Premium vs Freemium

In the span of around 12 months, the release of the very first iPhone and the launch of the App Store created a whole new appetite for mobile games, empowering a generation of indie developers in the process. But one small decision, to support in-app purchases for iOS games, would change the marketplace forever.

TRANSCRIPT

JAMES PARKINSON: When I think of classic handheld gaming, there’s really only one name that comes to mind, and that’s Nintendo. Sure, there were others along the way, but Nintendo has always been at the forefront of handheld games, and in a big way. From the Game & Watch, to the groundbreaking Game Boy, taking your games with you is a huge part of Nintendo’s ethos.

JAMES PARKINSON: So it seemed like a logical step when they looked to take on-the-go gaming to the next level. You may remember the N-Gage - that was Nokia’s attempt at combining a phone with a handheld gaming device, to compete with the Game Boy Advance. The N-Gage was released in 2003, and was a commercial failure. Nokia discontinued the device after a few years. So maybe that’s why Nintendo never followed through with their own plans for the Nintendo Phone. Yes, on June 27, 2006 Nintendo registered a patent in the United States for a quote, “electronic apparatus with game and telephone functions''. The designs included ‘A’ and ‘B’ buttons, a D-pad and a numeric keypad. Clearly, the Nintendo Phone never went into production. But just over a year later, a whole new kind of phone would change mobile gaming forever.

JAMES PARKINSON: I’m James Parkinson. From Lawson Media, this is Gameplay, stories about video games and the virtual worlds that power culture and community.

[Archive Audio]

Steve Jobs: "Everyone once in a while, a revolutionary product comes along that changes everything. Well, today, we’re introducing three revolutionary products of this class."

JAMES PARKINSON: On January 9, 2007, Steve Jobs introduced the iPhone at the Macworld Conference & Expo, during what is now a famous keynote.

Steve Jobs: "These are not three separate devices, this is one device, and we are calling it iPhone. Today, Apple is going to reinvent the phone!"

JAMES PARKINSON: Of course, Steve Jobs was right. Like the Mac and iPod before it, the iPhone did change everything. But during that keynote, Jobs could have added a fourth device to his ‘three things’ spiel.

[Archive audio underlaid]

Steve Jobs: "An iPod, a phone, and an Internet communicator…"

JAMES PARKINSON: An iPod, a phone, an internet communicator...and a handheld game console.

Steve Jobs: "...are you getting it?"

JAMES PARKINSON: Before the iPhone changed mobile gaming, playing games on your phone just wasn’t the best experience, simply because of technology’s limitations. That didn’t stop Nokia owners from firing up a game of Snake on their train ride to work, but phone games just weren’t that great, even as the concept of a smartphone was becoming a thing.

REBEKAH SALTSMAN: I remember attempting to play games on, I had like a Nextel device for a while, like when I was in college, like those walkie talkie phones, but it was all, it was like playing sort of original Game Boy games but, like, bad.

JAMES PARKINSON: That’s Rebekah Saltsman.

REBEKAH SALTSMAN: And I am the Co-Founder and CEO of Finji, which is an independent development studio and publisher based in Grand Rapids, Michigan.

REBEKAH SALTSMAN: The only thing that was really great about those original phones is that you could T9 text. But outside of that, all of the controls were really frustrating. Everything was really clunky, they weren’t colour for a long time. Nothing worked the way you expect it to. I remember trying to play a, you know, some kind of Tetris clone, and everything was really laggy, so you just didn't play.

REBEKAH SALTSMAN: Like, your only access to a really personal playing experience at this time, in handheld form was, like, either your Game Boy Advance, or depending on the timeframe, like, the original DS. But it was still, like, very much strictly a gaming device. I couldn’t just, like, easily download something, and it was just big, I had to carry it around in my purse, it wasn't something that I just had with me all the time.

JAMES PARKINSON: In the 2000s, mobile phones were increasingly becoming something that people did have with them all the time, hence why Nokia attempted to appeal to gamers with the hybrid N-Gage. But aside from just not being a great experience, that particular device was also never likely to appeal to anyone beyond gamers.

ELI HODAPP: I think I remember paying like, I don't know, probably $25 or $30 for, like, the most remedial sort of, like, spaceship game on my - I think I had a Nokia 6220 - yeah, insane to think back to that as me being like, “oh, man. This is a good value. I gotta get this game on my Nokia”, you know?

