It's not just games. I'm pretty sure nearly all markets work like this, and it makes sense. The good apps sell, the bad apps do not.

Even in my little niche, there are dozens of hiking apps and just a few make all the money.

I also think the word "hit" is misleading. The people making the money are often the people who released an unsuccessful app, then kept trying, and eventually it was a hit. The people who don't make any money mostly give up before they succeed.

It took me years to make a profitable software company, and I think people expecting to get rich off their first iPhone game just have silly expectations.

This has been my experience too. I have one fairly successful app, with good reviews and a long stint on the featured page in its category. It's still not even close to paying for the time it took to develop it. I would have been much better off financially if I'd spent that time consulting.

Writing apps is appealing because it's so much easier than bootstrapping a software business from scratch outside the store but I'm not convinced it's a good bet for the average developer.

Am I reading that right? 100k lifetime value seems to be near the top end of what you can expect from one app. A reasonable salary at a normal job for a senior-level developer is near or a little better than that. If you want to succeed better than you could by working for someone it seems like you either need to be completely serious about releasing new games every 3-6 months(and release hits constantly), or, maybe, not write games (do business apps fare better?)

Has anyone tried the minecraft approach on the app store?

That's what I'm saying. If you make half of what you'd make in salary at a full-time job you're doing much, much better than most indie iOS devs. Hacking on apps may be fun but it's not a smart way to make money.

Most people are barely recouping their investment in hardware and the iOS developer fee. It's like one of those mail-in schemes in the back of old comic books.

This assumes you only care about money and don't care about creative control and the satisfaction of running your own business. For a lot of indie developers making equal to or slightly less than they would as a salaried developer is doing well, even if you don't have a massive hit that makes $1M+.

I admit that's the way I phrased it, but I meant to say "Why iOS when you have other avenues if you want to work on your own thing?"

In other words, iOS seems to be a very bad choice for someone who wants to make money, when you could do a, say, SAAS web app, or a traditional app. Sure, you probably won't START making the same money as a traditional job with those, but the cap is much higher.

I'm making half of what I did when working as a "hired gun".

I consider this wildly successful - I get to work on my games (which I would have done for free anyway) and earn enough to pay the bills.