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Just How Big Is The iDevice Gaming Market?

There's a lot of discussion around Apple's App Store and the size and relevance of this market. Here, we try and crunch some numbers...

Depending on who you talk to, Apple's involvement in the commercial handheld games market is either non-existent or significant.  Unfortunately, it seems to be very hard to actually get any hard details on how App Store sales break down!  Still, we should never let the lack of hard data get in the way of some pondering! Though to give fair warning: the following stats involve a number of extrapolations and assumptions and may well be completely inaccurate.  Further discussion is welcomed :)

Back in June, Steve announced that Apple had paid out $1 billion to App Store developers.  Given that developers receive 70% of the sale price, this means that total App Store revenue is in the region of $1.43 billion.  With a bit of help from 148Apps.biz, we can have a go at figuring out how many game-units have actually been sold.

As of June 2010, there were approximately 200,000 apps in the store.  Of these, approximately 30,000 were games - or 15% of the total.  Also, their data indicates that just 30% of App Store titles are free, so we can infer that there were around 20,000 pay-for games on the App Store at that time.

Of course, the fact that 15% of the available items are games doesn't mean that 15% of sales are from games.  And there's a second issue: the average price for an application is $2.86, whereas the average price for a game is $1.20.

Still, if we do assume that games are responsible for 15% of unit sales[*], then some quick scribbles on the back of an old fag packet [**] indicates that a total of 175,000,000 game-units have been sold, for a total revenue of $210,000,000.

In terms of revenue then, the iDevice games market is pretty puny: Nintendo alone racked up $15.2 billion in revenue in the 2009 financial year (April 2009 - March 2010 inclusive).  And of this $15.2 billion, roughly 40% ($6 billion) came from software.  Or to put it another way, Nintendo pulled in thirty times as much revenue from game software in one year as the App Store has managed in over two years.

However, Nintendo shouldn't be resting on it's laurels. Because while they've generated far more revenue than Apple has, this is mostly because their software is significantly more expensive.  If we convert their revenue into units sold, then things look a little different: if we assume an average per-unit revenue of $25 [***], then that $6 billion comes down to a total of 220,000,000 units sold.  The DS is responsible for 60% of Nintendo software sales, so this means Nintendo sold 130 million DS games in the 2009 financial period.

Back to Apple, and they managed to sell 175 million games in two years.  How many of these were sold in the 2009 financial year?  It's difficult to say, but I'd expect it to be a significant percentage - given that sales will have ramped up over time, an estimate of 100 - 120 million seems acceptable.

Splitting the difference gives us two suspiciously easy to use numbers for comparison.  Apple has shifted around 110 million game units, Nintendo has shifted around 130 million game units.  Now, the iDevice game market is looking to be in spitting distance of Nintendo...

Still, there's more to the story than this - it's important to remember that Apple is just the retailer, while Nintendo is the publisher and developer - and that a game on the App Store faces significantly more competition: there's more games released per day on the App Store than Nintendo releases in an entire year!  Therefore, while Apple may be enjoying it's $63 million cut, the average individual App Store game sells around 6000 copies and  gets just $4900 back [*4].  Meanwhile, just one of Nintendo's top games (e.g. New Super Mario Bros) can pull in $400 million!

However, while it can be argued that the App Store is not a good environment for an individual developer, the flip-side is that 175 million games have been purchased.  In other words, people are buying iDevice games, in serious numbers.  Which then leaves us with a further question: are these game-sales encroaching on Nintendo's game sales?  It's certainly possible - though we also need to take into account the fact that a lot of people may simply be waiting for the 3DS.  In any case, that analysis will have to wait until we get some more hard numbers from both sides...


[*] in truth, I'd expect games to make up a higher percentage of the unit sales - it's a lot easier to see people impulse buying "Color Swap Deluxe Plus XL" while commuting than it is to see them deciding to splash out on "Mega Spreadsheet 2010"...

[**] or more precisely, plugging some numbers into an ad-hoc spreadsheet!

[***] A publisher generally receives around $27 per $60 game sold. Since Nintendo own the platform, they'd also get the $7 "platform royalty", making for an average revenue of $34 per $60 sale.  However, DS games are generally sold around the $30 mark and make up around 60% of Nintendo's software sales.  So an average revenue of $25 seems reasonable

[*4] a Gamasutra article actually lists the average revenue as $700, but this doesn't appear to be backed up with any evidence

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