How to survive the mobile gaming apocalypse

I was listening to the latest Walled Garden podcast and towards the end they stopped just short of stating what many developers I talk to have been saying–mobile gaming is dead.

Ok, not actually dead. After all, mobile gaming revenue is higher than it’s ever been, and mobile consumption of everything is eating the planet. However, mobile gaming is completely dead as a business model for independent developers and undercapitalized startups.

IAP has become so dominant that there’s really only one somewhat reproducible way to make money in the AppStore: make a hamster wheel f2p game in a handful of established genres and spend tens of thousands of dollars a day on user acquisition to drive traffic to it. Despite many bold experiments, the charts increasingly bear this out.

Republique

This means that some companies with top charting mobile games aren’t actually making a profit as UA costs can eat up most of the revenue. Surely this will produce a shakeout and consolidation in 2014. This is similar to what happened to Facebook games circa 2010 causing a mass exodus to mobile.

Now that mobile is dead, where should you escape to? There are several options.

PC

The PC, and more specifically Steam, remains the platform of choice for those who actually want to charge money for content. There’s a large market for premium games and Steam has loosened their gate with the advent of Greenlight. Some prominent developers have been abandoning mobile for PC with their new projects. Despite PC sales declining in the face of tablets, it makes sense. This is where the paying customers are.

Consoles

A lot has been written here about the impending demise of consoles, but Sony and Microsoft managed to change up their business model and product strategy enough to have early success with both the PS4 and XBOX One. One of the big changes has been the thawing of the gated ecosystem and allowing independent developers to self-publish. Oh yeah, and on the Wii U also.

Next generation console owners are starved for content. There will be many independent successes over the next few years before the channel becomes completely saturated.

VR

On one hand VR is merely a peripheral for existing games, on the other it’s part of an entirely new category of wearable computing and an emerging platform. Oculus Rift is the clear leader with a huge round of investment and development kits widespread. However a glut of VR headsets is on the horizon.

Oculus is building an ecosystem out of their device, but VR content can be distributed through any PC gaming channel. Although, supporting every single headset may be a nightmare for developers–isn’t it time for some kind of standard VR API?

Board games

Board games are a cottage industry yet a hot category on Kickstarter. As an example, Sandy Peteresen’s Cuthulu World Combat iOS game Kickstarter failed miserably, but when re-pitched as a board game, it blew past its funding goal. Going from digital to physical presents a lot of new challenges for developers, but does have a dedicated fan base of paying customers. Plus, you can’t pirate a board game!

Facebook / Web

Facebook games ‘died’ in 2010, but are ironically becoming an increasingly common alternative platform for mobile developers. Especially if you have a working web client already, why not put it on Facebook? The problem is the audience is decidedly non-hardcore. Facebook games can still make some money, but for a very specific audience. However, for hardcore games, the open web still remains a viable place to find an audience of paying gamers. Kongregate proves this.

What needs to change in mobile?

The supremacy of f2p and the very few options for user acquisition make the momentum towards free and the companies with enough money to compete in the mobile UA wars insurmountable. Apple could make some changes to the App Store to help support premium games and other alternative business models, however there really isn’t any incentive to do so–Either way, Apple sells phones. It’s difficult to foresee anything but the continuing dominance of f2p and mega-publishers on mobile in 2014. If you have a ton of cash and resources, solving this problem is hard, and thus very lucrative. For the rest of us, plan your strategy accordingly.

Alpha Funding vs. Crowdfunding

This Saturday, my fellow developers’ game, The Long Dark, managed to stride past its Kickstarter goal of $200,000 CDN after a month-long saga of nail-biting suspense. The campaign was executed with a mix of increasingly large announcements and trailer videos. The Hinterland crew managed to get major press in outlets like The Verge and BoingBoing, covering the daily announcements related to the campaign.

The Long Dark

Successful Kickstarters are a lot of work. In addition to having something people actually want to support, your media strategy has to be planned out. Merely Tweeting, “please donate!” looks like spam. If your posts display new features, concept art, trailer videos, and other content then it comes across as newsworthy. You have to prepare enough content to make announcements every other day or so throughout the entire campaign.

Crowdfunding is a major source of game financing due to the collapse of the publishing model. Not only are traditional publishers largely irrelevant due to the business model shift to f2p and games-as-a-service, but raising money from the public is preferable to contract terms that encumber most publisher dollars.

Another funding strategy has emerged as an alternative to crowdfunding: Alpha Funding.

Alpha Funding is when you charge users to access early versions of your game, usually starting at the playable alpha phase (hence the name!). Obviously, Minecraft is the foundation of this business model. A recent example is Klei’s Don’t Starve, a stylized survival game which began life as a paid alpha well before it arrived on Steam as a finished product.

Alpha Funding has a lot of advantages. You don’t have to bribe backers with cumbersome physical goods. Sure, T-shirts and plastic tchotchkes are a new avenue for game monetization. Yet, for a small team this can be a distraction. Alpha Funding allows you to focus on what’s important.

An early paying audience has an investment in your game. It’s a community of enthusiastic fans. Alpha users provide meaningful feedback and become evangelists instead of cranky forum trolls. When you finally launch, they become an important source of positive reviews and press.

Most importantly, getting paying users early is great customer validation. Not to mention an inspiring early source of revenue for your company. This allows you to experiment with pricing tiers for when you release the game in the wild.

There’s also the hybrid approach. The most famous example is Chris Roberts’ Star Citizen. It began as a crowdfunded project but has continued as an alpha funding smash–grossing $21 million and counting. They recently released a preview app which allows players to walk through ships they have already paid for in advance of the game’s release. Perhaps not early access to the game in the strictest sense, but a taste of the final product.

Publishers will continue to take a backseat to the indie revolution as crowdfunding evolves. Alpha funding has become so popular that Steam even has its own category for Early Access. It’s a critical game finance tool regardless of project size.