JAMES PARKINSON: Eli Hodapp covered mobile games as the Editor-In-Chief of the website Touch Arcade for ten years. He’s always had a love of games and mobile technology, having grown up in a rural area, spending long bus rides to and from school playing his Game Boy. That love naturally extended to mobile phones as he got older, always seeking out the latest model. And that included the iPhone.

ELI HODAPP: So when the iPhone was announced, you know, it was more or less, like, pre-determined that I was just gonna buy this thing, because it was, you know, the latest and greatest phone and for whatever reason, I was wasting all my money on phones. And so I just had to stand in line for it. You know, like I heard it was gonna be a thing, that people were going to be in line at the local Apple Store and I was like, “well yeah, I don't have anything to do I'll go camp out.”

JAMES PARKINSON: Initially, the iPhone was a shadow of what it is today. You could browse the internet and check your email, but it didn’t have any games or third-party apps.

ELI HODAPP: When you look back at the home screen of iPhone OS 1.0, it's like, “holy cow, like, where is everything?” Like, “what's going on with that?”. So the first year, Apple had a really sort of like, a really glib outlook on any kind of third-party functionality on the iPhone.

JAMES PARKINSON: This was mostly down to Steve Jobs and his reluctance to open up the iPhone to third party developers. He feared that malicious software might infect the phone and that low quality apps would give a bad impression. This led to a lot of “jailbreaking” - people finding ways to hack the iPhone and load various software directly, including games.

ELI HODAPP: No one really knew yet what to make of the control inputs that the iPhone actually had because like, the - as weird as it is to think now - like, the accelerometer and everything else was, like, a brand new thing for people. So there is, a lot of the early days of kind of the jailbreak third party scene, where people tried to start making games that were anything more complicated than, like, Solitaire or other very, very simple, like, touch-based things was developers sort of, like, awkwardly stumbling around with these kind of, like, third party API's that would interact with the accelerometer. I really think if it wasn't for jailbreaking and those initial hackers, like, showing people that the iPhone can do more, that I think that Apple might have been able to get away, at least for a while, with you know, satiating people's desires with just, you know, telling them to use web apps and stuff.

JAMES PARKINSON: Steve Jobs eventually gave in to pressure from Apple board members and senior management, and on the 6th of March 2008, the App Store was announced.

[Archive Audio]

Steve Jobs: "So, you’re a developer and you’ve just spent two weeks or maybe a little bit longer writing this amazing app. And what is your dream? Your dream is to get it in front of every iPhone user, and hopefully they love it and buy it, right? That’s not possible today. Well, we’re going to solve that problem for every developer, big to small. And the way we’re going to do it is what we call the App Store."

ELI HODAPP: By allowing the creativity of both indie developers, as well, like, sort of corporate or whatever you want to call them, developers, the functionality of the phone you know, just like increased exponentially. Like, I remember, I actually, I pulled up my very first receipt from the App Store launching in July of 2008. And the very first thing I bought was Tuner Internet Radio by Nole River for $5.99. And I remember it, like, absolutely blowing my mind, to an extent that was hard to even describe, the fact that I could just, like, listen to internet radio on my phone.

JAMES PARKINSON: The early days of the App Store was a bizarre time. There were a lot of these gimmick apps, because developers experimented with the capabilities of this new hardware, like the accelerometer and Apple’s Multi-Touch technology.

ELI HODAPP: There was a lot of, you know, games and apps and things like that, that were able to generate a lot of downloads and sales. And you know, I'm saying that based on like, 2009 standards obviously, not by today's standards. But by just being like weird novelties, you know, like the app Koi Pond, which was just like literally a 3D Koi pond on your phone. Or, I think was one called, like, iBeer or something like that, which was just kind of like a foamy little, like, beer display that you could pretend, like, you were drinking it because it would respond to you tilting your phone and stuff. So it's really crazy to look back at, you know, if you still have your email archives and look at your iTunes receipts and be like, “holy cow, I paid, like, $7.99 for iBeer, like what the hell?”.

JAMES PARKINSON: The iPhone was also challenging game design. Here’s Rebekah Saltsman.

REBEKAH SALTSMAN: Most of the games that were kind of being released, people were still putting these, like, clunky gamepads, like virtual gamepads on the screen that were taking up a lot of, like, really valuable real estate. You'd sort of have your, like, weird Nintendo controls on either side of your iPhone, on the screens. I understand, like, looking back now, because we were sort of looking at that. But it wasn't really using this, like, really beautiful device that was in front of us because, like, now you're sitting here, like, duh, you just touch the screen. Like, people were starting to understand sort of the capabilities and the control schematics and the UI for a device like this.

