Thanks to the massive success of a few iPhone game series that have become household names, such as "Angry Birds," you may think that the iPhone App Store is a route to instant wealth. In reality, these mega-hits are exceedingly rare, and most games get lost in a sea of hundreds of thousands of similar iOS games, never to turn a significant profit. While iPhone games do continue to sell well, it's important to consider the venture with realistic expectations.
As of April 2013, Apple lists over 800,000 apps on the App Store, with a stated distribution of 8 billion dollars paid out in royalties. This works out to about $10,000 per app. However, Apple's public numbers do not distinguish between games and other apps, nor between the source of this revenue, such as base app costs versus in-app purchases. Keep in mind this number averages in the few games making millions, meaning quite a few apps make well under $10,000.
A survey of iOS game developers taken in September 2011 confirmed the disparity between major hits and other games: while games earned an average of $48,756 in one year of sales, only slightly over 10 percent of games actually profited this much. A few games earning extraordinary profits heavily biased the average. At the 50th percentile, games earned a mere $1,100. For new developers, the numbers fared worse -- for developers with a single app on the store, the survey found a median per-game revenue of just $500. The median revenue only surpassed the $10,000 mark for developers with 10 or more games for sale.
Other Revenue Sources
In-game ads make up another source of income for developers. Apple's numbers do not necessarily account for ad revenue, since developers can use ad providers other than Apple's iAd, which only started operation in 2010. However, since ads pay out in proportion to the number of users seeing them, an app that receives little attention on the store will fare no better with ad revenue. In-app purchases also enhance potential app revenue: in the first quarter of 2013, 76 percent of all revenue on the App Store came from in-app purchases. By focusing on in-app sales, developers can hook new customers with a cheap or free base game, then earn profit through selling additional features to their fans.
While developing iPhone games does not require many expenses outside the cost of development itself, Apple does have a few charges that cut into app revenue. In order to sell games on the App Store, developers must pay a $99 yearly fee. Apple also takes a 30 percent cut of all sales made through the App Store, both of app sales and in-app purchases. This means that for a developer to earn $10,000, an app must actually earn over $14,000 between sales and add-ons.
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