All games should start out ridiculously expensive...

Here's my logic

imagine the world consists of 100 people

1 millionaire who will spend up to $1000 on a game to get it on day one
9 enthusiasts who will spend $100 to get it in the first week
30 gamers who will spend $10
60 non-gamers who will buy it at $1

Dev A decides that to get the most people he sells his game at $1. So his profit is $100.
Dev B decides to sell his game at $10. His profit is $400
Dev C decides to selll her game at $100. Her profit is $900
Dev D decides to sell her game at $1000. She sells one copy but makes $1000 profit!

So obviously is best to sell the game for as high as possible.

But now consider a different world...

1 millionaire who will spend up to $1000 on a game to get it on day one
20 enthusiasts who will spend $100 to get it in the first week
300 gamers who will spend $10
4000 non-gamers who will buy it at $1

Dev A decides that to get the most people he sells his game at $1. So his profit is $4321.
Dev B decides to sell his game at $10. His profit is $3210
Dev C decides to selll her game at $100. Her profit is $2100
Dev D decides to sell her game at $1000. She sells one copy and makes $1000 profit.

So in the second case it is best to sell the game as low as possible. But...

Dev X first sells his game at $1000, drops the price to $100, then to $10, then to $1.
His profit is $10,000! More than double any other dev.

So this is the optimal plan.

Now assuming you have the best starting price, p, then you could create a website which after each sale automatically reduced the price by some percentage, say 1%. The formula would be p=p*0.9. The exact percentage would probably be the same for all games.

 

Tell you what. You try this and report back how well it goes.

 

I'm 50% sure you're right..

 

On day 1 the rich guy doesn't happen to be buying apps.
On day 2 the app has dropped off the front page so neither the enthusiasts nor rich guy sees it...
... nor does anyone else ...

 

This is pretty straight forward economics. Its pretty much what every company in the creative industry already does.

Here is a random google result for StarCraft II. Note the relatively high start price. This is probably for pre orders of collectors editions. After release day the price steadily drops until its negligible. Pretty much every game follows this pattern. Many non game products also follow this pattern.

 

Sure, but remember that the real world is made up of a heck of a lot more than the ~4500 people the OP accounts for.

With that in mind, you don't need to get all of them. A small fraction will do.

Furthermore, day one sales don't have to be made on day one (which is why I think they're so misleading). They also account for pre-orders and such. So that huge spike at the start of the graph isn't sales made in a 24 hour period. They're the sales created over the marketing lifetime of the product that become deliverable on that day. Not the same thing. (Likewise, that marketing will have helped push people to make some of the later purchases. But most if not all pre-orders will be in that spike right at the start.)

 

It would be an interesting social experiment to openly broadcast a system like this. Tell your customers exactly what is happening. See how they behave.

Maybe not a profitable experiment, but an interesting one.

 

There's literally half a thousand more factors that come into play. One of the main ones being the hype generated over periods of time, increasing the value of the product. Coordinated competition releases, or lack of. Proper evaluation of the demand to adjust the cost of your product. This might be easier in, say, the bathroom products industry where they can evaluate their previous periods and schedule production to get the best out of every units. But in the game industry where every gamers have different tastes and products vary so much, the accuracy of your evaluation of the demand will fluctuate harder.

Sure, you can optimize, yet it's far from being a simple formula.

 

It is called cream skimming:
https://en.wikipedia.org/wiki/Cream_skimming

And I think that by dropping the price 10x times every time you'll progressively more and more people people that paid more for your product. next time they might decide to wait till the price goes down to $1.

 

This is a definite risk. I probably would have brought StarCraft 2 when it first game out. Except I knew blizzard would eventually offer a 10 dollar copy.

 

I saw an article arguing for the opposite, that is, increasing the price over time (like Minecraft).

http://thecastledoctrine.net/seedBlogs.php?action=display_post&post_id=jasonrohrer_1389812989_0

Some good points are made, though I am not convinced this is the best way of making money for all games.

 

Probably not a good idea. Customer psychology does not work that way. Every retail outlet has sales for a reason. Because humans are funny. We spend more when an item is on sale. We like getting a bargain. We genuinely do think that $9.99 is significantly cheaper then $10.

The better take away lesson is to budget your business to operate off of the sale price.

 

75% of statistics are made up on the spot.

Gigi

 

Games should start out very inexpensive. Then, when content is added to them digitally, the base price should be slowly increased to reflect the added content. Anyone who purchased the game early should get additional downloadable for free, while later adopters have to pay more for the game due to the steadily increasing base price.

