Music Simulator Game
In the chart above, the average cost to develop an application is assumed to be the same over time. Therefore, the aggregate cost of all iPhone applications increases in a straight line as the number of applications increases. Network effects increase the benefit of each application added until point A (tangent is parallel to aggregate cost), at which point the average benefit begins to decrease. Once you reach point B, the benefit of adding new applications falls to below cost.
Consider the PlayStation 3. When it was first launched, one of the main criticisms was the lack of games (particularly exclusively titles) to justify the console's high cost relative to the Xbox 360. Over time, as more games became available for the PS3, a virtuous cycle developed that helped to increase the pace of development. So far, Xbox 360 and PS3 development has not yet reached the crossover point represented by point B in the above graph. Ideally, console makers will introduce a new platform before the crossover point is reached and before developers decide that a platform is no longer worth developing games for.
This model is very similar to the product life cycle chart that I presented in an earlier article on music simulation games (see Too Much of a Good Thing: Explaining the decline of Guitar Hero and Rock Band). For example, if you were to overlay the product life cycle chart over the total number of music games, you would notice several similarities to Figure 1 (above).
In fact, diminishing marginal utility has an important role to play in both cases. Gartner assumes that current users will continue to purchase the same number of applications each year through 2013, telling Information Week that "high-end smartphone users today are early adopters of new mobile applications and are more trustful of billing mechanisms... Therefore, they are expected to continue to pay for applications they believe will be useful."
However, diminishing marginal utility suggests that users will purchase fewer applications over time as the value of each additional application and its ability to meet the particular needs of the user decreases. A new iPhone owner who purchases a software program from the App Store will first purchase the application that most fills a perceived need. The second application will also fill a need, but most likely it will be a less important one, and so on. By the time the average iPhone user has purchased 20 applications, the value added by each new program will be marginal at best.
Although Gartner recognizes that early adopters are heavier users of technology than late adopters, they ignore the fact that iPhone's future growth will increasingly shift toward late adopters. Diffusion theory suggests that early adopters tend to be educated, have higher social status, and are wealthy. On the other end of the spectrum, late adopters tend to be less educated, have lower social status and have less income. They will be more skeptical about adding new features and applications, and will instead rely upon standard applications that come preloaded with the phone.
Apple has responded to this challenge in two ways, through market expansion and platform renewal.
By continually adding new features to the iPhone, Apple has attracted new users who value these features and are willing to enter into long term contracts to obtain them. Examples range from commonly found features like GPS navigation to more esoteric features like instrument tuning and remote invoicing.
This approach is very similar to the one taken by Nintendo with the Wii. Nintendo began by improving existing GameCube technology and adding motion control through the Wii Remote. It expanded the market again with the balance board, which attracted a new group of customers who were fundamentally concerned about fitness.
The other option is to introduce a new platform to attract more early adopters. Console makers do this every time they introduce a new generation of gaming hardware, and Apple is doing it with the introduction of the iPad.
Initial demand for the iPad could help to extend the growth stage of the App Store’s product life cycle. Ultimately, however, the iPad’s size and price will limit its market appeal relative to the iPhone. As a result, it will not provide the type of renewal that will support the growth rates projected by Gartner.
Even if Apple successfully expands the market and attracts a new group of early adopters with the iPad, developers will still need to contend with the diminishing utility problem discussed earlier. The only exceptions will be applications that
- offer fundamentally new experiences,
- fulfill important functions that consumers value,
- and can be protected from similar programs through patents and copyright.
Quality versus Quantity
Returning to the social networking example, the network effect of adding more members would no longer be valid if the social networking site did not add additional servers, network switches, and bandwidth to compensate for the added burden. Instead, the system would begin to crash during times of peak activity and members would begin to turn to alternative sites. The value of any individual member's contribution to a social networking site does not matter to the site's overall performance. Users who fill discussion boards with gibberish impact online performance on these sites as much as users who contribute valuable content. Like the social networking user, the individual role of any given application does not matter, because it is the aggregate that determines overall performance from the point of view of the consumer.Figure 2: Aggregate Data for the App Store
The most comprehensive & realistic racing simulation comes to your iPhone/iPod touch. Experience the finest driving sensations ever by controlling one of over 100 cars featured in GT Racing: Motor Academy. Step by step, you’ll earn your place in the circle of racing’s best drivers on the App Store.
THE GREATEST LICENSED CONTENT EVER
24 manufacturers and more than 100 licensed cars to buy, drive and upgrade, from the Nissan GT-R and Audi R8 to the greatest Ferrari models.
Take your wheels for a spin on 14 tracks, including the iconic Mazda Raceway Laguna Seca, urban and even rally tracks.
THE MOST DIVERSE RACING EXPERIENCE
Numerous game modes, from a huge Career mode with several driving tests, challenges and money rewards, to an Arcade mode and online competitions.
Buy tons of car parts to optimize your car’s performance and race with 6 different driving sensations, including an exclusive branded cockpit view for each manufacturer.
Begin as a rookie and pass your driving tests and challenges to master all the subtleties of racing and attain the highest honor in the sport.
ENJOY REAL DRIVING SENSATIONS
A new and elaborate physics engine particular to each car and intuitive controls using both the accelerometer and touch screen will immerse you in a more realistic experience.
MAKE THIS RACING EXPERIENCE YOURS
Listen to music from your own library and post your greatest replays on YouTube to show off your driving skills.
Full list of licensed manufacturers: Citroën, Renault, Audi, BMW, Mercedes, Volkswagen, RUF, Mini, Ferrari, Lamborghini, Mazda, Mitsubishi, Nissan, Subaru, Toyota, Jaguar, Lotus, Morgan, Caterham, Chevrolet, Dodge, Panoz, Ford, Plymouth.
For fans of racing simulation games.
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Become a fan of Gameloft on Facebook: gameloft.com/facebook
Follow the official Twitter account: @Gameloft_Racing
Also available from Gameloft this Christmas: Driver, Tom Clancy’s H.A.W.X, Skater Nation, James Cameron’s Avatar and N.O.V.A. – Near Orbit Vanguard Alliance
Published and distributed by Gameloft. Minor bug fixes