REBEKAH SALTSMAN: Like, we had to invent our own new UI for a touchscreen, which is now in everybody's pocket. And it had the ability to show beautiful graphics. It wasn't just, like, a black and white, pixelated screen, which is what kind of the cell phones were before. And the screen was huge - at the time. It's laughably small now! But it was enormous, it was like, I remember holding it for the first time, and I was like, this device is amazing.

JAMES PARKINSON: When launching the App Store, Apple obviously wanted to showcase all this power and beauty that the iPhone could deliver, and games are clearly a great way to do that. So Apple partnered up with some of the bigger developers to bring some well known titles to the iPhone.

[Audio Archive]

Ethan Einhorn: "So when Sega and Apple started talking about what games would be great to bring to the iPhone platform, Super Monkey Ball was a natural choice. When they told us that we’d only have two weeks to create a full 3D demo of the game, I thought that was impossible. But here it is, thankfully up and running, and it looks awesome. And we were able to do this because we were working with a terrific, flexible and powerful SDK."

JAMES PARKINSON: That’s Ethan Einhorn presenting at the App Store announcement, and in making use of the accelerometer, Super Monkey Ball was an impressive example from a big name in gaming that set the tone for this new marketplace. But the best thing about the App Store is how it empowered indie developers.

REBEKAH SALTSMAN: Our first game was in 2008. And, like, we ended up ranking. Like, we were a Top 10 app.

JAMES PARKINSON: That game was Wurdle from SemiSecret Software, programmed by Eric Johnson, with art from Rebekah’s husband, Adam. SemiSecret was the Saltsman’s first studio, before Finji.

REBEKAH SALTSMAN: And like, back then it was like, you know, you're making like $50,000 in a month, which is like nothing to sneeze at, like not to, you know, sort of be derisive about $50,000 in a month, but the ecosystem and the number of players with the original iPhones, which were sort of early technology mavens, compared to now, which is just everywhere, people just have smart devices. The difference in player base is radically different.

JAMES: Yeah, those monthly numbers are impressive, but to Rebekah’s point, things were set to get even bigger down the road - and we’ll get to that soon. In the beginning though, the upside for indie developers was Apple’s revenue split, which was previously unheard of in the games industry. Here’s how Steve Jobs laid it out.

[Archive Audio]

Steve Jobs: "Now, developers are going to ask, “well this is great but what’s the deal?”, right? “What’s the business deal?”. We think we’ve got a great business deal for our developers. First of all, the developer picks the price. Pick whatever price you want to sell your app at. When we sell the app through the App Store, the developer gets 70% of the revenues, right off the top. We keep 30% to pay for running the App Store. This is the best deal going to distribute applications to mobile platforms."

REBEKAH SALTSMAN: Outside of games, if you're hearing that you're just like, that seems crazy. That's a really high percentage for a storefront to take. But at the time, that was revolutionary. At that time, most of the sort of console revenue share splits. Were not in the favour of developers. And they also were very not public. So yeah, that 70-30 split, knowing that like, you would get the majority of your revenue, even if it was only a few dollars, it was sort of worth a shot. Especially as an independent developer, you just had to pay your development fee to like access the ability to self-publish, and then you could quite literally just put up a game.

ELI HODAPP: If you were an indie developer that wanted to release a game on, you know, say like the Game Boy or something like that. You needed to have a deal with a publisher, typically, that worked with Nintendo that could get your game physically created licensed by Nintendo and then physically distributed to you know, whatever electronic stores or game stores exist, which like, you know, if you're just some guy that, you know, has a normal nine-to-five job as an engineer or something like that, that’s just kind of passionate about making games or whatever, the chances of your game being released on the Game Boy was, you know, close to zero, basically. Whereas, the App Store came along and Apple basically said, like, “hey guys, for $99, you can become an official licensed Apple developer and then distribute your game on the App Store.

ELI HODAPP: And you paid Apple a hundred bucks, you were on equal footing on the App Store as, like, Sega, and EA and all these other, you know, like big giants of the gaming industry, that would be those exact people, that would be the only ones that have that conduit into having a physical game published somewhere. So that, truly, I think if you want to put your finger on like one revolutionary thing about the iPhone that potentially mattered the most, it was opening up that accessibility to everyone.