A system like this one actively encourages people to be early adopters, and buy the game as soon as it comes out. At the same time, it helps to avoid de-valuing the game by tying the base price to the amount of content available in the game. (which is generally also the most expensive part of the game to produce)

 

Step 1: Establish large endearing fanbase
Step 2: Do whatever you want.

 

Heil Gaben! He will bring those prices to their knees before their time!

 

You also forget about the portion of folks like myself that will see your $1000 opening price, immediately brand you as a greedy bastard, and never give you a dime because we don't like the practice of price gouging.

 

I don't know if this information is helpful or not, but I did the opposite once and it didn't work very well:
I made an app more expensive over time and I openly displayed how the price is going to change.
Well, needless to say, most of the purchases have been made when the game was still at its lowest price.
So if you turn this around and make games cheaper over time, it may be working better!

 

I know it worked for me with Minecraft. I doubt I would have tried it at full price.

 

Your mistake, and it is a huge one, is assuming people with lots of money blow it like candy. A lot of people have a lot of money because they don't spend it wastefully or without purpose. In fact for self made people, this is more common than for people who got rich quick.

Everyone loves a bargain.

 

Is no one going to ask what the heck this means?

 

We'll tell you when you're older.

 

Well there's this girl called Candy...

 

A growing concern, especially in the realms of mobile and indie development, is a seeming race to the bottom with prices. But the truth is that a lot of our current pricing schemes are based on retail distribution. This makes no sense. Digital distribution has very little in common with retail distribution. A fully digital game is not a boxed good. It is a mistake to treat it as such, or price it as such.

Start a game off at $10. When you add a major content patch, bump the price up to $15. When you add another content patch, bump it up to $20. Anyone who bought the game at $10 gets the new content, no extra charge. Anyone who didn't buy it at the earlier price has to pay the new base price, but they get all of the new content. And any content that comes out later will be theirs for free as well.

This scenario handles a lot of issues. For starters, it avoids fracturing the user-base on optional content. (a common issue with DLC) You don't have to worry which version of the game a user has with this system. Multiplayer games can be assured that ALL of their players are working with the exact same version of the software, with the exact same content. It also ties the price of the game to the quantity of the content being produced for it.

Naturally, it wouldn't necessarily work for every game. But for certain types of games, it would be a really good approach.

 

I'm thinking there's a lot of psychology to consider, yeah. Generally, at least at the higher end, you want to focus your marketing effort on one big release day and send gamers into a frenzy. Simply releasing a very high priced product first, then gradually reducing it could miss that "hype target." If most gamers were logical, they'd wait a year on every title for when it's cheaper, but that's no fun, especially when brand new games aren't *all* that expensive and the hype machine is at full force. There's also the matter of multiplayer games where you want to get on during that window where your friends are still interested in the title.

Kind of seems like the big publishers have the formula pretty well dialed in already.

 

Then why do they still fail, and on a regular basis? Sure, the "hype-machine" might work for certain annualized series with strong brand recognition. But for so many other titles it falls short and fails on a distressingly regular basis. Marketing alone is not enough to carry a title, and over-reliance on targeted marketing is a source of many of the difficulties the gaming industry is currently facing.

Marketing is not the end-all-be-all of game development or promotion. It's simply another tool that can be utilized. And like any tool, it can be used improperly, often to disastrous effect.

You are correct in pointing out that psychology plays a large part in pricing models and sales. You are just looking at the issue from too narrow of a perspective. Psychology is also just a tool, and can be used to implement a number of different approaches.

 

What failed games are you thinking of? Marketing alone isn't enough to carry a bad title, but it is certainly often enough to push a good title into a sales success. It's still a very significant factor, at least at the high end. I'm making a lot of assumptions here admittedly (I'm just a nobody hobbyist and game player), but I imagine the publishers know when the right time to reduce prices on titles over time based on their sales data.

What approaches do you think would work better than the current model? I'm thinking in terms of the really big PC/console titles. You may be thinking of something else.

 

Yes, but this only applies to the retail space. As I was pointing out earlier, digitally distributed games don't have to adhere to the same pricing models. In fact, it doesn't make any sense for them to adhere to those models at all. Major retail releases, such as the ones you're using as examples, still have to stick to those models, as most of their sales come from boxed retail copies.

