Apple apps do big business, not their developers
(MoneyWatch) COMMENTARY Apple's (AAPL) so-called App Store has been a monstrous hit for the company. The applications help cement loyalty to the company's iPad and iPhone, with more than 400 million accounts with an attached credit card, said CEO Tim Cook at the technology giant's annual Worldwide Developers Conference.
How monstrous? There are 650,000 apps, 225,000 specifically targeted to the iPad. Cook said Apple had paid out $5 billion to developers, adding that it is "what we do together" that is important.
No doubt, apps allow an enormous range of functionality, much of it valuable and ingenious. For many app developers, however, the business is often a long way from lucrative. I've discussed before how the big sums Apple pays for these tools become less impressive when you spread them across the hundreds of thousands of apps. By Cook's numbers, that amounts to an average of $7,692.31 per app. Even apps that are popular for a time may never come close to recouping the full development costs.
Just ask Los Angeles game studio Lonely Few, maker of the game Brainsss, which is like a cross between PacMan and a zombie apocalypse (except you play the part of one of the zombies). When the app became available in early May, it had one of the treasured featured app spots from Apple and great user reviews. Owner/developers Yeong-Hao Han and Rod Green got attention from the media. But ultimately, that support didn't translate into sales, as the graph below that Yeong-Hao emailed shows:
After a month, the two saw gross revenue of $30,756.59. Now for the cost side of the equation. According to Yeong-Hao, the partners invested roughly $20,000 of their own money to develop the game. "That includes expenses for the engine license, Apple [software development kit], hardware, contract work, etc, and does not include salaries," Yeong-Hao writes.
The two seasoned game developers took two years working full-time to write the game. "From a business point of view, that was probably a mistake, but we really wanted our first iOS [Apple's mobile operating system] game to turn out exactly how we wanted it to be," Yeong-Hao says.
And by the way -- the missing salaries would have been for them, as they are the only two employees at Lonely Few. "It depends on the company, but realistically we probably could have made somewhere between $85,000 to $100,000 per year for our salaries," Yeong-Hao says. "Both of us have been in the game industry for years."
That would be the unloaded amount. Add employee benefits and you'd realistically look at $110,000 to $133,000 a year. In other words, to develop a game like Brainsss cost upwards of $286,000 for first month gross sales of under $31,000 and a trend line that doesn't seem to hold the promise of the so-called sales hockey stick, where revenue suddenly jumps sharply.
In the future, Lonely Few will "probably have to go with less polished games, with a much quicker turnaround time," Yeong-Haol writes.
That raises the question of how well an app economy can ultimately do if even experienced, promoted developers can find themselves falling flat.