Moderated by Jamil Moledina (Director, EA Partners, and fellow board member of the IGDA), Jack Buser (Director, Playstation Home), Bob Meese (New business development, Google), and myself.

I thought some of you might be interested to know how our experience launching Steambirds on iOS and Android worked out. So I’ve written up a little post-mortem of sorts, below. But first, some important notes: the excellent iOS version was developed and published on our behalf by Semi Secret, best known for their wonderful game Canabalt, and the equally-excellent Android version was developed by Flat Red Ball and published by us.

Both the iOS and Android versions of the game were featured by Apple and Google, respectively; the iOS version was featured immediately upon launch, while the Android version was featured a couple weeks later. We did little in the way of traditional marketing to support the game, but we did put a very prominent link in Steambirds: Survival to a page advertising both the iOS and Android version, and given that SB:S has already been played by over two million people, that’s a fair amount of promotion. We were also fortunate enough to get a shout out from Penny Arcade, among other notable sites.

So, enough background information. Here were the pros/cons of each platform we released Steambirds on:

Cons: Android

First: Fragmentation was an issue, and not simply because of the many older Android devices floating around out there. We got one-star ratings from unhappy users of newer devices (such as the Dell Streak) who complained of inexplicable crashes. Given that even Rovio (the developer of Angry Birds) has struggled with Android fragmentation, it was pretty much a given that we’d struggle with it, too.

Second: For a while, refunding was a big issue. Prior to a very recent update, Android Market essentially encouraged users to request a full refund, no questions asked, if they uninstalled a game within 24 hours. Many people realized that Google’s refund policy was a way to play any game they wanted, for free, without resorting to piracy. Prior to the aforementioned Market update, roughly 15% of people who purchased Steambirds ultimately requested a refund. After the update, the rate dropped to about 9%. That new number is both good and bad — good because it isn’t 15%, but bad because I’m guessing most of those nine-percenters are folks using a device that is not compatible with our game (…speaking of fragmentation…)

Pros: Android

First: the ease with which I am able to update the Steambirds application itself, the description of the app, and the price of the app is simply awesome. With a single click, an update is instantly available to consumers worldwide. When some early negative reviews alerted us to problems with the game’s memory footprint on older devices, we were able to turn around a quick fix and staunch the bleeding immediately. (In fact, some users took note of the quick change and rewarded us by recanting their negative reviews.) Similarly, when reviews indicated that users were unhappy with the lack of a software setting for disabling music and sound, we were able to satisfy them immediately… and once again, reviewers took note.

Second: Google’s responsiveness to our questions was remarkable. I nearly always received answers to my questions within 24 hours, even if the answer was simply: “we’re working on that.” I enjoyed several very active and very frank chat sessions with someone on the Android Market team. We’re a small company, so for us to experience that level of attentiveness was truly gratifying. I should note that since the iOS version of Steambirds was published by Semi Secret, we didn’t interact directly with Apple, so I can’t compare levels of responsiveness.

Third: I can log into Google Checkout and see every single transaction (purchases and cancellations) made for Steambirds in real time. And we get paid by Google within days of selling a copy of the game. Awesome!

Cons: iOS

First: I’d been told by friends that Apple has significantly improved its turnaround time on application (and app update) approvals. For the iPad version of Steambirds, this certainly seemed to be the case; our update, which addressed a critical sound bug, was released almost immediately. But for the iPhone version of Steambirds, this was not the case. We were forced to wait nearly a week for the release of our update, which addressed another critical, iPhone-only bug that seemed to drag down our review scores by at least a full star — more than enough to potentially harm our sales momentum in the incredibly competitive iTunes app market.

This was unfortunate, because Steambirds was featured immediately at launch, which meant that it was receiving tons of attention at precisely the moment when it had its biggest problem. I thought that being featured would get our updates fast-tracked, but for at least the iPhone version of Steambirds, that was clearly not the case. Ultimately, our problems were our own fault — I can hardly complain about the fact that Apple generously decided to feature Steambirds. I just hope that in the future, Apple will find a way to process updates faster (if not as fast as Android Market.)

Second: speaking of that “critical bug” I mentioned in the iPhone version of Steambirds — it was a pinch-to-zoom issue that prevented players from completing the tutorial. What I didn’t mention was that the bug only affected people with v3.1.3 of iOS running on their phone, which turns out to be a small but significant number of 3G owners who want to avoid the performance hit caused by upgrading to iOS v4+. We had tested the game on a 3G device running v3.1.2 (which, notably, had its *own* unique bug) but we missed v3.1.3.

As I mentioned earlier, this single bug seemed to really hurt our overall review score. It makes sense — if you buy a game and can’t play past the tutorial, your odds of getting pissed off and giving a one-star review are very high; people who play the game successfully are much less likely to give reviews of any kind. Long story short, while there’s no question that fragmentation is an issue for Android, I wouldn’t say that life is completely hunky-dorey on iOS. Adam Martin posted a similar story on his blog recently.