And even there we see plenty of examples of major publishers failing to properly gauge interest or price their titles reasonably. How often do you see retail games released for $60 when the content and development that went into them clearly don't warrant such a price? This is why the mid-scale development scene has dried up over the past decade. A lot of the development that used to be targeted to more mid-scale development has shifted hard over to the digital space, where it is currently flourishing.

The truth is that major publishers have actually been rather incompetent when it comes to game pricing. Some of this is not entirely their fault. They are beholden to their retail partners, after all. And retailes don't like mid-tier priced games. Why would they want to devote limited shelf-space to a $30 game when they could be selling a $60 game in the same space? With the volume of titles that get released every year, such considerations become more important. But while the financials may favor selling more expensive titles at retail, the demand for mid-level game pricing is very real. People like and want quality games released at lower prices.

 

Well, on the high end it seems similar between downloadable (hate the term "digital" in that context) and retail. Rise of the Tomb Raider started at $60 on Steam. I'm sure by the summer sale it'll be $30, then next year it'll be $15 or something, etc.

In the self-published world where you don't have a traditional publisher in the loop, I'm sure it's much trickier, and that's probably a more relevant topic for devs on this forum anyway. Though this forum may not be the ideal place to discuss it, since you have idiots like me chiming in who don't know what they're talking about.

I can't imagine the risk of having to produce physical discs and ship them around the world, get shelf space, etc. It's weird to me that in 2016 more players don't just pick the download option. Though apparently Rise of the Tomb Raider sales on Xbox One were 3:1 in favor of downloadable vs. disc, so maybe it's changing. A surprising number of gamers sure do still like their spinning optical discs it would seem.

As we continue to transition away from physical media, it'll be interesting to see how the pricing goes. It seems that the sales on Steam and the PSN store are a little less aggressive on price reductions, now that they're more established. Hopefully the race to the bottom doesn't go the way of mobile.

 

Lets be honest, its lucky we get any money at all from digital content!

Its one of the only industries where the product costs practically nothing to produce on large scales and yet we can charge money for it. (The only other industry I can think of is when CocaCola began selling bottled tap water). In both cases the actual value of the product is mere illusion.

 

I wish I could like this twice. I've been saying this for 6 years now. It's the same philosophy I apply to tutoring. Why should I charge for that? I've consumed no resources and produced nothing!

The real cost of selling digital content is the power consumed by the assembly instructions for making a copy...

 

I think you are missing the point here. The cost per unit (variable cost) of producing software is quite low. But the set up costs (fixed cost) can be quite high.

Bottled water also costs money to produce. Sure the water is cheap. The bottle, cap and label cost a bit. But the most expensive component is the labor to put the water in the bottle, put the cap on the bottle, and move it to sales points. Don't underestimate how much it costs to bottle stuff. And how much consumers are willing to pay for bottled convenience. My day job used to be putting things in bottles.

 

Maybe but you can get a bottle of water for about 10 pence. Or a bottle of water with a picture of a ice capped mountain on it for £1. They spend loads on advertising to create the illusion that the bottle with the mountain on it is worth more.

Maybe indie games are an illusion too? Perhaps really they should all be free! But luckily for us, the illusion still exists that people should pay money for them!

Also, paradoxically the more you charge for an indie game the more it enforces the illusion that it is worth more. For example selling a game for £1 vs a game for £10 with 90% off. Both cost the same but the second it deemed to be more valuable!

 

I think I've bumped into reports of experiments where a band or game studio released their game but the starting price was the total cost of making it. If you purchase it you pay a fraction of the total price divided between all buyers. So the more people purchasing it the cheaper it was.

The band / studio get their costs covered from the initial sale and fans get the game they want.

Kind of reverse Kickstarter without all the silly price tiers/rewards.

Actually is there a Kickstarter system that works on this principle (as long as the developers get their timeline/budget correct)?

 

Ah, but it is worth more! Pictures of mountains are a growing market.

That issue was discussed recently with file size, right? I don't remember if I read that here or on some steam forums but file size also has perceived value in it. The conversation was started by a really fun game that released at like 300 or 400mb.

But that's understandable when you make a game without an engine. It also performs beautifully on your target platforms.

 

Isn't entertainment worth something? It may not be actual "value of raw material", but in today's society, there are many services that don't result in a final materialistic product.
And even "value of raw material" is just an illusion when you think about it. Who says gold should be worth more than dirt? Just because it's harder to obtain?

