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Bytes: The 0.99 Problem
by Adam Saltsman on 12/06/09 03:44:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.


If any of you don't know, I work at an iPhone game studio that I founded with my friend Eric last year.  We're kind of a weird little studio, as we've made just two iPhone games, both have been financially successful, and both were self-published without a marketing budget.  Both games made the EDGE Magazine top 50 iPhone games list, and both games are original IP.  Both games cost more than a dollar, and that's what I'd like to write about tonight.

I am not going to write any doomsday predictions about the app store, but I am going to explain why we don't sell our games for a dollar in the hopes that it might add something interesting to the iPhone game pricing debate.


We released Wurdle for $1.99 in August 2008.  At this time, it was NOT rare for apps to cost $4.99 or even $9.99.  The 3G had not yet been released.  Wurdle was embraced primarily as a cheap but high quality title - a "no brainer" or "must buy" or whatever.  Wurdle peaked at #7 in September but stayed in the top 50 or so until January.  We had a really great run with it, and it allowed us to bootstrap our company and shift to internal development full-time.  It's been an awesome year!


Sometime during maybe the spring of 2009, people began to notice a weird thing happening on the app store, a pricing pattern for top 10 games; everything was $0.99!  Well, not everything, but the vast majority.  Frequently this would take the form of a launch price, $0.99 for a limited time, save 80% during launch week, etc.

This seems really odd and backward compared to retail, but it's important to remember that the app store is NOT a normal retail all.  Pricing your game down doesn't really cost YOU anything as long as volume goes up, since you're not printing boxes or manuals or anything.  And app store ranking and sales tends to be a little logarithmic; moving up a few slots can mean a huge increase in sales.  Dropping your price from $1.99 to $0.99, chopping it in half, can mean increasing your actual units sold by a factor of 10, or 20, or 100.  The benefits are pretty obvious!

As a result, this has become the standard pricing scheme for nearly all iPhone games, and it's more or less I think accepted wisdom that if you want to make a top 10 app, it's gotta be a dollar.  But hold that thought!  We're going to come back to this, but we need one more chronological data point.


We released our second game, Canabalt, for $2.99 in October 2009.  It has been unanimously critically praised and we've seen very satisfactory sales - we peaked at the #37 slot this time.  More than a few people have wondered why we didn't price our game lower; say, for $0.99 maybe.  Our short answer is an honest one, that we felt (and still feel) that the game is worth $2.99, and our intuition was solid there.  Nearly every review (and there have been a lot) has glossed over or outright praised our pricing decision.


Since launching two months ago, though, I've had more time to think about the decision, and the more I think about it, the more I realize that we really didn't have a choice.  So, using the conflict above and a little maths, I would like to quickly explain why, as a developer, pricing your game at $0.99 is actually far more risky than pricing it at $1.99 or higher, using something like Canabalt (popular, self-published, self-marketed, NOT a top 10 hit) as an example.  And we will call it:

The Manabalt Business Plan

Our 3-man studio, Manabalt Games, has a new game idea.  It's called Manabalt.  It's a pretty small game, but highly polished, and we have a lot of pre-existing tech and a good workflow.  Barring any tragic unforeseen circumstances it should only take about 8 weeks to build.  NOTE: This is definitely a best case scenario, but that's actually even more useful in this case!

3 people x 8 weeks = 24 man-weeks, or roughly 6 man-months.  That's our budget.  Since we're riding high off the success of our first game (Manabalt 0: Origins), we're not worrying too much about the finances at this point.  We put in our time, build the game, test the crap out of it, then upload the file to Apple.  While it's sitting in certification for the next week or so, we need to figure out how much we should sell it for.

First, let's simplify this some for our own sanity; instead of lifetime sales, we're just going to worry about sales from the first 2 months, since most games will do the majority of their sales in the first 6 weeks or so.  Between our journalist friends and contacts at Apple, we're pretty confident we can make a top 100 app, maybe even a top 50.  In the simplest terms, we're hoping to sell 50,000 copies in the first two months.