Pros: iOS

First: When the update for the iPhone version was finally released by Apple, our rating quickly stabilized at a much higher value. That’s partially because we fixed the critical bug, partially because Apple helpfully resets your rating when you update an app, and partially because we added a “would you like to rate this game?” popup to the app, which quintupled (5x) the number of reviews we received in a day and helped prompt fans of the game to give us a boost. (Some people don’t like the fact that updates reset your rating in the app store, but let me tell you, when you’re trying to recover from a bug, that’s a pretty great feature…)

Second, but pretty much all that really matters: The iOS version of Steambirds has thus far outsold the Android version by almost 6 to 1. What makes this even more remarkable was the bug I mentioned earlier, which hurt our iOS review scores during the first week that Steambirds was featured. The Android version of the game had a significantly better average review score during the time period in which it was featured, and yet iOS sales were still dramatically higher.

One important thing to note: Steambirds is $0.99 on the iPhone and $1.99 on the iPad, whereas the price is $1.99 on all Android devices. So, the revenue difference between the two platforms is more like 4 to 1 in Apple’s favor, not 6 to 1.

You might also wonder if the higher Android price somehow artificially depressed sales relative to the iOS version. My thought: the average price of top Android games is much higher than top iPhone games, so our having gone with $1.99 should not have had too much of an effect on purchase intent, and as (admittedly anecdotal) evidence to support that, we have noticed very few complaints about the price in customer reviews and on forums. Consumers judge prices based on locally relevant information, not some sort of “universal value” system. If you own an Android phone, and you want to play games on that phone, the average price of highly-rated games in Android Market is mainly what matters to you, unless you’re also carrying around an iPod Touch.

What’s next?

In general, as I’ve noted several times on this blog, I’m more excited about the potential of free-to-play games than I am traditionally-purchased games. I think it’s likely that the next iOS/Android game that we release will be F2P, and it will be interesting to see how that changes the relative revenue performance of the game (if at all) on iOS and Android. I’ll let you know.

PS. If you didn’t hear, the Android version of Steambirds won the IndiePub Mobile Games Competition grand prize! Congratulations are due to our friends at FlatRedBall, and to Andy and Daniel for their tremendous design work.

Today we launched Steambirds: Survival (SB:S), the first true sequel to the original Steambirds. It’s essentially “Steambirds meets ‘Horde Mode’ from Gears of War” — your goal is to fight off ever-growing waves of enemies for as long as you can manage. Aside from this central conceit, the key differences between SB:S and the original SB are:

• In SB:S, you can choose from 24 planes, all of which need to be unlocked, and nearly all of which have very distinct characteristics which heavily impact your play style.
• In SB:S, when enemies are shot down, they leave a collectible powerup where they crash. Judiciously deciding when to collect these (and how to use them) is key to your survival.
• In SB:S, there are microtransactions. Seven of the twenty-four planes in the game can only be unlocked with cash. One of the twenty-four planes is unlocked for free, if you create an account and sign up for our newsletter.

Monetization headaches

Adding microtransactions to SB:S proved to be non-trivial. To understand why, you need to understand our distribution strategy. We’re excited about Flash because it opens up such a huge audience to our games. Part of that huge audience comes from the hundreds of Flash gaming portals who will happily host and promote your game for free, without any negotiation or formal arrangement needed, in exchange for the opportunity to monetize the game via their own site’s advertising system. Normally, all you get in return (aside from exposure) is a prominent link (or links) in the game to other websites of your choosing. But we wanted more than that – we wanted to monetize content inside the game, no matter where it was hosted. That turned out to be a huge pain in the butt.

If you’re a relatively small company like Spry Fox, there’s no way you’re going to implement your own secure billing solution for microtransaction-based games. You’re going to use a 3rd party solution like Mochi, Social Gold, Facebook Credits, etc. Unfortunately, none of these solutions support a virally-distributed game (Social Gold has been promising support for ages, but they haven’t delivered on those promises and it isn’t clear when they will, if ever.) After wasting quite a lot of time trying to identify a solution that would work, we finally settled on Gamersafe, which is run by the same people who run FlashGameLicense (FGL) , a well-established auction site for flash games. Chris Hughes, one of the co-founders of FGL, worked directly with us to implement Gamersafe in SB:S and has been a huge help, in general.

Many flash game portals will happily host Gamersafe-enabled games (especially since Gamersafe pays them a small percentage of all microtransaction revenue generated by the game.) However, some of the very largest flash game portals will not accept a Gamersafe-enabled game, sometimes because they have their own microtransaction system they want you to use, and sometimes because they simply don’t want a third party API for currency or achievements to be active within their portal, which is not too surprising. In such cases, we’ve decided to either integrate the portal’s own currency system if that is an option, or to insist on a very prominent link back to Steambirds.com (the link appears instead of the cash-only planes in the game.)