JAMES PARKINSON: The iPhone and the App Store also arrived at a time when making games was becoming more accessible, because developers had more tools at their disposal, like Unity which had launched in 2005. Flash developers were able to port their games to iOS too, and a whole new wave of independents emerged. Rebekah says this was kind of like a gold rush, with people believing they could make a game in a week and become a millionaire. That wasn’t the reality for everyone, but if you could make a fun and compelling game, yeah, you could certainly do pretty well. And because it was so simple to publish a game and reach millions of people, the 70-30 revenue split was a game changer.

REBEKAH SALTSMAN: Knowing what I do now about, sort of what the industry looked like then, and the conversations that I was privy to then, about just the revenue share and how it's public. And everyone just sort of like wide-eyed, staring at each other thinking, “really, this is possible?”. And watching that sort of trickle out to everybody else. This is all just the way that the industry works, and it started with the App Store.

JAMES PARKINSON: In the first year or so of the App Store, paid or “premium” games were the norm. After Wurdle, SemiSecret had another hit in the endless runner, Canabalt.

REBEKAH SALTSMAN: So Canabalt launched in August of 2009, like August 30th 2009. Canablt started out as a flash game. Adam was doing a sort of game-a-week challenge, game jam challenge, which the theme was minimalism, which is if you look up Canabalt, it's sort of why there's the grayscale. And it kind of went viral very, very quickly. And as a response to that, we actually spent three and a half weeks or something, we ported it as quickly as possible over to the iPhone.

JAMES PARKINSON: A lot of games in 2009 were still doing the whole virtual controller overlay on the screen. But Canabalt’s simplicity contributed to its appeal.

REBEKAH SALTSMAN: Canabalt is designed to have a single one button jumping mechanic. So you just tap the screen and the guy jumps between the buildings. So it's kind of, we just ended up in like, the right time, right place. It had this incredible song by Danny Baronowsky, who's gone on to win tons of awards for his music in video games.

REBEKAH SALTSMAN: And we attempted something new, sort of in our marketing, because we knew at that point that if you could rank, if you had enough people buy your game in a single day, you would rank in, sort of like, the top charts. And that was sort of just common knowledge among developers. So getting as many people to sort of buy the game, especially launch day, would kind of get it noticed. Not only by people who buy it, but also sort of Apple editorial, because there’s so many games that were coming out, even in 2009.

JAMES PARKINSON: Adam Saltsman’s approach here is something that probably wouldn’t be as effective today, but this was when Twitter was still pretty new. Within Canabalt, you could send an automatic Tweet with your score every time you died - being an endless runner, that happened quite a bit - so you’d just tap a Tweet button, then return to your next run. The Tweet would also include a direct link to the game on the App Store. And the result? Free marketing.

REBEKAH SALTSMAN: So we ended up, I think we topped out at, like, 11 or something with Canabalt. And we just sort of stayed there as a, like, super good arcade game. And it's still even brought up, like we were just featured in sort of like arcade classics, yeah, we get featured in arcade classics and we get featured in endless runners, because that's what Canabalt created. Like, endless runners existed before Canabalt, in various forms, but Canabalt was sort of the first one that became popular, sort of before Temple Run.

JAMES PARKINSON: If you were fortunate to own an iPhone in 2009, you were spoilt for choice with some incredible indie games. But in October that year, Apple made a decision that saw a huge shift in the ecosystem of the App Store. After the break, the arrival of micro-transactions.

[ AD BREAK ]

JAMES PARKINSON: When Apple first launched the App Store, developers could submit their app for no charge, if they were offering it to consumers for free. Developers set their own price, so if it was free, there were no up-front costs. So you typically only saw free apps from companies like big news outlets, or large game studios. But most indie games were paid apps. Then in October 2009, Apple announced they were supporting in-app purchases for free apps. A TechCrunch article by Jason Kincaid at the time framed it like this, quote: “This is absolutely huge news for developers, and will likely lead to a fundamental shift in the way applications are marketed and priced. It’s hard to overstate just how much this will change the App Store.”. Here’s Rebekah Saltsman.

REBEKAH SALTSMAN: There was this thing that was happening in 2009. And then continued on through 2010, 2011 where there was a race to the bottom. You couldn't sell anything for over 99 cents.