As you all probably know already, Apple takes 30% off the top, and we need to at least recoup our development time on this little 6 man-month project.  The best case scenario here is that we're all working from home and have cheap mortgages, and only need maybe $5,000 per month for living expenses (before taxes).  We're going to ignore health insurance and stuff like that for now too - very rosey best-case scenario!  So, quick mental math, we need to recoup about $30,000 in net revenue just to break even, much less earn a little extra to put toward the next project.

So, let's check out the bottom three pricing tiers (in USD only for sake of simplicity):

50,000 copies x $0.99 = $49,999 - 30% = $35,000

50,000 copies x $1.99 = $99,500 - 30% = $70,000

50,000 copies x $2.99 = $149,500 - 30% = $105,000

Lest I somehow forget to belabor this point even more, the situation I'm talking about here is not a worst case scenario, or even a likely scenario; this is a best-case, just shy of winning the lottery situation. 99.95% of developers never do this well on the app store (top 50 or thereabouts), much less breaking out into the top 10.  And I cut so many corners figuring out that $30,000 number that it's not even funny.  A little bit of feature creep, a little bit of health insurance, and that could very easily be $50,000 or $60,000 if not more.

But...what if you have a good idea?  A great idea?  The best idea of the year?  If you think you have made something that is so hopelessly compelling, so brutally addictive that it can't help but succeed, yes, I believe the only way you can reach the top 10 in the app store is by selling it for a dollar.  I can't and won't dispute that.

You have to keep in mind, though, that as the sales scale up exponentially on that ranking chart (which is why you want to be in the top 10 in the first place) the competition scales up as well.  Getting into the top 100, or the top 50, you don't have to beat Flight Control or Hook Champ or Fieldrunners or any of those great games.

Which brings me somewhat circuitously to my main point: selling your game for $0.99 means you have to get in the top 10 to make it worth your while.  Selling your game for $1.99 or more means you can get by and maybe even fund your next project even if you're only in the top 100.

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Craig Stern
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Nice analysis--thanks for sharing your wisdom. :)

Kimberly Unger
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Hi Adam!

Thanks for this breakdown :) The iPhone profit model seems to still be evolving, and breakdowns like this certainly help newer devs to get a handle on just what they are looking at in terms of recouping their dev costs.

Elliot Green
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Supply and demand.

The reason why iPhone games are so cheap is because there are so many available. If a person were to enter a word into the app store search bar, then they will likely find dozens of decent games conforming to their query. Of these games, they will likely choose the cheapest. The cheapest game gets more buyers. The other games need to lower their prices to get revenue. It becomes a cycle.

At a physical store, finding out if there is a cheaper game requires getting into your car and driving to another store. At the iPhone app store, it is very easy to find out if there is a cheaper game. You never see two game stores together in the physical world. They don't do that because they would be cutting into each other's business.

This has been written about extensively.

Fortunately, there is a well founded way to get prices up even if there are lots of people making the same thing.

The author of this post is trying to get everybody to agree to an artificially higher price for iPhone games. This is called price fixing. However, if a single game developer drops out and lowers their prices, then the entire agreement is useless, since the other developers will do the same to preserve business. If you were to track down each of the thousands of game makers with iPhone games and have them agree to a price, then you may have better results in price fixing. However, there is another problem.

Price fixing is ILLEGAL.

This is how the market works. If people try to stop this force, then the government fines them.

My advice is to get out of the iPhone game business. Yes, people made tons of money on iPhone games, but the number of games has grown and the number of buyers has not. People made lots of money when there only a few hundred iPhone apps, not thousands. Now, only chump change is left.

To make lots of money, then the developer needs to find people who want a game that has not been made yet. That opportunity abounds on the internet, but not on the app store.

Adam Saltsman
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Tyler Glaiel
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yes, writing a blog about how it's ok to charge slightly more than hobo change for an iphone game is the same thing as price fixing.

You should be ashamed of yourself, and just give me canabalt for free even though I already bought it

David Marsh
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Charging what you think something is worth is NOT price fixing. Developers are under no obligations whatsoever to charge any specific price, and the idea that charging more or less than a specific price amounts to price fixing is laughable.

Ted Martens
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It's called advice. Take it or leave it.