A prominent out-link may seem like a trivial thing, but it is not. Large portals don’t like it when the games they host feature prominent out-links, and will often insist that such links be removed. But as a Flash game developer, you have to ask yourself: why are you creating games? To eke out a modest income cranking out disposable content? To be perpetually firewalled from your fans? That’s just not a sustainable business model.

Encouraging conversion

Because we just launched SB:S today, I have no idea what our conversion rate (free user to paying user) will look like, but I promise to post something about this in the future. What I can tell you is that we’re not expecting much – 0.5% would be a real win in my book. The reason for my “low” expectations is this: SB:S is a completely single player game, so we’re missing many of the social hooks one would typically employ to encourage purchase. Additionally, while I think SB:S is an incredibly fun and extremely replayable game, it isn’t particularly “deep,” and that’s going to impact our retention, which will ultimately impact our conversion rate.

That said, there are still things we could theoretically do to nudge the conversion rate upwards, and we’ve done them. Here are some examples:

• Instead of having eight awesome cash-only planes, we have seven awesome cash-only planes and one awesome plane that you get for free if you simply register a Gamersafe account and our newsletter. This removes one of the major barriers to purchase: the annoying task of giving us your username, password and email address. It’s all totally optional, of course.
• Some of the coolest planes in the game must be earned with a very large amount of unpaid currency (aka “copper.”) But you can earn those cool planes more quickly if you fly other planes with a high “copper bonus”, which is simply a multiplier that is applied to all the copper you earn during a mission. There are free planes with a high copper bonus — you just need to work your way up to them, and then you can use those planes to unlock the more expensive ones. But if you’re in a hurry, you can purchase a plane with a really high copper bonus straightaways. Or, if you don’t mind spending a bit more cash, you can pay to unlock every plane in one fell swoop.
• It’s important to note that because this a single player game, and because every plane has its own leaderboard, unlocking planes for cash confers absolutely no competitive advantage on paying players – it simply enables them to progress through the game faster and/or experience more gameplay variety sooner.

I hope this insight into the business thinking behind SB:S has been useful to you. If so, you can return the favor by checking out the game and better still, tweeting about it, posting an update to Facebook, etc. :-)

This week is a big milestone for Spry Fox; we released the first independently-developed game for the Kindle, which we called “Triple Town.” Our playtesters have described Triple Town as, among other things, “the Civilization of Match-3 games”, which is both flattering and terrifying. :-)

Danc has written a nice post about the design philosophy behind the game. If you own a Kindle 2, Kindle DX or Kindle 3 you can purchase Triple Town directly from Amazon.com.

As a supplement to Danc’s post, I thought you might like to know our business rationale for creating Triple Town. It shouldn’t surprise long-time readers of this blog that I’m always on the look-out for platforms in the “uncertain beginnings” phase that may soon enter “early glory”. The Kindle seemed like just such a platform. Let’s break that down:

1. Platform prospects

First and most important question: is there a reason to believe the platform has a good chance of becoming a viable ecosystem for its first wave of game developers? Looking at the Kindle, I saw a platform with a reasonable number of users (Amazon will not release ownership statistics, but I’ve been guessing that there are currently at least 2m+ active content-enabled devices out there, based on publicly available information. I could definitely be wrong about that, but hopefully not by too wide a margin on the downside.)

More importantly, I saw a platform with users who are inclined and encouraged to purchase large quantities of digital content at relatively healthy prices. And given Amazon’s merchandising expertise, I hoped that unlike on so many other platforms (Wiiware springs to mind as a sad example), Kindle games would get plenty of visibility and Kindle developers would have reasonable marketing tools made available to them.

2. Content supply

Secondly: what is the supply of high-quality content likely to look like when the platform first launches? Will it be an overwhelming flood or a small trickle? The latter is what creates a supply-demand imbalance during the “early glory” phase, and which ultimately leads to strong returns for early developers. The Kindle was an interesting case in this regard. While I’d imagine that software developer interest in the Kindle is quite high in general, when I personally asked a large number of my friends in the game industry, “are you planning to develop a game for the Kindle,” the answer was always either “no” or “you can make games for the Kindle?” Furthermore, I didn’t see much Kindle-related news in the game industry press or at game industry conferences. To me, that indicated a potentially-unappreciated market opportunity.

3. Investment threshold

Unfortunately, even when both the conditions above hold true, there is no guarantee that the emerging platform will ultimately prove viable. Any number of issues — ranging from mismanagement of the platform, to unanticipated technology problems, to rotten luck — could cause the ecosystem to be less viable than you might hope. Consequently, the third major condition of a good “uncertain beginnings” investment opportunity is simply: can I dip my toe in the water with a project of relatively small scope? If entering the market requires a huge expense, it probably doesn’t make sense for most independent game developers. But Daniel and I were confident that we could create a great game that we were proud of in a reasonable period of time, with a reasonably small team. And so we did.