JAMES PARKINSON: The race to the bottom. So, mobile games were costing more to make and maintain, in order to support new versions of iOS, and new devices, with different screen sizes and resolutions. And developers are trying to make great games at a sustainable rate, and still make a profit from App Store sales. Then they also had to balance that with what customers were willing to pay. When the App Store launched, it wasn’t uncommon to see games for $4 or $5, and in some cases $10 or $20. But that got cheaper and cheaper, driving down the average price. Bigger studios could afford to do this, but it put serious pressure on indie developers, like SemiSecret. What followed was the rise of freemium, free games with in-app purchases.

REBEKAH SALTSMAN: And in-app purchases was sort of like, for us as a studio, and us as creatives, a pretty hard line in the sand. It's not something we were comfortable with. Because there's two versions of in-app purchases. There is, I put out a game and I charged you for it. And I am now charging you for just the additional levels that I've created, which is sort of like it's DLC content. So that's like, if you're playing Plants vs Zombies, and you wanted to buy the other game modes or whatever, that's legit, those things took, like, you know, six to ten months or whatever of dev time, and you're just paying for a product.

JAMES PARKINSON: Some premium games also had in-app purchases, and you started to see a ton of free games, supported by ads as well. But the other version of freemium is where an in-app purchase is either necessary for game progression or it’s just easier just to pay a few bucks to progress quicker, rather than grind away for a few more hours. And this is where the ethical argument comes into play, when games exploit behavioural psychology, through mechanics like in-game currency and designing inconvenience into the game, all geared towards getting you to spend more money.

JOANNA NELIUS: When in-app purchases came around, and this was fuelled by the rise of micro-transactions in the gaming world, but in order to access features within the game, or to buy custom items, you would have to spend X amount of money.

JAMES PARKINSON: That’s Gizmodo reporter, Joanna Nelius.

JOANNA NELIUS: So for instance, like Candy Crush, they sell, like different, like booster packs, where depending on how much money you spend, you can get X amount of in-game currency, special boosters to like, make levels easier to pass and things and things like that. It's a lot easier for the consumer to get sucked into that sort of model, when there's no barrier to entry, like money wise. So if they play a free-to-play game, and they like it a lot, they're playing it a lot, but the developers designed it in such a way that oh, you know, it's easier if you, you know, buy these special power ups and you can unlock these levels a lot easier, that's going to tempt you. So all of a sudden, these are all ongoing transactions and the same person, rather than spending $10 on a game, suddenly, they can spend $100 in the span of maybe a few weeks. And for the developers, and consequently, for Apple and Google who host these games and other apps on their store, that's just a constant revenue stream for them. Not only are they in-app purchases, but they're revolving transactions. They don't stop because these people keep paying for these items in this game, and they keep doing it because they've already invested so much time and money in it.

ELI HODAPP: There's just such a distinct difference between the way that you kind of like develop a free-to-play game versus the way that you would develop a premium game, right. So on the premium side of things, developers would basically build games that were like games on other platforms, you know, like Game Boy and PC and stuff like that, which which, you know, is to say, like, games that have a beginning, middle and end and, you know, have a story to them maybe, and just sort of have some purpose or a narrative curve or something like that, that makes it feel like a more traditional kind of like experience, right? And you know, you eventually beat it, and it's over and you move on to the next thing, and you had a good time and you tell your friends, maybe to check it out, or, you know, the game might be updated to add new content, and you know, maybe you'd revisit it and check it out there.Then on the freemium side of things, you know, it was like the it was a completely different notion in that, instead of providing you kind of like - and I don't mean to make it sound like you know, these games weren't a good value because like certainly, you know, if people are paying money for a known entity on these games, you like, you know, to them, that's a good value, right? But like, they introduced the concept of, kind of like, unlimited spending potential. Which, you know, obviously is not a thing in premium games, and since they want you to keep spending instead of mobile games where you know, you download it and beat it and or you know, play it until you're bored of it or whatever else. They kind of shifted to, like compulsion loop based gameplay and appointment gameplay, in that like, you play a little bit every day and kind of like get your fill for the day, or or pay to keep playing in some cases, with games with energy systems. And it was just a completely different vibe between, kind of, releasing games that, kinda sort of felt like completed projects from version 1.0, a lot of the times, to games that were kind of run as a service, although like, it would take a few years before the evolution of that would you know kind of reach its pinnacle, where ‘games as a service’ really, honestly became a thing.