James Hofmann
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I think it's hard to justify extremely low-end prices on games made to emphasize the artistic value, that are not a clone or branding exercise. As you drop closer and closer to zero, the burden of making *any* purchase decision starts to outweigh any real cost considerations on the consumer's end. Hence the only reasons to sell an item at super-marginal levels are:

-The customer is making a bulk buy(machine parts, toilet paper, etc.)

-Via marketing/buzz/availability/awesomeness, the market is larger for you than for other games. People will be inclined to make a purchase they won't ordinarily even consider; ultra-low price acts to accelerate the hype machine, causing a viral explosion

-Surrounding items are cost-competitive alternatives and crowd each other out

The first one has no correlation in downloadable/online gaming, but applies to retailers.

The second is adopted by social games and browser games by setting the price at $0 and monetizing with other methods. Canabalt was $0 in its Flash incarnation, and this definitely assisted the iPhone port.

For that lattermost case, examples in gaming might come from casual-game genres; the products in genres like cards, match-three, hidden-object, or time management have a tendency to differentiate themselves from competitors on fit-and-finish elements, not by changing mechanics. The experience is extremely similar across the competing products, so you are likely to make purchase decisions based on price and popularity, because other factors don't particularly matter.

Pushing for the top of the App Store rankings is the best option if you're doing this type of game, because if you don't get there, you aren't likely to be in the middle, either. You're going to be down at the bottom and a better clone will take the top spot.

A game like Canabalt is unique enough to hold a niche, but is not so unique or so successful that it would attract developers to make clones and try to outdo the original; it can afford to ignore economics of volume. Furthermore, it can announce that it's unique and worthy of your attention by pricing itself above the norm. A 0.99 game doesn't distinguish itself.

I've been studying microtransactions in Flash to judge what an appropriate price for selling additional content would be; the iPhone market seems to be a good model for this and I am now leaning towards a $3-4 price for an estimated half-hour of content(in addition to a twenty-minute or half-hour demo). The game has to be far above the average Flash stuff, of course, but I've correspondingly spent more time on it...

Jude Beers
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Adam, thanks for taking time to write the article. Any insight on the voodoo that is the app store is always appreciated. My company, Mad Monkey Militia, is trying very hard to crack the app store puzzle right now as well. I think there are 2 major points missing in your article that may do a disservice to those trying to establish an iphone app in the market today.

Your companies 1st app, as you pointed out, was released August 2008. The app selection at that time was radically different then it is right now. I think Wurdle is a good app but I question whether or not in this day and age where review sites and promo site are so glutted with devs trying to get their app seen that they openly send emails saying that they are backlogged please buy ad space and we will que you up sooner. That you can get by without any marketing now? I mean August 2008 you could still hope to make money with a fart app.

The second major point is your 2nd app Canabalt, which by the way is a great game, you had been giving away for free as a flash app long before it hit the app store and already had exposure on widely read sites like Kotaku before it was released on the app store. People could play and see that your game was great even before it had a price on the app store.

A .99 cent price point can sometimes be the only way for a developer starting now to even break into the money making field that is the top 100 or the lottery winning that is the Top 10. Maybe a better point to make is what many already know, which is sometimes to sell a game at 1.99 you need to have a lite version that you give away, or in your case with Canabalt a flash version that is free. Lite versions are a hard line to walk too, not giving enough and getting low ratings for lack of content, or giving too much away and no one converting.

Pricing and updates has been well known as a tool for developers to use to not only generate interest, but to manipulate your placement on the charts. I would be curious as well why when your app peaked at 37 why you did not run a temporary sale? I would think you could have made your way to the top ten easily. I have seen many developers successfully do this.

Adam Saltsman
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Hey Jude, great points! The app store was a completely different place when wurdle launched, and I definitely don't simply 'trust in our apps' the way we did then when we do a launch now. Way too much noise! Canabalt was launched with a very specific marketing strategy which I haven't shared too much of publicly, I think we'll be talking about it more at GDC this year. I kind of glossed over that stuff here because it's a very long post and/or powerpoint in and of itself!

My impression of the app store in its current state is that there are enough $0.99 apps out there (tens of thousands) that you really can't use that anymore to break into anything, unless you are vying for those top 10 spots. This is also just based on the last month or two of the app store, really - by next week this will probably be a totally different system :P talk about unpredictable!

