Gold Rush 2.0

Promises of a new wave of profit for iPad developers ignore the destructive downward pressure on iPhone game prices.

GamesIndustry.biz, the trade arm of the Eurogamer Network, recently completed the next step in its evolution toward greater support for the videogames business with the implementation of a full registration system.

As the overseas launch of the iPad approaches, and the United States prepares for the arrival of the 3G models of the tablet system - which are likely to bring with them a significant surge in demand, if the pre-order figures being bandied about are realistic - many developers will be casting their minds back to statements made during the gadget's much-hyped launch. In particular, some will recall the promise of a "second gold rush" - a new wave of success for app and game developers, comparable to the heady early days of the iPhone and iPod Touch.

The concept of a gold rush brings to mind the unbridled optimism of realising that there are untapped veins of profit waiting for the right people to come along and exploit them - open pastures as yet untouched by the big corporations who dominate other sectors of the market, ready for small, enthusiastic and innovative people to move in and make their mark.

Students of history, however, will point out that real gold rushes also tended to have much darker consequences. Battles between rival prospectors and a wanton disregard for the environment meant that the human and ecological costs of gold rushes could be immense, leaving behind a barren, scorched landscape and dusty, desperate towns filled with those who couldn't afford to escape to greener pastures. There's a good reason why many of the most bleak Westerns are set in the aftermath of a gold rush.

In other words, it's worth taking a closer look at where the iPhone gold rush has left the market before we all get too excited about the prospect of doing it all over again on the iPad.

There's no question but that the iPhone has been an immense success as a gaming platform. Software revenues on the device have overtaken the PSP in the United States, according to some measurements - and even if other metrics are more dubious on this claim, the fact that a platform where games almost all cost less than $5 is even in the same ballpark as one where the games cost $25 or more is astonishing.

Moreover, it's undeniable that much of that success has fallen into the laps of small, plucky developers rather than the established publishers. Larger publishers have certainly had hits on the iPhone, but most of the platform's runaway successes have come from newcomers or independent developers.

Their success is enabled by Apple's largely agnostic approach to publishers, with the firm much more willing than other platform holders to promote worthy indie efforts over the heads of less appealing titles from industry behemoths, and is amplified by the low overheads of small studios, who can therefore enjoy far more of their success as profit.

Not all of the promised land's rivers, however, run filled with milk and honey. Huge problems have emerged in the iPhone game market - problems which the iPad risks repeating, or simply carrying over.

The most obvious problem is pricing. From a consumer perspective, the iPhone offers extraordinary value, with many great games selling for under $2 - and some good titles going for under $1, or even for free. This is the result of intense competition on the platform, which has pushed prices down closer and closer to the App Store's lower limit (79 cents, or 59 pence) as the device's lifespan has extended.

What started out as price points for simple, cheap games have gradually become ingrained in consumers' minds as being the price point everything should aim for - and more expensive software has to work very hard indeed to justify its pricing.

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