JAMES PARKINSON: By about 2012, ‘games as a service’ had pretty much taken over the App Store, which is essentially any game that has some sort of continuous monetisation built in. Not every game using the freemium model employs those questionable game mechanics, but many of them do. What started as a great platform for indie developers, quickly turned into a marketplace dominated by freemium. It also led to a flood of poor quality games, including a lot of clones. The biggest freemium games, think Candy Crush, Clash of Clans or Pokemon GO, bring in millions of dollars every month. And the interesting thing is, most people don’t actually spend much money in these games. It’s the so-called “whales”, a small percentage of players, who spend more money on in-game purchases than anyone else.

JAMES PARKINSON: The evolution of the App Store has had a profound impact on independent developers. Of course, premium games still exist but they’re greatly outnumbered and it’s harder than ever to break through and find an audience on the App Store, or even Google Play, which has seen a similar trajectory. Over the years, many indie studios just couldn’t keep up with the way the mobile game industry was moving. Some didn’t want to compromise their games with ads or in-app purchases, and many smaller creators couldn’t afford the increasing maintenance costs to keep their games online and compatible with every new Apple device and software update. Many great indie titles were almost lost to history because of this, and it’s a problem that GameClub is trying to solve. Eli Hodapp is now GameClub’s Vice President of Business Development.

ELI HODAPP: It’s a subscription service that costs $5 a month and gives you unlimited access to all these games that don't have in-app purchases or ads or any of that stuff, you just pay like you pay for Spotify or Netflix or whatever, and you can play games, you know, to an unlimited capacity. You can share your GameClub account with, you know, your family and loved ones and stuff like that and have those kind of like, really classic shared experiences like you might pass a cartridge around back in the day.

JAMES PARKINSON: GameClub has revived a stack of classic indie mobile games, and now they’re also porting some much loved PC games to mobile devices.

JAMES PARKINSON: There’s a subscription service for almost everything these days, and there’s the possibility of fatigue that comes with that. But for games, in many respects I think subscriptions make a lot of sense, especially if they’re able to offer a better platform for independent studios. And in 2019 Apple made their own play for this space, with Apple Arcade.

[Archive Audio]

Ann Thai: "Competing with free is hard. So these games haven’t been as successful for developers, and they haven’t been as easy to find for players. We think we’ve come up with a great way to bring more of these amazing games to more people than ever before. We are working with some of the most creative game developers in the world, on a new kind of service, designed specifically for games like these. A service that is giving them the freedom to do the best work of their lives. We call it Apple Arcade."

JAMES PARKINSON: That was Anne Thai speaking at Apple’s September 2019 keynote, and one of the games featured in that presentation was Overland, from Finji. Here’s Rebekah.

REBEKAH SALTSMAN: So one of the early things that, like why we were so interested in Arcade - because we brought Overland to it - is when we were developing Overland, Overland is a PC game. It is a game designed to be played on your computer, but it is also a game designed to be played on your consoles. And those are just beefy computers. We wouldn't have been able to bring Overland to a mobile device, like three years ago, it just wouldn't run. Like, the power in the devices just hadn't gotten up to snuff. We would have had to down-res everything, we’d probably have to cut out half of the - like, our shader work would have to be redone or particle effects would have to be done. It just wouldn't run. So when Arcade came about, and we were sort of interested in it with Overland specifically. It was finally at a point where, sort of like, the technology had caught up in a way. It's not to say it was super easy - it was actually really, really hard. It was interesting, sort of in early talks with a lot of the sort of people around Arcade, how interested they were in bringing really beautiful games to a bigger audience, and how could they make that possible? Which aligned very, very closely with sort of just mine and Adam’s desire of taking our games to an audience that maybe doesn’t play games.

JAMES PARKINSON: With no ads and no in-app purchases, Apple Arcade sounds like a good deal, especially if you’re someone who’s not a fan of freemium and free-to-play. But Joanna Nelius is skeptical about whether Arcade is actually solving the problems created by the dominance of freemium.

JOANNA NELIUS: I don't really think it's Apple trying to bring back quality and control with a subscription service. For Apple, I think it’s just about having their own thing. And gaming subscription services in general have, from my talks with developers, my understanding is those things have been kind of met with a few raised eyebrows. Just because there's a whole question of like, “okay, well, you know, how are the developers getting paid?”. I've asked Apple before what their payment model is for developers, and I did not receive an answer. So yeah, I just see it more as Apple just wants to try to get into gaming, but gaming's moving in a completely different direction than Apple's whole, you know, ecosystem philosophy.

JAMES PARKINSON: I asked Rebekah Saltsman about the Apple Arcade payment model for developers, and unsurprisingly, she declined to comment.

