iOS Pricing Techniques Driving Small Companies to Freemium Models

During Black Friday, you may have noticed that several large publishing companies implemented significant price drops on many apps in the App Store. Garmin’s navigation apps were available at half price, and many gaming companies provided even deeper discounts, such as EA, who dropped the pricing on apps up to $9.99 to a mere $0.99.

These discounts are not exactly a rare occurrence, and most of these companies are able to offer deep discounts multiple times per year at various holidays. Incredibly cheap apps lead to inflated charts in the App Store, when temporarily discounted apps top lists.

While larger publishers can afford to offer up to 90 percent off on games, many smaller publishing companies are not able to flood App Store marketing channels in the same way. As a result, some companies have turned to freemium games to compete.

“Paid games are always going to have that risk,” said John Walsh, CEO of the independently operated Fuse Powered, in an interview with gamesindustry.biz. “The big publisher is basically selling at an extremely low cost to gain market share and if it works for them they are going to continue to do it. So we can either complain about it or make sure our business model works around it. That’s where the freemium model works for us.”

Walsh’s company, Fuse Powered, is responsible for titles like Dawn of the Dead and Jaws Revenge, which are available at a $0.99 price point with several in-app purchases to enhance gameplay. The company’s goal is to publish multiple titles on a regular basis, to establish a loyal consumer base that can be tapped to download future titles.

With a freemium model, Fuse Powered can afford to offer a cheap baseline price to get more recognition in the App Store. Free-to-play games, like those that Fuse offers, are designed to get people in the door and then get them to fork over the cash. This strategy appears to be moderately successful for the company, with several of its apps having many thousands of downloads. It’s not all sunshine and roses though – the company’s reviews also feature many one-star customer complaints about the push to buy additional features in the game.

As an avid app store user, I’ve noticed that many more companies have been experimenting with and turning to freemium apps in the last several months. While this model works fine for many users, others, like myself, have an issue with downloading an app and then being nickeled and dimed for every additional feature.

It would be less of an issue if apps offered something substantial for the cost – and I often don’t mind paying extra for another set of levels if I like a game – but many freemium games offer purchases of “gold” or “energy” in finite amounts that are soon consumed, which leaves the player needing to make yet another purchase to continue with the game.

Recently, I played a $2.99 physics-based puzzle game that charged another $0.99 for the ability to skip a level. With difficult puzzles, it was easy to get stuck, and a game that I paid a decent amount for quickly became too frustrating to continue with. It’s this kind of trickery that has some app store users up in arms about freemium content. I liken it to  paying for an order of french fries and then finding out that there’s an extra charge for the salt, ketchup, and napkins.

I would rather pay for an app upfront and know what I’m buying rather than downloading a free-to-play game and then getting suckered into paying later. I do not download or play freemium games except when doing app reviews, because I have never found one that was worth the additional purchase. While there’s an occasional gem – Tiny Tower or Pocket Frogs – that is playable without a purchase, that isn’t the norm.

Unfortunately, if the freemium model didn’t work, it wouldn’t be gaining in popularity. The concept itself isn’t inherently bad, but unfortunately, some companies have taken it too far. It works, and we can hardly blame publishers for cashing in and lining their pockets with a successful strategy. Like it or not, freemium is here to stay, but as consumers, we can dictate the way the market evolves. Support the freemium apps that are balanced and fair and skip the ones that are treating consumers as cash cows.

Do you have an opinion on freemium games? Have you paid to play? Let us know what you think in the comments.

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About Juli: Contact me via Twitter: @julipuli