incentive would be to encourage higher ratings of the product as a way to stimulate future downloads. While that incentive may encourage some further development of the app, it doesn't generate the same level of continued investment that exists for a subscription system.

The difficulty of making major upgrades and monetizing them could encourage talented engineers to simply call it "good enough" and move on to a new project. This results in a poor experience for both engineers and users with an abundance of poor quality apps.

Thus far most of the monetization has come through the "freemium" model in which the game itself is initially free but certain features or substantial advantages are available by paying for them. The weakness in this model is that the entire developing...


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