JAMES PARKINSON: With iOS devices and the App Store, Apple helped create a whole new arm of the games industry. Even with Google Play and Android devices contributing to the overall mobile games business, Apple’s role was key to it’s incredible growth. And through it all, Apple has maintained its walled garden approach, and that’s now causing friction with the way the industry is evolving.

JOANNA NELIUS: Everything that they do with their App Store and Apple Arcade, they're so focused on making sure that what they provide to their customers on their platform is safe for them to use and play. But with the direction that gaming is going in, in general, and granted, it's moving very slowly in this direction, but it's moving towards an open ecosystem.

JAMES PARKINSON: Meaning, a system that allows things like cross-platform play, gives users the ability to install whatever software they choose, and process payments directly through developers.

JAMES PARKINSON: In the middle of producing this story, in August of 2020, Apple removed Fortnite from the App Store, for violating its Terms of Service. Epic Games had launched a new way for players to pay for Fortnite’s in-game currency, by purchasing directly from Epic, along with a 20% discount, which wasn’t offered to those paying through the App Store or Google Play. This allowed Epic Games to circumvent Apple and Google’s 30% cut of every in-game transaction, which led to Fortnite being pulled, and prompting Epic to sue both companies. Here’s the reaction from CBC News.

CBC News Broadcast: “Now the makers of the game are going to court, taking on Apple and Google, calling them behemoths that block competition and stifle innovation. The tech giants fired back, removing Fortnite from their app stores, making updates unavailable on iPhones and Android devices.”

JAMES PARKINSON: Epic also accused the App Store of being a monopoly, and that Apple has become the very thing that they themselves had once rallied against in the computer industry. Shortly after Fortnite was pulled from the App Store, Epic released a video mocking Apple’s iconic 1984 TV commercial, encouraging their fans to quote, “Join the fight to stop 2020 from becoming ‘1984’.”

Epic Games Nineteen Eighty Fortnite video: “...we have taken our tribute, our profits, our control! This power is our and ours alone. We shall prevail!”

JAMES PARKINSON: This whole feud has been bubbling away long before Epic Games took legal action, and still won’t be resolved at the time of publishing this episode. But that traditional 70-30 revenue split, which made the App Store such a hit with developers, is central to Epic’s stance here. Because the money that 30% generates for Apple now, far outweighs those earlier years. Epic Games and many others feel it’s just too much. And the whole fight demonstrates Apple’s dominance of the ecosystem, and their reluctance to change. Here’s Joanna.

JOANNA NELIUS: Fortnight is a perfect example of that, because you can use your Fortnight account and play Fortnight on any platform. So you can play on PlayStation, Xbox, PC, and up until very recently, on your iPhone, iPad or Mac OS - you can still play but you just can't get the updates. But cross-platform play is something that a lot of gamers have wanted for a while. They want the ability to not only sign into their account from PC or console and be able to have access to their character, and all the stuff that they've earned or bought. But they also want to be able to play with other people on a different platform. So if I'm playing Fortnight on my PC, I want to be able to go play or team up with my friends who are on Xbox, you know, that's kind of been this, kind of, gaming dream for a while. Naturally, a lot of the big studios, or companies have been very reluctant to do this because there is still this idea of like, “if we do exclusives, if somebody really wants to buy it, they'll go ahead and just buy, like our hardware for it”. Which I think with the beginnings of cloud gaming, that idea is starting to go away. So now we're seeing companies like Microsoft who are like, you know, “we have our cloud gaming platform, we want you to be able to play the same games either on PC, Xbox or on your phone, and have access to the same account and your games across the platform”. Granted, to do that, you have to have, like, a subscription, but that is where it's headed. And Microsoft would love if it could include Mac OS and iOS in that, but because of the App Store policies, Apple automatically counts out any cloud gaming services. So what Apple is kind of doing then is they are inadvertently locking out their own customers from another market, and not giving them, sort of, the freedom of choice, as you know, an Android platform would offer.

JAMES PARKINSON: There’s a lot of layers to the Apple vs Epic case, and we hope to cover it in full on a future episode, once the dust has settled. But will there be a tipping point? Can the wider games industry force Apple to change?

JOANNA NELIUS: Apple's gonna fight it tooth and nail, you know, they're gonna do what they're gonna do. I don't think we're at a tipping point yet, but we're getting there. We're, like, climbing up their walled garden to get in there, and fight with bows and arrows and swords and a whole glorious Game of Thrones style, you know like, end of season finale type deal. But Apple is so big, there's still a lot of hesitation about poking the bear. So, I don't see this being a short, easy fight for anybody. That's what I'm confident about, at least.

