Super Mario Run and Its Pesky Price Tag

50millionAccording to Nintendo, Super Mario Run has been downloaded 50 million times. Digital Times reported the game was the fastest growing app ever. Regardless, analysis have been heavily criticizing the game for not being free. “How can you have a price tag. The game must be free!” exclaims the pundits. To my knowledge, Nintendo has not provided any details on the game’s revenue and firms seems to provide vastly different numbers. So I’ll do my own estimate how much the game may have made and how it could have made more than the average mobile game.

First, let’s start with reviews. The game has a 2.5 rating according to the Apple App store with the most common complaint in reviews seems to be the game’s price tag. So we can assume that someone who gave a low score probably didn’t buy the game. Unfortunately, the Apple App store doesn’t give numbers for reviews (and I’ll revise this if I stumble across them). So let’s assume that all reviews from 2-4 are proportionally the same. To reach the 2.5 score the game has, we can assume that 1 reviews are about 60 percent where 5 scores are about 40. When we take into account the other scores, we can assume that 5 star score are closer to 30 percent. Again, this is just an estimate so actual results could be drastically different.

Let’s say that the game has 30 percent 5 stars. So if review scores are representative of the population, then we can assume that 30 percent were also passionate enough to pay. So of the 50 million downloads, lets say 15 million bought the game(which isn’t unexpected as other 2D Mario games have sold far better). So at 15 million purchases, the game would generate 150 million dollars. “But that’s still too high.” Let’s say that only 10 percent of users paid instead.. Profits would still be 50 million.

So how does this compare to other free-to-play mobile games? According to a study by Swrve, less than 2 percent of users actually spend money on a game. “The report found that, on average, players spend $24.66 on in-app purchases. This number is also up from the $22 monthly average reported two years ago. The average player who typically opens their wallet while mobile gaming only makes 1.8 purchases, which averages to $13.82.

So consider what we mentioned before. If 10 percent of users bought the game, revenue would be 50 million (10 percent of 50 million [5 million] times $10). If only 2 percent of users spend $25 on in-app purchases, that would only be 25 million in profit. As long as 5 percent of users bought the full game, than Super Mario Run would perform the same as the average freemium game.

super-mario-run-screenshot_1242-0

The weirdest thing mobile analyst do is they speak about everything besides profit. They talk about engagement rates and downloads, but they don’t speak about money. This is why they never speak about the low amount of users buying mobile games. The current problem in mobile games is you have to generate a colossal mass of users so that a small sliver of them will actually spend something on your game.

Now I’m sure that there are some freemium games that have done well because of the free-to-play model. However, this strategy is not enough for small developers. If you can only get 10,000 people downloading your game, you don’t make a profit. But if you get, say, 5,000 people to pay 2.99, at least you’ll make close to $15,000 which is probably far more than you would have made with just 2 percent of 10,000. This is why the mobile market is being dominated by a few companies and cost are increasing. To get more users, you need to spend a lot on advertising. Clash of Clans had  large ad campaigns and even a Super Bowl ad which cost about 4.5 million dollars.

Now, we could argue that Super Mario Run was still priced too high, but if successful it could be a crucial and necessary shift for the market. The history of commerce has been selling a product for a set price. The freemium model is a new fanged idea that has never consistently existed throughout history. There are no freemium grocery stores where you can get some food for free and have to pay for the rest. So why is the freemium model OK for mobile games? Analysts don’t seem to be questioning the very nature of this business model. As the study above suggest “These findings suggest that maybe the freemium model is not the best way for developers to make a healthy source of revenue.”

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