'Free' games on smartphones are often anything but, with some players racking up huge bills

James Tennent discusses why mobile gaming - including Tapped Out and Candy Crush Saga - is increasingly all about the money

I've been playing the new Crazy Taxi game on a friend's iPhone. It's addictive; you pick up customers, drive them to their destination and collect money, then buy more upgrades for your car to tackle harder challenges. I could tap a button on the screen and purchase some in-game currency to just buy these upgrades, costing £13.99. But I don't – because this is not my phone.

For children it's less simple; they want to progress and if they see a button that facilitates that, they press it. Like the 11-year-old boy from Kent who, it was revealed this week, racked up a £1,000 bill in a fortnight playing Small Worlds. Last year, Theo Rowland-Fry, an eight-year-old from Bristol, shocked his parents with a £980 bill for virtual doughnuts in the "free" Simpsons game Tapped Out. A glance at the App Store Kids section reveals that this is not just about a few rogue games – seven out of 10 of the top grossing kids' apps are wholly funded by in-app purchases (IAPs). A father in Pennsylvania recently launched a legal case against Apple during which the games were described as "highly addictive" and designed to "compel" children to buy in-game currency. The case ended with a settlement that saw Apple agree to pay out refunds totalling $100m (£59.4m).

It's become such a common occurrence that the European Commission last week "scolded" Apple over its unchanging policy of labelling apps with IAPs as "free". Google Play has said it will change the labels by September.

It's not surprising that Apple is dragging its heels, though. Think Gaming, a games marketing company, estimates that Tapped Out alone brings in $89,714 (£53,284) a day. If you think that's a lot, Candy Crush Saga is estimated to bring in $995,100 (£591,137) a day. The game is "free", but to explain to the uninitiated (though there can't be many – the game has 7.5 million daily users) buying extra lives, extra moves and extra special powers all help get players through the game to more and more difficult levels. For some games, the IAPs let players pay to skip levels or unlock extra levels; for others it's about getting more customisation options.

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There are some who say that the freemium model is not an issue for most users. Bango, a service which "powers payment for major apps stores" including Google Play, recently released an infographic telling us that only one in 16,000 purchases that it saw come through was an unauthorised child transaction. This is not including unqueried transactions. This is in a market predicted to be worth $25bn by next year.

The infographic also doesn't ask what the trend towards IAPs – now responsible for 92 per cent of App Store revenue – is doing to the games we are left with. With supposedly free apps being so easy for us to just click and download, the charts are skewed in their favour, leaving games without a narrative that facilitates IAPs finding it harder to get seen. Small studios, with no real marketing budget, are priced out.

At the time of writing, you have to scroll down to 17 in the list of top-grossing iPhone games before you reach one that isn't powered by IAPs – that being Minecraft, a well-established name. The next one doesn't come until 52. For an indie developer, getting on the charts can mean a game that it has poured itself into can actually be successful and reach a wider audience.

At 52 on the UK chart is 80 Days by Cambridge-based studio Inkle. Jon Ingold, Inkle's creative director, told me why they chose to follow the traditional path of having a set price for the entire game: "The pay-for [in-game] currency model is the one that really pays out but it's built for repetitive systematic games that never end: essentially, for dull games. Our games are narrative, contentful and interesting; a currency model we felt would distract people from their engagement with the game."

In Ingold's view, freemium is creating an unsustainable industry: "We need to be building a trust-based relationship with a core group of customers and not burning through a flow of acquisitions that we have to pay marketers to keep up. Free pay for in-game currency is a business model a small studio can't easily sustain."

Free apps have hidden costs. For parents who don't have time to watch over their child every moment they're playing on their phone, or for people who want great games to keep being made, initially shelling out £2.99 as opposed to nothing is going to cost you a lot less in the long run.

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