Finally I totally agree that lite versions and online demos are a pretty fine line, I am lately leaning more and more toward having online versions of our games though. They're easier to load and play than a lite version and they have the added encouragement of a purchase 'unlocking' the portable play option. All lite versions give that away inherently, which makes them harder to balance i think.

As for the possible missed benefits of putting Canabalt on sale...I'm not convinced it's a totally foregone conclusion that a weekend sale would have pushed us into the top 10, but I've seen enough stats and talked to enough people that I kind of agree, I think it might have done the trick. I don't really have a good answer about why we didn't do it, just...Canabalt was already a science experiment for a lot of different things and ideas and strategies, and I think I was just a little burnt out on trying things with it :P if we get another chance at it with one of our future games I think we might try it though!

Glenn Storm
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Thanks for this story from the trenches, Adam. We've heard about one danger of the $0.99 price point, that is, if it comes time to 'go on sale' you have no where to go. But this puts some numbers on the argument that are valuable, even if a little fuzzy. (It gives my own fuzzy math some validity) :) For the record, I think Canabalt would have jumped significantly if it had gone on sale in week 6-8, but now I'm much more interested to see what you have for us at GDC. ;)

Could there be another reason to avoid this price point? Based on the user interface at the app store, or any online catalog for that matter? When a user browses for games, and there are way too many to give serious thought, what do users do? They sort. By genre, alphabetically, or by price. It seems today that if one sorts in ascending order by price, the results don't appear much different than if unsorted. :

@James: A fine analysis as always. Thank you.

Jamie Mann
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I think the point on the break-even point for $0.99 games is a good one. However, something the article hasn't really touched on is how much of an impact a higher price point has on overall sales. Doubling your per-sale revenues may not help if it results in your sales dropping by two-thirds. After all, if someone's looking for a Christmas snowball game, they can buy Snowball XL for $1.99 or Snowball Frenzy for $0.99. It may not be a huge difference financially, but psychologically, that's double the cost and hence a significant risk.

Or to put it another way: has there been any comparisons of sales of two similar games at different price points over a single time period (as opposed to one game changing prices over time)?

Also: I know Apple are finally coming around to the idea of App Store DLC, but the concept of "lite" versions has to be dropped: it's clumsy and seriously clutters up the store (according to uquery, there's 5'327 free "lite" apps out of a total of 98'300. Also, this is roughly 20% of the total number of free Apps (23'000)). The XBIG mechanism of time/feature limited demos is a much better solution. Sadly, we're stuck with the existing mess unless Apple introduce an expiry mechanism for existing apps alongside the DLC mechanism...

Jonathan Hughes
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I smell microtransactions... otherwise the economics just aren't there as Adam so ably demonstrates.

Terry Sharp
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Of course high end games should cost more than 0.99, but Canabalt is not a game that I would put at the high end of the spectrum. Don't get me wrong... It's a nice game, but I wouldn't say that it's worth more than Doodle Jump (0.99), Jet Car Stunts (1.99), or Meteor Blitz (1.99).

As a member of Touch Arcade hilariously put it, "there is something to be said about a 2.99 game in the app store that is entirely incapable of having a lite version, as the lite version would be the entire game."

Bejeweled 2 is the #2 game in the app store right now, and it's 2.99. Implode, a game by an independent studio, is 1.99, and it's #4. And Monopoly is #8 at 4.99. You don't have to sell your games at 99 cents, or have army of marketing geniuses on your side, to get into the top 10. A good game, and a fair price, can do the same.

The iPhone may have some nice games, but it's not an ideal platform for gaming. The screen is smaller than the average display, and virtual joysticks / d-pads are still a problem for most people because their big thumbs cover too much of the screen. Many developers started offering their games at low prices to compensate for these drawbacks.

1.99 would have been a fair price for Canabalt, but 2.99 is just ridiculous for such a simple, 1-button game that only has enough variety for about a week of gameplay, and no online leaderboard.

Adam Saltsman
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For those who don't know, Terry started a thread on TouchArcade titled "is canabalt worth $2.99":

I don't recommend reading all 40 pages unless you have no regard for your own sanity, though much of the thread is quite funny. The theme of "I paid $3 and all I got was this great game that I played every day for a week" is pervasive and confusing.