[Archive Audio]

Tim Cook: “Apps have reshaped the way we connect, learn and play. From day one, the App Store has been a safe and trusted place for users to discover and download apps. It’s no wonder that the App Store is now visited by over a half a billion people each week. Now, the most popular category on the App Store is games. In fact, iOS has become the largest gaming platform in the world!”

JAMES PARKINSON: Apple never quite expected the App Store to become as big as it has, but it’s greatest influence is the way the marketplace, along with the iPhone, has brought games to more people. You probably know someone in your life who doesn’t consider themselves a gamer, but they’ve found joy and satisfaction through playing games on a device in their pocket.

REBEKAH SALTSMAN: So I have an incredibly good friend in Austin, Texas. And she's, she was telling me about how she played Candy Crush. And I was like, “really, you play candy crush on your phone? That's - you don’t even check your email on your phone, this is amazing!”. And she told me that she had played so much Candy Crush, that she had beat all the levels and would have to wait for more levels, because she had played, I don't know how many thousands of hours. Because she did not access in-app purchases at all. She said she once spent a dollar, and she was so ashamed that she spent a dollar that she never did it again. And she was insistent at that point, she was insistent that, no, she absolutely did not play games. This was an activity that she did on her phone. Let me assure you that anyone who plays a game on their phone, like my friend did - and I'm going to use the term ‘gamer’, even though I think it's a terrible way to describe somebody - but, like, you are a gamer, you play games.

REBEKAH SALTSMAN: And that's what I find really, really fascinating is the ability to take games to an audience that doesn't actually think or believe that they are playing games and kind of growing a more diverse and robust audience because of that, providing accessible content to a huge audience.

JAMES PARKINSON: Many thanks to Rebekah Saltsman, Eli Hodapp and Joanna Nelius. Up next, after the credits, Games Archive. The Macintosh was marketed as a serious business computer, but it also led to a first for computer games in 1984. That’s after this.

CREDITS

JAMES PARKINSON: Gameplay is a production of Lawson Media. This episode was written and produced by me, James Parkinson.

JAMES PARKINSON: The Gameplay theme was composed by Breakmaster Cylinder, our artwork is by Keegan Sanford, and other music comes from Breakmaster Cylinder.

JAMES PARKINSON: You can find the show at 'gameplaypodcast' on Twitter, Instagram, Facebook and Twitch, and join the community on our Discord. You’ll find that and much more on our website, gameplay.co.

GAMES ARCHIVE SEGMENT

JAMES PARKINSON: So, Apple’s history with games is an interesting one. Steve Jobs supposedly hated video games, despite being Atari’s 40th employee, where he brought on Steve Wozniak to work on the game Breakout. Breakout itself inspired a lot of the features of the Apple II, designed by Wozniak. It was a real hackers computer, with the ability to program games into the machine, and of course became a popular home computer, with gaming being a big part of that. It was even compatible with Atari-style paddles and joysticks.

JAMES PARKINSON: Apple started to veer away from games though with the Apple III, marketing it as a serious business computer, and definitely not a toy. That approach continued with the Macintosh in 1984, and developers were met with resistance by Apple when wanting to make games for it. But the Macintosh did ship with one game built into the memory. It was called Puzzle, accessed through the Apple logo in the menu bar. Created by Andy Hertzfeld and using just 600 bytes, Puzzle was a simple but challenging game, consisting of a grid of 16 squares, with numbers 1 to 15, and a blank square. The point of the game was to move the blank square around to align all the numbers in order. It’s considered the first game designed to be played specifically with a mouse, and remained a standard on Mac OS for ten years.

JAMES PARKINSON: I’m James Parkinson. Thanks for listening.

References:

• The Nintendo Phone patent

• Apple Announces In-App Purchases For Free iPhone Applications

• How Apple’s app store changed our world

• Steve Jobs on the App Store in 2008: 'We Didn't Expect It to Be This Big'

• How Apple’s 30% App Store Cut Became a Boon and a Headache

• Life and Death in the App Store

• Inside GameClub and the evolution of iPhone gaming as a service

• We're losing the history of the App Store

• Chasing the Whale: Examining the ethics of free-to-play games

• How Apple Arcade Will Reshape Mobile Gaming