Conclusion

Of course, it certainly didn’t hurt that both Spry Fox and Amazon are based in the greater Seattle area. Knowing that I could easily meet the platform managers in person if they were interested in our company or our game was a nice bonus. That said, I wouldn’t call location one of our key investment criteria.

Anyway, long story short, we decided to give the Kindle a shot. I am very grateful to the people at Amazon for their decision to release Triple Town as one of the first games on the Kindle, and look forward to seeing how this grand experiment turns out. :-)

“People are willing to pay for magic.”

That’s what my friend Brian replied when I told him that no one in Microsoft’s target audience would purchase an Xbox plus Kinect for a minimum price of $300 when they either A) own a Wii already, or, B) can purchase a Wii (with MotionPlus, Wii Sports and Wii Sports Resort) for just $200. Brian, as I frequently must admit, is a perceptive fellow.

People are indeed very willing to pay for magic. They have lined up around the block to pay $500 minimum for a slice of magical iGoodness from Apple. They lined up to watch Avatar in 3D (multiple times.) And they — that is, we — will continue to line up for the products and services that dazzle us, recession or no.

So, if you want to know who “won” E3, perhaps one way to figure that out is to apply a magic test to the products that were unveiled there.

Sony’s Move

By essentially copying the Wiimote’s nunchuck, Sony forfeited one of the few ways it might have differentiated the Move from the Wiimote w/ MotionPlus. Furthermore, the Move games I played exhibited noticeable lag, despite frequent assertions from booth attendees that the Move is lag-free. Lastly, there was nothing in the Move 1st party content portfolio that particularly stood out for me (Ubisoft’s Child of Eden was thoroughly intriguing… but also multi-platform.)

Verdict: magic tricks lose their luster after we’ve seen them too many times. This trick is getting old.

Microsoft’s Kinect

I’ve been waiting a long time for someone to make camera-based games that actually work. And there’s no question that controlling your media center with your voice and a wave of the hand is a magical experience, in theory. (How many people spend a small fortune on a universal remote? Now imagine that, minus the remote, plus a system that recognizes you on sight, and you’re starting to appreciate the possibilities.) Interestingly, pre-orders have made Kinect the #1 best-seller in the video game category on Amazon.com for the past six days; a clear signal that many people have bought into the initial hype. And finally, I will personally attest to having witnessed many people (usually women) positively cooing with pleasure while watching Kinect demos at E3. (Mostly Ubisoft’s fitness offering and Harmonix’s delightful Dance Central.)

That might or might not be enough. Nobody wants a universal remote that doesn’t work when you’re sitting. Being a Jedi loses some of its appeal when you’re paralyzed from the waist down. Noticeable lag isn’t a deal-breaker, but it certainly reduces the total potential number of magical experiences. And it’s still unclear how a party game works when anyone who walks into the party room can accidentally break the experience.

Verdict: very possibly magical… as long as you’re not sitting down, not in a crowded room, and not hardcore.

Nintendo’s 3DS

You turn it on and play games in 3D. No glasses. No excuses. It just works. Today, you get Kid Icarus dodging lasers in 3D. Tomorrow, it’s a safe bet you’ll get Mario hopping into your face.

Now that’s unadulterated magic.

The Magic Test, in summary

If you’ve seen it before, it’s probably not magic. If it doesn’t work the way you feel that it should (or doesn’t work in “normal circumstances”) then it’s probably not magic. But if it’s novel, fun, and just works, then you just might have magic on your hands. This test can be applied to game development, not just hardware development.

Don’t take my word for it. Just think about any performance given by the world’s greatest magician.

No, not Houdini. Steve Jobs, of course!

I’ve been casually tracking the daily active user numbers for the top 40 Facebook game developers for the past six weeks. Why the top 40? Because that’s the quantity displayed by Appdata.com on the first of 200 pages. Why daily active users? Because monthly active user numbers are widely considered to be an unreliable statistic for Facebook games, whereas DAU is, if not perfect, at least more directionally accurate.

I was mostly curious to learn how “hit makers” are faring on Facebook. (The 40th developer on the list has just 200k daily active users, so it’s safe to assume that all the heavy hitters are represented in the top 40 list.) Facebook’s total population has supposedly been growing by leaps and bounds over the past several months — it jumped from 350m “active” to 400m in the three months leading up to February 2010) so theoretically daily active users for the top 40 game developers should be growing as well, if for no other reason than there are more potential customers on the platform. However, it turns out the DAU count is down slightly since March.

How about Zynga, the king of Facebook?