Regardless, THIS article, unlike that ridiculous thread, actually is not about whether or not Canabalt was priced correctly, and I dearly hope that the comments on it stay at the high level they were before Terry's intrusion. I would politely ask future commenters (if there are any) to NOT take the bait, and instead read the TouchArcade thread to see where logic and reason will get you.

Carry on!

Adam Saltsman
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Juice uk - also great points! As I said on a previous comment, if I glossed over te effects of price it's because A) I don't understand them and B) I'm not sure that price alone HAS an effect for most games, but I could be wrong on account of A.

Also I strongly agree that the lite apps situation is insane/ridiculous. If apple allowed you to legitimately upgrade your app from within the lite version, the store would e a very different place, and we wouldn't be so obsessed with building online versions of our games :P

Terry Sharp
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My post was not a "low level" post. It was a calm, to the point, and it addressed some of the errors in your reasoning.

Game developers shouldn't cheat themselves by underpricing their games at 0.99 cents. I completely agree with this point. However, they shouldn't overprice their games either, especially if the game lacks basic features like a return to menu button.

And laughing people off is a very poor, and rather childish, way to deal with criticism. If nearly 1/2 of the public thought that I was overselling my product, I wouldn't find this funny at all, and I would try to do something to improve my relationship with those customers.

You're a very smart guy, but you still have some things to learn about customer service.

Eli Hodapp
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"If nearly 1/2 of the public thought that I was overselling my product"

[Citation Needed]

David Marsh
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In our magical journey through app store pricing land, we have found that taking a game from 1.99 to .99 can just about double your units sold (can, not WILL). However it is usually just a bump from the extra attention from the price change, and not the fact that it is 99 cents alone. Once that dies down, you usually end up making more putting the price back to 1.99 unless you are somewhere in the top 50.

Also it has been our experience that trying to cater to people that care more about the game being 99 cents than wanting the game for the game's sake can be detrimental depending on what kind of audience you are looking to build. Customers who will buy your game at 1.99 or 2.99 because they want the game specifically and not just any game at a certain price seem more willing to consider buying your future games, and generally tend to be more thoughtful in reviews and advocating your games in general. However once you throw yourself upon the mercy of the 99 cent crowd, who don't really care what the game is unless it is 99 cents, since there are OTHER games priced at 99 cents - we have consistently found that your itunes review scores will go down a star or two, and those customers are unlikely to consider future games from you unless they are also 99 cents.

phil fish
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adam saltsman wants everybody to pay the same price for his game!

he's a communist!

Terry Sharp
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Hi Eli,

Many of the reviews for Canabalt in the app store, including many of the positive ones, make some mention of the price.

"Canabalt is a great app, but I think it is somewhat overpriced at $2.99."

- Crazybones42 (4 stars)

"I really liked the flash version of this game so when I heard it was coming out for Ipods, I was very excited! But why $3? That seems odd for a game that you can just play on your computer..."

- Zombiebot King (5 stars)

And nearly 1/2 of the people who voted in the poll at Touch Arcarde do not believe Canabalt is worth $2.99. For the record: I did not make that poll.

Eli Hodapp
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Oh when you said "half the public" I thought you were referring to something more substantial than two iTunes reviews and 30 people on TouchArcade.

Terry Sharp
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How do you think polls are done? They don't interview everyone in the country. They interview small groups and extrapolate the results. For the sake of accuracy, I'll clarify my statement. "A lot" of people think Canabalt is overpriced.

Adam Saltsman
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HEY I said no taking the bait, kids. This article is not about Canabalt's "worth"

Kory Heath
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Thanks for the post, Adam. I suspect that Canabalt would have made it into the top 10, and possibly to #1, if it was priced at $.99, especially since it made it to #37 at $2.99. I've read a bunch of anecdotal claims that the #1 app will sell at least 10,000 units a day while it's in that slot. I don't know if you're willing to divulge how many units Canabalt was selling per day when it reached slot #37, but if it was selling less than 3300 per day in that slot, and if it had a reasonable chance of making it to the #1 slot by dropping it to $.99, then it may have been more profitable to do so. I guess that's the basic logic behind the "race to $.99". I don't like it, but it does make some sense to me. Am I just overestimating how likely it was that Canabalt priced at $.99 would have made it to the top, or at least the top 10?