 

It conducts electricity better than dirt so I value it more than dirt. It's also shiny so some primitive parts of the brain feel all sorts of euphoric when they see gold. Also, isn't gold more edible the higher the carat is? It probably goes down easier than dirt - and gives you better poo!

As a building material, I guess dirt wins in ease of utilization to make bricks / foundations. But hey, gold wins in ease of creating a horrific torture device just by melting the stuff

It's funny that some groups value gold more than dirt since they're made from it.

 

gold is seen as immortal , artifacts from ~7000 years ago still exist intact, almost perfect as they were
gold has MANY unique chemical properties

cant have coins of iron or copper theyd be gone in a year or so..
not to mention, likely alot of shamanistic value because of its "immortality"
like the mummys encased in gold

 

There are some schools of economic thought that say the only thing we ever really pay for is human labour. So yes, something that is harder to obtain should be more expensive.

That is ultimately the heart of the information pricing dilemma (and games are a subset of information). On the one hand information should be priced high, because it's difficult to obtain. On the other hand information should be priced low, because it's easy to duplicate. Several economists have discussed the idea at length. Lately the market for software tends to be skewing heavily to the free side.

 

Blender's original development company went this route once it was determined they wouldn't stay in business. They put up a campaign to open source the modeller for €100,000 and made it after a few months.

https://en.wikipedia.org/wiki/Blender_(software)#History

 

It sounds like an interesting approach. Could you provide examples of projects that successfully got funded by following this approach?

 

Interesting! It does make sense! Then again, why do tickets for concerts cost more money when the musicians are more famous? It's not like they work more. That's when supply and demand matter, too. Probably just like in the gold / dirt comparisson: People just like gold more than dirt:

, so they are willing to pay more for that.
So basically: There are very limited gold resources, but many people who want gold, which leads to its high value.
As you said, @BoredMormon, video games are information that can be cloned easily. Therefore, the supply is potentially unlimited. So if higher supply means lower value, its value is basically infinitely low. At least in theory, when only looking at supply and demand.
On the other hand, I'd say you don't pay for the information itself, but rather for being allowed to access the information. So you buy the right to access it. As deveopers or publishers are the only ones that can grant you that right, they may charge any amount of money for that. The thing is: This means there is no supply. The price won't be result of supply and demand, but supply will rather be the result of price and demand.

Gold is actually a pretty soft material. So I'd not use pure gold for coins. Also, "shamanistic value" is pretty much what I was talking about: that sort of value is pure imagination. It's some sort of fetish. There is no real useful value besides for example the already mentioned conductive qualities. Other than that, it's people's taste that makes them want the material. Or at least they want the material because they know others will give them a lot in exchange.

 

It's worth noting the right to use information is a totally artificial product. Copyrights, trademarks and patents are all artificial structures put in place to drive profits to the creators of information. Without these things in place there is little intrinsic benefit to producing information.

 

That and Maslow's Hierarchy of needs being generally filled out for most people in the developed world. See were its value lies when you take away food, water, or safety...

Oh, and how has someone not mentioned inducing an artificial sense of urgency?

Or, how the product fits into the Zeitgeist?

Look at Oblivion and their Oblivion gates. You think it's an accident they look like the Eye of Sauron?

Or look at twin movies. You think it's an accident that Deep Impact came out the same month as Armageddon?

That's a MAJOR advantage the AAA studios have. They get together and work out release dates to give the general public an appetite for a genre, style, or concept.

 

You like to milk your games at all costs like Ubisoft / EA?

Or you want to give it to as many people as possible, which is why games are made, for fun and passion, and still make money?

 

Last I checked EA and Ubisoft reached more people then any indie game...

 

They did, you are right
Doesn`t matter, do you think the S*** they pull out like recycling entire far cry 4 map into far cry Primal map is okay?
Or milking AC franchise and spitting out copy+pasted content every year.

 

The last 3 far cry games are all the same thing. Fallout suffers horrendously from using the same old engine. Consoles have obscene loading times on a lot of AAA games now.

A consumer not so content with being treated like

would be the end of the AAA game industry.

 

Yes, I meant Far Cry map was recycled, not Fallout.

I think games like Fallout, Witcher, or indie games like 7 days to die are example of how the games and players should be treated.
One Witcher 3 DLC is roughly 30 hours of content, which is usually more than any AAA 60 dollar full game.

 

I'm willing to bet Minecraft at least got very close to beating them. EA though has been around for a very long time.