How about EA+Playfish, Crowdstar & Playdom (2nd, 3rd and 4th place behind Zynga, respectively)?

All flat-to-slightly-negative, with the exception of EA+Playfish which experienced a small increase in DAU over the same time period. Coincidentally, Gamasutra and Inside Social Games jumped on this story on Friday (two days ago), identifying the falling active user numbers and blaming the drop entirely on “recent changes in the way Facebook manages notifications.” You should be skeptical about that assertion. While changes to FB notifications may well be having a significant impact, the larger issue is simply that Facebook has clearly entered the inevitable misery phase, which I predicted just a few months ago.

The Facebook game development scene has become crowded. Facebook’s platform managers are making decisions that are unpopular with many of their developers and looking to monetize developer activity more aggressively. And the average “hit game” has yet to shift from the “early glory” stereotype to the Facebook game of the future (whatever that might be.) To use a historical example, Facebook is like the MMO market when it was all about Everquest — just waiting for a World of Warcraft to show people what a truly successful social game actually looks like. Of course, Facebook’s WoW won’t look anything like WoW itself, and may not even have a higher development budget than the games launching on Facebook today. It will definitely have a better retention rate, better monetization, and better (less spam-like) viral functionality.

Remember all those VCs and pundits saying it’s too late to become a top dog on Facebook? The guys currently choking the halls of one-too-many social gaming summits? To heck with those guys. The next several months (and perhaps longer) are going to be very ugly for the Facebook game development community. Lots of small developers are going to lose money. We may even see a big Facebook developer collapse under the ungainly weight that they have packed on while attempting to bloat their revenues pre-acquisition/pre-IPO. But this phase will end, and when it does, Facebook’s “triumphant return” is going to make XBLA’s triumphant return look like peanuts by comparison. The only question is: who will ride that wave and who will drown before it arrives?

PS. If anyone has access to the complete DAU data for Facebook — i.e. all 200 pages of it — I’d be curious to know if there’s any meaningful evidence of Long Tail activity over the past several months. If there’s anywhere the Long Tail should be manifesting itself, it’s Facebook IMO.

PPS. If you’d like to download the data I used for those charts, please feel free to grab it here. It took a while to get the data in useable form so I’ll be glad if someone else finds use for it. :-)

Update: interesting to note that on May 7th, around the same time as Gamasutra’s article, Techcrunch revealed that Zynga and Facebook are currently in the midst of a very ugly war and Wired published an article labeling Facebook “rogue” and advocating for a new social standard. Last Friday was truly a nasty start to Facebook’s inevitable misery phase.

For a couple weeks now, I’ve been getting calls from friends in the industry bemoaning their lack of inclusion in the upcoming Summer of Arcade promotion on XBLA. The tone of the calls has varied, but they’ve all shared one thing in common — frustration with Microsoft. As I’ve thought about it, I’ve come to the following conclusion: Summer of Arcade will have to change or, at very least, cease to be Microsoft’s ultimate promotion for the XBLA service.

First, a bit of history. Summer of Arcade was the brilliant brainchild of my good friend, Jeremy Wacksman. It was born of the realization that Microsoft desperately needed something that would draw positive attention to XBLA and make consumers, developers and the press take it seriously (bear in mind, this was during XBLA’s “inevitable misery” phase, when no one had anything good to say about the platform.) SoA served that purpose beautifully; it kicked off XBLA’s “triumphant return” and changed the tone of public conversation from “XBLA is full of crap” to “XBLA is the only place you can find games like Castle Crashers and Braid.” It also established the $15 price point on XBLA — an important and under-appreciated feat.

Dealing with rejection

Summer of Arcade still gives consumers and the press something positive to focus on. Unfortunately, SoA seems to be turning into a net negative for the developer/publisher community. Today, many companies will target a summer release in hopes of making it into SoA and may even choose to hold a finished game in their pockets for several months for that purpose. A couple months before SoA is scheduled to begin, ~five lucky development teams find out their games have been blessed; significantly more discover that they’ve been rejected.

You might be thinking, “oh well, that’s how the cookie crumbles; not everyone can get lucky.” Unfortunately, this isn’t simply a question of “getting lucky” or not. Rejected developers and publishers — aka the majority — find themselves faced with a difficult decision: rush to release their game before SoA or wait to release after SoA. If they release before SoA, it may compromise the game’s quality and/or pit the game against many other high quality games that were rejected and released early (it also truncates the time that a company has to execute marketing activities). If they release after SoA, they’re pitting their game against the SoA titles and/or the retail holiday titles… a scary proposition. Some developers might also lack the financial flexibility to delay launch for very long. Either way, this feels like a lose/lose situation to developers and publishers, and it makes many of them angry. The fact that Microsoft only distributes one game per week during SoA only exacerbates the situation because it contributes to an overabundance of competition before and after.

