Digital Distribution and app stores
Video Game App Stores
IDATE just published the report “Video Game App Stores”. The App store phenomenon, which is radically altering the way digital content is sold and consumed, has already had a tremendous impact on the video game industry. This report provides readers with an analysis of the main issues at hand for the video game industry, and takes a close look at the app stores themselves.
“Digitisation is making steady inroads into the world of video gaming primarily because of the app stores currently being deployed on all platforms.”, comments Laurent Michaud, head of the Digital Entertainment Practice at IDATE. “Its likely success should see the sale of digital games generate almost two-thirds of the sector's revenues by 2014.”.
Key factors for the success of app stores
Digitising distribution will only be successful for operators if several conditions are met. Apple’s success with its iPod/iTunes, iPhone/App Store and iPad/App Store bundles have largely inspired these conditions.
• Create an ecosystem that is self sufficient: Apple’s success is due to the company’s ability to create a closed ecosystem and impose it on consumers, developers and telephone operators. It does this via a device supported by a virtual store. The entire system for accessing content is standardised, with transparent billing via the operator.
• Open up the catalogue to third-party content providers: app stores must be accessible to the community of developers if they wish to offer a catalogue of content that appeals to the largest possible audience. A virtuous circle can thus be set in motion in which high user levels attract developers, and so on.
• Limit device diversity: Apple’s popularity within the community of developers is partly due to its single device solution (in terms of technical features). This helps developers cut their versioning costs, particularly the high porting costs involved in adapting their games to the 1 200 mobile phone versions in circulation in Europe.
• Offer an attractive business model: Apple, leader of the mobile app stores market, has devised a revenue-sharing model that has now become the norm. 70% of revenues generated by the sale of an application is paid to the developer and the remaining 30% is retained by Apple. Only two mobile players currently offer a more lucrative model for developers: LG and RIM (80%-20%).
• Innovate in terms of features and functionalities: innovation is a decisive factor for capturing audiences. Incorporating new technologies with user-friendly designs has been key to the success of Apple’s and Nintendo’s devices. Apple has given developers a device packed with innovative features (accelerometer, high-capacity multi-touch screen, compass, GPS). This has encouraged the community of developers to create usages based on these capabilities (augmented reality, virtual reality, location-based solutions, innovative gameplay, etc.).
• Form exclusive game partnerships: retailers that have signed exclusivity agreements with publishers find themselves in a temporary position of monopoly. This could also prove highly advantageous for equipment manufacturers, with some game titles actually selling the consoles they are played on.
• Market an accessible development kit: an SDK is a set of tools allowing developers to create applications using proprietary programming languages. In order to avoid creating barriers to entry for developers and risk excluding some developers that might be truly talented, the SDK must be offered at an affordable price.