Even among these 1-2% of users there is a significant skew in spending, where 20% of the users make 80% of the total revenue.
In these games, you can say there are three kinds of payers:
80%: LTV of $5-10, or people who would have bought the game for $1-10 up front. A significant amount of additional revenue is earned from these users when you change from paid to free-to-play, because they end up paying not the $2.99 you charge at the door but the $9.99 they're actually willing to pay.
20%: LTV of $50-$1,000, or people who really like your game and understand how the mechanics of paying and playing tie together.
~1%: Unobservable LTV, people who will keep spending until your game dies, not until they get bored. These are your diehard fans, they'll buy your limited-run art posters from Kickstarter, they'll play all your sequels simultaneously, they will clamor for you not to shut down your servers, they'll ask you to make more of the same.
A game like Clash of Clans has generated a cohort of people whose lifetime value is longer than the likely age of the game. If you play it, and appreciate how the mechanics of the paying integrate with the mechanics of the game, you'd understand how it differs significantly from your typical psychologically-manipulative casino.
Suffice it to say, it is extraordinarily hard to make a Clash of Clans game.
With regards to your specific example, I think Blizzard with Hearthstone and Valve with Team Fortress 2 both showed unequivocally that, even for people who are willing to spend $60 (or TF2's case, $25), you earn 5x more (Valve's numbers) with a free-to-play title with no pay-to-play mechanics (like TF2). I don't know how much more Hearthstone has earned by being free-to-play, but TCG mechanics tend to earn very well in this setting.
I think "I want a diversion" is more common than "I want a game". Mobile games compete against Facebook, Twitter, the news, text messaging, anything else someone can do as a diversion on their phone. And none of those things cost anything at all. People who want a game and are willing to pay good money to get one generally expect a better experience than mobile can provide.
I guess as more people go mobile-only, there will be a bigger market for higher priced mobile games, but I can't imagine anyone who considers themselves a gamer right now doesn't have either a console or a relatively high-end computer. (And I don't see anyone who doesn't consider themselves a gamer dropping more than $5 to play a game.)
>I think "I want a diversion" is more common than "I want a game". Mobile games compete against Facebook, Twitter, the news, text messaging, anything else someone can do as a diversion on their phone. And none of those things cost anything at all. People who want a game and are willing to pay good money to get one generally expect a better experience than mobile can provide.
I agree with your general point, but I want to point out that the last sentence doesn't have to be true. Like tools in a toolbox, some platforms are more well-suited than others. The reasons vary for this, but in games it usually it comes down to control schemes. Mobile has its advantages as well- you always have it on you, likely has network connectivity 24/7, its unique control scheme, etc. I think mobile's biggest problem right now is creators are still trying to shoehorn last decade's games on a platform that was not designed for it. They may be different games than we're all used to, but there's no reason why mobile can't come into its own.
That all said, I would rephrase your last sentence to "...generally expect a better experience than mobile currently provides."
For what it's worth, I feel a game like Clash of Clans uses mobile's strengths very well (although I personally find it boring and its revenue model distasteful)- it makes good use of mobile's control scheme, makes good use of its platform's always-on mentality by delivering notifications of attacks, etc, and is social.
The values differ amongst those gamers. But on average it amounts to those 1-2% CLV being >= $.99 (and exactly why the games are free to begin with). The strategy that these developers make is simply, if we have a larger pool of total users, and we lower barrier to entry of downloads (make it free), then you can guess that the 1-2% of paying users will grow linearly with number of total users.
Making it free and marketing it as such lowers customer acquisition cost, while still retaining a low to decent CLV (and this is discounting the extreme case users who pay a lot higher than would be expected of a mobile purchase as well)
I still don't get why mobile games are aimed at "I want a game, but I only have $0.99 to spend." Computer games cost $60+.