So what can Microsoft do to change things?

So what does this mean for Summer of Arcade? I can imagine four likely scenarios. The first scenario is that Summer of Arcade simply goes away, but I doubt that will happen. The second scenario is that Microsoft stops limiting which games can be released during Summer of Arcade, but only promotes “the chosen ones.” Unfortunately, this may confuse consumers, and it will still offend many developers and publishers who hoped to be “chosen” and now find themselves competing against overwhelming PR firepower, so it isn’t a great solution.

The third scenario is that Summer of Arcade becomes a pay-to-play event. In other words, if you pass Microsoft’s quality filter (an important caveat), your entry into SoA will depend entirely on whether you’re willing to pay for a slot (in direct payment or, more likely, in greater revenue share to Microsoft). Much like a 30 second ad slot during the Super Bowl, the SoA “slots” would be priced high enough that demand for them would be relatively measured (as opposed to today, where demand is insatiable.) And to those who complain, Microsoft would point out that much like physical retailers, Xbox LIVE has a right to sell some of its “shelf space” and to arrange special promotions for the purpose of attracting customers. In the retail world, one name for this is MDF, or Market Development Funds, and game publishers are very accustomed to MDF arrangements with the biggest retailers. (Before anyone gets too excited, I should note that not once in all my time working for Microsoft did I ever hear anyone discuss or even speculate about the possibility of selling SoA slots. This is my own imagination running wild here, and nothing more.)

The fourth and final scenario is simply: Microsoft introduces more “top-tier” promotions that developers and publishers care as much about as Summer of Arcade. There have already been attempts by Microsoft to do this, but I would argue that none of these new events have resonated with the community quite like SoA did when it first launched. It’s hard to know why, but perhaps the reason is that these new promotions have not been sufficiently differentiated from SoA. Bottom line: *if* Microsoft can somehow create a few more promotions as compelling as SoA, the net result should be greater total sales for the platform and fewer developers/publishers obsessed with getting into SoA.

I really don’t know which of these scenarios will play out. But no matter which, I’m confident that given the increasingly negative feelings developers and publishers have about Summer of Arcade, it’s only a matter of time before the promotion changes in some sort of significant way or at very least is rendered “less important” by the introduction of other, more meaningful promotions. So perhaps the real question underlying this post is: what kind of platform (and what kind of retailer) does Microsoft want XBLA to be? We’ll soon find out.

PS. A special thanks to Kim Pallister for his help with this post.

Lots of people are talking about the iPhone announcements today. Most relevant to game developers: Apple is putting viral invites, matchmaking, achievements, and leaderboards into the OS; adding the ability to gift apps; introducing a slick in-app ad network called iAds; and (finally!) limited multi-tasking if you possess a 3GS or better. This is an impressive list of features, and as a consumer, I’m pretty excited about it.

As a developer, it doesn’t change my feelings about the platform much. It has been evolving into an ecosystem in which F2P is the most viable business model (as exemplified by Ngmoco) and it will continue to evolve in that direction. In fact, the introduction of iAds will likely accelerate the trend as developers race to compete with one another for a share of ad revenue. When Steve Jobs says of iAds: “This is us helping our developers make money so they can survive and keep the prices of their apps reasonable,” he really means “this will help maintain downward price pressure in the app store, which I love because cheap apps help sell iPhones!” (Btw, was anyone else struck by Jobs’ use of the word “survive?” I think that’s the closest he’ll ever come to admitting that life for developers is rough in the world o’Apple.) And if you’re still not convinced that F2P is the future of Applesville, let me remind you of now-common revelations that anywhere from 60% to 90% of app downloads are pirated.

Console Killer?

Piracy is just one reason why I balk when people call Apple’s products “console killers.” The truth is that the iPhone+Touch+iPad triumvirate defies simple categorization and collectively represents a new kind of market for games. It isn’t being positioned to destroy the console market, though it’s clearly having some impact on the portable console space in particular. (Gotta say, I love the title of that article –> “iPhone Is Eating Sony PSP and Nintendo DS’ Lunch.” I guess Nintendo’s 70% of the market doesn’t qualify as a full meal anymore..?)

Successful game consoles have historically limited piracy in Western markets to a great degree. Successful game consoles have historically supported (if not required!) high game prices. Successful game consoles have sharply restricted who can develop content for them and who cannot. Successful game consoles have, as a result, made experiences like GTA 4 and Call of Duty MW2 possible, and there is a non-trivial segment of the population that still wants to buy those games. And perhaps a non-trivial segment of the population will still want to buy the games that will be available on the successor to the Nintendo DS, even if those games cost $30… as long as they are sufficiently differentiated. But Apple doesn’t care about any of this, because Apple doesn’t need to own the “high end” game space or become a “traditional console!” Apple is perfectly happy catering to the mass market consumer (and/or the pirate) who is buying its high-margin devices, watching its iAds, and generating microtransaction revenue via in-app purchases.