Do you (or any other readers) know where to get information about how many units per day the #2 app on the Paid Apps chart typically sells, or the #10 app, or the #37 app, etc.? I'd love to see a spread for the whole top 100.

Tak Fung
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Hi, Im Tak Fung. I made MiniSquadron on iPhone (buy it its great!). Right now I have it on a $0.99 sale to promote the Update to it. I echo the previous comment about pricing it at $0.99 and having nowhere to go when you decide to go on a sale (well you *could* give it away for a while).

From my random information asking other devs who do not want to be named and looking at numbers for their sales along with my own, if you make the top 5 in the *all paid apps* chart, sure it'll sell ~10,000 units a day IN THE USA. It's then pretty much an exponential drop from there. Its about ~200 units a day (again in the USA) if you are about ~100 in the *all paid apps* chart. You can divide that number by ~10 for other territories (major ones are the usual suspects - UK, France, Germany, Japan. Italy features as well for some reason).

Basically, its like indie bands and music. To actually make it anywhere you have to be Top 10, and to mkae proper sales you need to "break the US market". I think the article contains good information, but I stress it should qualify its position as to why Canabalt did so well due to the Flash version going viral - that is a hugely important thing!

Otherwise - the article says what it says, plot your demand curve, and know that ultimately where you land on it (well technically which way it shifts left or right economics fans) will be a combination of Quality of software + Marketing to the right people + Luck/Trend of the day.

Kepa Auwae
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People caught price fixing apps can get into a lot of trouble from the Federal iPhone Pricing and Regulatory Commission. You may know it as F.I.P.P.A.R.C.

For Hook Champ, a temporary sale at the beginning to 99 cents was most likely crucial to us getting noticed at all. I think two outlets had even responded to us about the game before Apple featured us. I'm really thinking that the reason we were featured was due to those two review outlet's readers.

Positive initial, if sparse, coverage + Hook Champ was cheap initially, combining to negate the whole "completely out of nowhere practically first game" penalty. It helped that those "two review outlets" were very good sites.

Generally, it does seem like sales are only worth it if you're in the top 25 or so, and sinking to 1 dollar might push you to the top 5. Otherwise it's lost profit, especially if your game is already well known.

Tak Fung
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I think we can all agree that *real effort* is required in the pre-launch buzz to any successful app. I know that many first time iPhone studios are made of developers and as such PR is not something they usually do. That side of things certainly threw me off quite a bit when it came to just how much work and time it consumes. Luckily I have a MASSIVE EGO and love talking about myself. (love me love me etc).

I would qualify my sales comments: Sales are worth it if they either a) bring in more revenue than before the sale or b) gives you more units sold that you think its worth the loss (or not) in revenue. I dont particularly think your position matters so much as long as you keep the above 2 base points true. If they happen to be EQUAL (ie sales leads to equal revenue) then you have to decide whether you want to increase user base and/or what kinda image you want to portray your app as (cheap or premium or whatever voodoo mind trick).

If you are in the Top 25 then as far as Im concerned you have "won" and I shall hail you as almighty.

Matt Rix
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I think a lot of this discussion is related to the "The Two App Stores" idea

Basically there are two totally different approaches to making a game for the app store:

-Quick and simple game with mass-market appeal and a $0.99 price point

-In depth or specialized game for a specific audience and a higher price point ($2.99 etc).

The main issue here is that any time you're out of the top 25, it's way better to have a higher price... but the moment you're in the top 25(and to get there in the first place), a 0.99 price is golden. It's better to have 10x the sales at 0.99 ... but the chance of you getting there is so slim.

Anyway, I think the main thing hindering Canabalt from getting more sales was that it required 3.1. I know you guys probably would have seen 2x the sales if you'd supported 2.2.1. You didn't use any features that required 3.1, so I'm really not sure why you did that?

Ken Carpenter
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Our first game, Charmed, was recently featured in the Hot New Games category, and I dropped the price from $2.99 to $1.99 and then to $0.99 to try and get as high in the rankings as possible. I thought that this might be our one big shot. Unfortunately I think I should have left it at $2.99 at least until sales started to slow down, and then dropped the price to boost it again.

