The App Store increased developer royalties by 23x

When the 30% cut that Apple et al take on sales in the app stores is being discussed, I always marvel at those who suggest that 30% is bordering slavery and that developers would be far better off without middle men. It's like they willingly ignore the realities of how a game (or other software) is marketed, sold and supported in the real world.

For example, when a box of software is sold in a physical shop, that shop has added at the very least 25% to the price they pay the distributor. Given a game that costs the customer $50, that gives the shop $10 and the distributor $40. The distributor will likely want to make some money too, let's say they add about 15% to the price they've paid the publisher. We're now down to $35 left for the publisher and developer to share in a way they see fit. Most likely, it's the publisher that decides on the split, given that they're not "all in" on any given developer, unlike the developer who has only one publisher.

Lo and behold, $35 turns out to be 70% of $50 – when we're down to the publisher, physical and digital goods are at parity cost-wise. This means, more or less, that Apple has taken the place (and cut) of the shop and distributor but left the rest of the supply chain intact but without the need to produce physical copies of the software.

Now to the reason I'm writing this: I read an article about the creation of a legendary game: Lemmings . This bit about how they financed the development was interesting, emphasis mine:

Jones estimates that Lemmings cost around £100,000 to make, and took around a year in total to develop: longer than was usual at the time. In the Abertay University talk, he also recalls it was partly funded by royalties ( 75p per £25 sale ) from DMA’s first two games. Menace and Blood Money had racked up lifetime sales of 20,000 and 40,000 copies respectively.

They were getting 3% royalties for the games sold! I think we can assume that they got money up front to pay for the development of those first two games, otherwise they'd have to be living a very spartan life… But still, it doesn't seem like a very big cut. Compared to the 70% a publisher-less developer gets from the app stores, it looks like things might have improved for some (23x larger cut compared to what the Lemmings devs were getting, hence click bait title). Today it's actually possible to get a game published and into the hands of customers without having a publisher, but there's still the slight problem of getting anyone to buy the game among the million or so competitors; most of them giving away their creations for free.

And so, the more things change, the more they stay the same: being small and unknown, there's very little chance of making it big in games. If you strike gold, there's the chance of big money – but the likelihood of this is close to zero. With the help of marketing money (read: a publisher) you can improve your chances, but it will lower your cut of the revenue and most likely you'll still need a day job.