What about quantity?

This is partially why I am not impressed when people point out that there are only 2,500 Nintendo DS games as compared to 50,000 iPhone+Touch games. With a few notable exceptions (such as GTA Chinatown Wars and CoD: WoW: Zombies), there is limited overlap between “premium” DS experiences and “premium” iPhone+Touch experiences, and that overlap may shrink if publishers begin to fear that the iPhone cannibalizes too much revenue from other, more profitable platforms. (Also: today, the iPhone+Touch has a big advantage over the DS: no retailer margin! I have to believe that this advantage will be reduced or eliminated when Nintendo releases its next major portable console.)

No… the iPhone+Touch+iPad is a beast all its own. Not a console killer, but something equally impressive. A weird hybrid of some of the best and worst aspects of open and closed platforms, with a touch of crappy retailing thrown in to boot (sorry Apple, but the new gifting feature doesn’t make up for how poorly apps are merchandized.) It’s a place where indies looking to make a buck might find their fortune in the F2P space or with a (rare) 99 cent mega-hit. It’s a place where larger companies might profit from cross-platform F2P games and/or opportunistic use of known IP. It is, to be clear, a remarkable place that anyone serious about the games business has to keep abreast of… but it’s not the be-all and end-all of gaming. And it probably won’t be anytime soon.

PS. Comments on Adobe vs. Apple reserved for a future post. For now, I’ll just say that I’m still pretty excited about the F2P opportunities in the Flash games market.

I was recently interviewed by Matt Martin of GamesIndustry.biz on the subject of publishers making the transition to Facebook. Since my correspondence with Matt was via email, I thought I’d take advantage and share the full transcript, for those of you who are interested in this topic:

Question: Is Facebook a viable format for traditional videogame publishers? Are there opportunities for someone like EA or Take 2 to make a significant profit? Or is Facebook as a platform over for those big publishers that haven’t already established themselves on the service?

Facebook is definitely a viable platform for traditional publishers. The short-term problem, as I’ve noted in the past, is that traditional publishers simply aren’t geared towards making the kinds of games that succeed on Facebook. In general, their game designers are trained (and prefer) to make games that are fun above all else, where a Facebook game designer needs to be as concerned with designing a free-to-play game that is capable of generating real revenue. And in general, their designers are also accustomed to thinking of player acquisition as “marketing’s problem,” whereas viral player acquisition is clearly a core design challenge on Facebook. But I don’t want to make it sound like design is the only challenge; traditional publishers don’t have much experience marketing these kinds of games, in this kind of channel, to this broad an audience. They’re set up to manage the relationship with Microsoft, Sony and Nintendo, to push discs into retail stores, and to blow a wad of cash on TV and magazine advertising. Obviously this is a generalization, but you get my point.

But as I mentioned earlier, that’s all a short-term problem. There’s no inherent reason why traditional publishers can’t build (or buy) fresh studios to focus on this opportunity. They’ve done it before; mobile games are a good example. The traditional publishers will end up wasting quite a lot of money in the process — you can be certain of that — but some of them will ultimately succeed at entering the market.

Question: Would big game franchises such as The Sims or Civilization translate to Facebook gaming, or should publishers try new projects and IP?

Regardless of the platform, it always pays to have a healthy portfolio approach. There’s no reason *not* to try bringing established franchises to Facebook; you simply need to be wary of being too literal in the translation. Put another way: as long as The Sims on Facebook is different enough from The Sims on PC+console, EA has an opportunity to broaden the already huge audience for the Sims and make some extra cash in the process. On the other hand, if the two experiences are excessively similar, EA might find that it has inadvertently trained its consumers to expect all Sims content for free (assuming the Facebook version is F2P, which is likely but not a given). At any rate, I doubt they’ll make that mistake.

All that said, the early life of a platform is generally a great time to launch original IP, and publishers should clearly take advantage of the opportunity to the greatest extent possible. But who in their right mind would say no to a Facebook version of Civilization? :-)

Question: What gaming opportunities are still available on Facebook, and how long do you expect until the platform suffers from a glut of games?

Currently, I think the number of gaming opportunities on Facebook dramatically outnumber the genres that one might call saturated. With a few notable exceptions, many of the most popular games on Facebook seem to be cut from the same cloth. They have simple art, they are oftentimes “social” in only the loosest of ways, and they’re generally simple puzzle games or RPGs. Many quickly devolve into unabashed time sinks. There’s clearly tremendous demand for these experiences so please don’t think I’m denigrating them, but there’s also room for many other experiences as well.