Interestingly, the second price drop to $0.99 had almost zero effect on moving us up further.

Anyway, we made it to #24 in Games/Board and #37 in Games/Puzzle for a brief time.

Then, when I saw the rankings starting to fall after the Hot New Games feature was over, I raised the price back to $1.99 and the next day immediately dropped to 1/3 the number of sales. Ugh.

The App Store is a harsh mistress!

Benjamin Marchand
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Well written article, and thank you for that, but nothing surprising here ...

Finding a balanced price depending on a game's content will always be the best choice, of course.

One thing that iDevs tend to forget, though : a product's price can also represent its content value to some consumers too. When you don't know the quality of a fresh new product, price tag is a part of its identity. So putting the same price tag as other crap apps won't help a great game to be distinguished.

Rev. Stuart Campbell
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I don't think we'll ever hear an end to angst from devs complaining about low App Store prices, and nor will there ever be a solution to it, for several very obvious reasons.

1. Apple won't impose a minimum price higher than $0.99 because they're not stupid, and know perfectly well that it would be total commercial suicide.

2. There's 0% chance of getting indie developers to agree to a cartel that voluntarily increases prices either, because in the microscopically unlikely event of that ever happening in the first place, all it would achieve would be to multiply the attraction for a new developer to come in at $0.99 by about a million percent. (Plus if it worked it would be seriously illegal.)

3. It wouldn't work anyway, because the clamour for a higher price is based on the total fantasy that every game can sell. The market has finite resources. Every $2.99 sale for Canabalt is three other indie apps losing a sale at $0.99. In a highly competitive market, even good games WILL fail sometimes, just like good movies and good books and good songs do. Welcome to capitalism. Grow up and get over it.

As for Canabalt specifically, it's a great game. But it's not (nearly) as good as Run and Mr AahH and Squareball put together, and unfortunately it's priced at the same as all of those put together. The fact that a Touch Arcade poll saw as many as 50% of voters rate it as overpriced - when TA is an arena where anyone arguing in favour of low prices tends to get banned instantly under a barrage of abuse - illustrates that Canabalt's sales almost certainly underperformed their potential, no matter how much it actually made.

A game with that much market presence and that amount of positive coverage should unquestionably have done better than a brief moment at No.37. There is, beyond any reasonable doubt, a very substantial untapped market for the game that wants to buy it but is being dissuaded by the price. You can't swim up a waterfall, and nobody wants to hear you moan about how you got your head wet when you tried.

Shay Pierce
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I see that I'm getting to this party late!

This was a very interesting post that gave a very interesting and valid perspective on the app store and pricing. Always helpful to see how another developer approached a very tricky problem like this one, and especially when they're willing to share some details of their results for us all to learn from. Some interesting replies as well.

But I have to point out what no one else has (perhaps because it's astoundingly obvious?) - that in your three mathematical comparisons, you treat Price as a variable and Number of Sales as a constant. But as I'm sure you'd agree, Number of Sales is of course a function of Price - all other things being equal, a $.99 app will always sell more than a $1.99 app, period.

To me the true equation for a game's financial success is:

numSales(price,quality,marketing) * price = total income

In other words, the number of sales you're going to get depends on how the app is priced; the quality of the app; and how well the app is marketed.

Of course, exactly how important each of these variables compared to each other is a question with a different answer depending on the current mood of the market, and/or who you're talking to, and/or the price of tea in China.

You as developer have a lot of quality over the Quality variable (which is a function of the How Good Your Idea Is variable and the Execution a.k.a. Time Spent On Development variable). In theory you also have a ton of control over the Marketing variable, except that what constitutes "good marketing" changes from week to week and day to day, and large parts of it (such as word of mouth, who chooses to review your app on the store, and whether Apple guys hear about your game and choose to feature it) are largely out of your control.

Personally I think the entire world would be better off if the importance of the Marketing variable was negligible in the equation, and Quality was the only real distinguishing factor in success. It seems like the more apps come out, the harder it is to market one, and the more critical marketing becomes to success...

Shay Pierce
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Also, I forgot to point out this excellent, well-written article by Joel Spolsky about the economics of pricing, particularly of software: