The Case For and Against Game Subscriptions in the App Store
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Look at the top-grossing games in Apple’s App Store and you’ll quickly start to see the same words over again: “Free” and “Offers In-App Purchases.”
Fully 93 percent of all mobile games sell virtual currency, lives or levels in free-to-download games, a business model commonly known as freemium or “free-to-play.” Plenty of non-game apps also monetize from short-term in-app purchases, but the most successful ones, like Pandora, Match.com and Spotify, have cracked the top-25 grossing app charts via another route: Paid subscriptions.
Only a handful of apps that might be called games are subscription-based. Disney’s Club Penguin came to the iPad last December with its standard subscription fees in tow; last week, EA founder Trip Hawkins’s new company, If You Can, launched a $5/month subscription for its educational game If.
Despite having game elements, neither of those is really a traditional game, though. Club Penguin is part game and part social network, and If’s target buyers are parents and teachers seeking to impart social-emotional learning skills to children who play it.
And, at least as of three years ago, the App Store was not okay with game-specific subscriptions. Big Fish Games launched a $7/month all-you-can-eat subscription gaming service on Nov. 22, 2011. Apple yanked it from the store on Nov. 23.
Rule 11.15 of the official App Store review guidelines says only periodicals, business apps and media apps may offer auto-renewing subscriptions. One source familiar with the store’s editors said they are hesitant to consider changing course on that point.
So, why not allow subscriptions, too? First, let’s look at the downsides.
The big one: Joost van Dreunen, the CEO of digital research firm SuperData, said revenue from non-mobile subscription games like World of Warcraft has ebbed over the years as free-to-play titles in similar genres have risen to prominence. He said gamers might just prefer the lack of commitment offered by a free-to-play game.
“Considering that free-to-play is the number one form of monetization on mobile, it will be challenging to sell mobile gamers on committing to a monthly fee,” van Dreunen said via email. “Unless, of course, Apple rolls out a buffet-style offering (‘Best of App Store, every month for $4.99!’), but I don’t see any upside for them in that.”
Apple would almost certainly take its standard 30 percent cut of a game’s subscription revenue, as it does with non-game apps.
But the rule limiting auto-renewing subscriptions may hold firm since forgotten auto-renewals can lead to surprises on one’s credit card bill. It’s easy to understand why Apple might be hesitant to bring games into the mix, since it recently lost a battle with the FTC over the approval of in-app purchases made by children and will have to refund at least $32.5 million.
Hawkins said If will prompt users each month to renew as new chapters of the game are made available.
On top of that, a standard one-price-fits-all model might undermine the profits made off of games’ biggest spenders, a.k.a. “whales.” The unlimited ceiling of the free-to-play business model means that, according to a monetization study conducted by app testing firm Swrve, 0.15 percent of players were responsible for more than half of all revenue.
On the other hand, having that ceiling in certain apps could let some consumers (especially parents) breathe easier, so long as they manage the subscriptions carefully. Committing to a monthly or yearly plan might encourage longer engagement with a game rather than a casual dalliance, as is the norm in many free-to-play games.
And for game makers, knowing that a certain number of players had already committed to a certain length of gameplay might make planning the resources for future game updates a more exact science. At a zero price point, acquiring users is easier but keeping them — especially in a casual game — is tough.
“A subscription model provides a developer/publisher with more reliable cash flow,” van Dreunen said. “This allows ongoing development, server hosting and additional content. This already happens on mobile even without subscriptions (e.g. Clash of Clans), so I’m doubtful this will change soon.”
Van Dreunen also questioned whether mobile games were deep enough to stoke a loyal subscription-paying community a la Activision Blizzard’s World of Warcraft or CCP Games’ EVE Online.
Still, subscriptions have legs in other forms of gaming. Sony and Microsoft both offer monthly premium subscriptions, PlayStation Plus and Xbox Live Gold, which include free game downloads every month; EA said this week it would launch into beta a $5/month subscription for at least four of its popular console games; and the Android-based microconsole Ouya is also testing Netflix-style subscriptions.