I should add that to my knowledge, there’s been little exploration of potentially lucrative niche audiences on Facebook. This is a platform with hundreds of millions of users — surely there must be some online audiences in the millions (or tens of millions) that would be unreachable in the console space but are reachable on Facebook! What do those audiences want? Religiously-themed games? Something else? Ironically, one might call “games that appeal particularly to hardcore gamers” an under-explored niche on Facebook!

When I look at Facebook, I see a games platform that has been thoroughly enjoying the “early glory” phase of maturity. Not too long ago, there was guarded optimism about the potential of Facebook to host profitable games, but few good examples of such games. Less than a blink of an eye later, Facebook has become the apple of our industry’s eye.

While most publishers are laying employees off by the hundreds, Facebook-centric publishers are hiring like mad. Savvy conference organizers are rushing to capitalize on audience demand for business venues to discuss social gaming. The inevitable stories of unbelievable growth have, quite predictably, become common-place. Facebook’s platform managers have finally started embracing our industry and contributing to the hype around their platform. And finally, a remarkable number of developers (and even large publishers) have begun to re-orient themselves towards the development of social games.

Facebook’s “inevitable misery”

All of these are classic signs that Facebook gaming’s “early glory” phase is in full swing. You may therefore conclude, with 99% certainty, that Facebook as a games platform is likely within a single year’s reach of the “inevitable misery” phase of its lifecycle. Probably much less than a year, in fact. As I’ve argued before, this does not necessarily mean that savvy developers should begin to look elsewhere — it simply means that there will soon be a large quantity of blood in Facebook’s waters. The victims of that impending blood-bath are listed here, in no particular order:

• Developers who fail to realize that the quality bar for content is rising rapidly.
• Developers who believe that “viral game design” is all that matters. Hardly! User retention will prove increasingly crucial (and difficult!) as the options available to consumers explode in quantity. Furthermore, effective marketing and/or cross-promotion will increasingly distinguish those games that reach critical mass — the point before which “virality” is meaningless — from those games that do not reach critical mass and therefore fail.
• Developers who run afoul of Facebook’s platform managers. Make no mistake: Facebook may be an “open platform” but they can and will pull the rug out from under developers… not because they are nasty people, but because they genuinely believe their actions serve the greater good and/or the customer (they may also be looking to pad their own pocketbook.) Facebook might choose to dramatically change the mechanics upon which a developer has unfortunately bet all their eggs. Or perhaps Facebook might begin to proactively promote content, ala Xbox LIVE or the iPhone App store, in which case a developer could find their competitors’ games featured at the expense of their own! (Better be sure you’re supporting Facebook Credits if you want to stay off the black list…)

Early signs of trouble?

Very early signs of the “inevitable misery” phase are already evident. Not long ago, I was hearing that the conversion rate from free users to paying users on Facebook was somewhere around 3%. However, Zynga recently revealed that as of now, 1% to 2% is probably more accurate. Falling conversion rates are one of the harbingers of “inevitable misery,” though I must re-emphasize that neither falling conversion rates nor the inevitable misery phase itself are inherently “bad.” A low conversion rate is fine when your game attracts 70m players! The inevitable misery phase features a great many losers, but it sets the stage for some big winners as well.

When it arrives, what will Facebook’s “inevitable misery” phase look like?

Facebook gaming’s “inevitable misery” phase is going to look a lot like every other successful platform’s inevitable misery phase. Industry news will turn mostly sour for a period of time. Many developers will lose their shirts as games that formerly would have succeeded no longer do so. But there is one major difference between Facebook and other platforms that came before it: never before has a platform been so friendly to cross-promotion and viral growth. These twin forces will likely guarantee that today’s big social gaming companies (i.e., Zynga, Playdom, EA Playfish, etc) should continue to thrive despite any mistakes they might make. In other words, we are less likely to see a Sierra Online-esq fall from grace.

Between having truck-loads of venture capital to advertise new games with, and having millions of existing players that they can point towards new games, these social gaming juggernauts should have an easier time surviving the inevitable misery phase. They may be hiring new employees way too quickly (which unnecessarily increases their burn rate and makes them less efficient), and they may currently be cranking out derivative, shallow games, but as long as they manage to publish at least a few compelling titles as well, they should be OK. (Those “compelling titles” may be clones of competing games, but hopefully a rising quality bar and greater consumer awareness will make cloning harder in the future. I wouldn’t hold my breath, but we can hope!)

And what should you do if you’re not a Zynga, Playdom or Playfish? Well, aside from referring to the advice I gave in my previous article, I’ll add this: unlike so many other games platforms, Facebook is actually large, open, and accessible enough to support many games that target niche audiences — and Zynga is less likely to clone your game if you’ve targeted a niche. (They’re probably looking for games that have the potential to attract 100m players, not 1m or 5m players.) I’m not suggesting that indie developers abandon the mass market — not at all — but niche strategies are worth considering as competition on Facebook continues to intensify.