Apple announced a major App Store rules change, saying that iPhone and iPod Touch developers may now sell virtual goods through in-app transactions in free apps. The initial set of rules announced for in-app transactions restricted such sales to paid apps only. With that restriction lifted, Facebook-style freemium social games can finally come to iPhone.
The move opens the way for developers of game, entertainment, and utility apps that reside on the App Store to use the business model that’s been wildly successful for social game developers like Zynga and Playfish. The only possible complications would come from App Store restrictions that haven’t been lifted yet, namely a ban on the sale of virtual currency and a minimum in-app transaction price point of $.99.
So why did Apple change the rules for in-app transactions only months after introducing the feature? A desire to curtail high iPhone piracy rates, like those currently experienced by ngmoco, seems to have been a major motivating factor. Apple’s official release concerning in-app transactions for free apps includes the statement, “Using In App Purchase in your app can also help combat some of the problems of software piracy by allowing you to verify In App Purchases.”
Most iPhone pirates justify their activity by claiming that the App Store doesn’t offer demos, even though developers usually offer free “Lite” versions of paid games. The pirates claim they merely want to try out software, so they don’t pay for a game that’s disappointing. When games are free, piracy becomes much less attractive: pirates don’t save money with the illegal download and can’t purchase helpful items or extra content in the game. The freemium model was pioneered in Asia to curtail high PC game piracy rates using this exact same logic.
Today’s decision has been met with almost universal approval. SGN founder Shervin Pishevar posted a joyful comment in a Tech Crunch story on the news: “This is a really huge deal for SGN and for all iPhone developers!!! Thank you Apple!!” The new policy by Apple is bound to accelerate revenues for social gaming companies, which will now be able to port their games to iPhone with more features intact.
Although the announcement has been live for less than a day, iPhone developers are taking advantage of the new rules. Ngmoco has announced that its highly anticipated FPS Eliminate will now be a free download. The same goes for Gravity Sling, a game being launched by start-up developer Riptide Games. The non-gaming push notification app Boxcar is also going freemium, offering users basic service and charging $1.99 for addition of additional services in-app.