[As iPhone's 3.0 update debuts, Game Developer EIC Brandon Sheffield discusses Apple's recent iPhone announcements, the potential for hardware-related market fragmentation, and what microtransactions may do for the business.]

At the recent Apple’s Worldwide Developers Conference 2009, which I attended, the company revealed the new iPhone 3.0 SDK, as well as the "faster" iPhone 3GS.

With the iPhone 3.0 SDK update, available today, the obvious change is the ability to add downloadable content, and indeed microtransactions. But are true microtransactions really possible? The free-to-play, pay for items model won’t technically work here, as free apps must remain free. (Though, if you sell a high-quality app for 99 cents, that’s basically free.)

On the PC, people are accustomed to paying retail console price for full-featured games, so by comparison, the free-to-play model looks quite different. But on the iPhone, where most apps range from $.99-$5.99, with no options lower than $.99, a "microtransaction" at the same price you paid for the app doesn’t look too appealing.

For many titles, the first port of call for this system will be expansions, or item packs. And that’s what we’ve seen with the first two announced titles to use the new feature.

Gameloft’s Asphalt 5 will have a new track and car pack available for $.99, and ngmoco’s Star Defense will have a new "universe," meaning several levels of gameplay, available for $2.99.

What’s interesting here is that this is much more like instantly-available DLC than it is like microtransactions. Similar to Space Invaders Get Even or Final Fantasy Crystal Chronicles: My Life as a King, if you want to get the "full" game from the onset, you have to buy everything.

It’s not as though you’re unlocking existing content, as people do often complain about with DLC, but it is a case of buying a game piecemeal. It will be interesting to see how consumers react to this in a less high-profile (press-wise) environment. Were this happening on the Xbox 360, there would be a much larger to-do.

That said, this method has its significant merits. For some, the base game will be enough – who’s to say ngmoco wouldn’t be charging $9.99 for the "full" game, rather than the current $5.99? In that way, this might be a value to those consumers for whom the expanded experience isn’t compelling.

All this is by way of saying that the transaction model, while initially new-seeming, is actually quite familiar in the downloadable environment. It lends itself to episodic content, more than anything.

What Else is New?

Apple also announced new parental controls with the 3.0 update, which asks developers to self-rate their titles in the App store. This self-regulated system is unique for the industry, which largely uses the ESRB (which incidentally has offered to help Apple with ratings) as a regulatory and representative body.

Apple’s idea here is quite different, in that it basically assumes no responsibility for the content as a company, shifting culpability to the developer, which has its obvious upsides and downsides. And furthermore, with a 17+ rating available, this raises the question of whether "adult" content will be allowable on the app store, going forward. The addition of 17+ as a possible rating certainly suggests it.

One question in my mind is whether the new iPhone 3GS represents the beginning of market fragmentation for the device. The iPod Touch has a performance boost over the original iPhone, and the iPhone 3GS will have a boost greater than that.

The 3GS also has new features for developers to take advantage of, such as the video camera. But more important is the availability of OpenGL ES 2.0 on the 3GS, thanks to the 3GS-specific PowerVR SGX chip. Games written in OpenGL 2.0 will be more powerful, but ultimately incompatible with previous iterations of the platform, specifically the iPhone 3G and iPod Touch. That does sound like market fragmentation to me.

The idea “porting up,” which mobile developers have been so happy to leave behind, may have returned to the marketplace. It’s likely that for the time being, as Ngmoco’s Neil Young recently said, developers will create an app for the baseline, and then maximize performance on the higher units.

So what does this all mean for the future of iPhone? That’s uncertain. The platform is doing amazingly well, and the idea of better performance is always going to be appealing to developers. The question to me is not whether the market can handle the fragmentation.

There are so many games on the App Store and so many people making them that if the 3GS gets any kind of market saturation, there may be an audience for those higher-end games.

The question for me is whether developers, who have found that they can make a living off of these smaller-scale games, will be able to, or want to support multiple platforms.