The E3 trade show for computer,video games and related products has got underway at Los Angeles. And there is excitement around developing mobile and social gaming applications amidst the monetizing challenge of these apps. The buzz around mobile and social apps tie in to the changing behavior of gamers who are moving out of controllers, stationary TV sets according to this WSJ report. In fact, video game discs,consoles and accessories sales declined in double digits in the first quarter of 2012 compared to 2011, according to research by NPD Group.
The challenge of converting mobile game app users into paying customers is huge. Because in contrast to paying upto $60 for a disc the mobile game app user expects the app for almost free. The NPD group panel survey suggests that the Freemium model works if people start free and then upgrade for a better experience. However, those who do not convert to paying customers within a month, rarely do convert. So the revenue model has to be Ads within the App and that will take time to develop.Even here, the serious gamer may not really be interested in the sub-optimal experience that a mobile phone screen offers.
The game developers can use platforms like iTunes or Amazon but unlike the digitization of music video games is new territory for the consumer. People always listened to music and had time to move from various paying formats like vinyl,cassettes,CD and MP3 to free file Internet sharing to paid iTunes. In contrast video gaming is an individual sport and there are not many games you could play solo in the pre- computer age, except for perhaps Patience in cards.
Complicating things are the price points of the earlier game video disc. No one expects to get a video game disc for under $10 whereas everyone expects Internet based content whether on mobile or computer to be near free. But if people are going to play more on their iPhones and iPads that's where game developers need to be. The monetizing challenge for the industry will continue though, as the advertising revenue model gets clarified... Contact StratoServe.