[In this opinion piece, originally printed at indiegamerchick.com, independent developer Ian Stocker of MagicalTimeBean discusses how his setting XBLIG prices at 240 Microsoft Points may have cost him thousands of sales.]
You may not know me by name, but I wrote three games in the last two years for XBLIG: Soulcaster I & II, and Escape Goat (pictured). All three were released at 240 Microsoft Points ($3US).
The whole thing started last night on Twitter. Ben Kane reported his 15,000 sales of DLC Quest alongside CSR Studios' 35,000 sales of Dead Pixels. I chimed in with my melodramatic tweet that my new game Escape Goat has sold "literally dozens of copies," which got the attention of XBLIG blog indiegamerchick.com. There, the editor published an article asserting that, to paraphrase, all XBLIGs should be 80 MSP.
I had been called out to answer for my 240 MSP price tags, in what was sure to be a vicious counterpoint to her argument. But how was I going to do it? Defend my position? In the face of such stark sales data? The answer is: I won't.
I changed my mind. Last night was a wake-up call. I now believe that unless you're making 3D CraftMiner, your game needs to be 80 MSP. This article will be in two sections: part pricing study, part confession.
The Pricing Study
Let's start by going back to DLC Quest for a moment. The numbers for this game hit me like a ton of bricks. Since it came out literally within hours of Escape Goat, I get to hear about it frequently--we get mentioned in the same sentence on blogs and podcasts, forever destined to do battle in the various "pick of the month" features. We even shared a page in Famitsu 360. Essentially, both our games were well received by critics, and experienced the same landscape on the marketplace. Well it's been a little over a month since launch -- let's look at the numbers.
Escape Goat: 560 sales, net $2.10 each: $1,176 gross profit DLC Quest: 15,000 sales, net $0.70 each: $10,500 gross profit
Maybe DLC Quest just has broader appeal. I could buy, say, double or triple the audience, sure. But no, we're looking at a 1,000 percent difference in revenue. To account for that, you have to look at the one major difference between the titles: the price.
The Confession
I was wrong to set the price at 240 MSP for all my games. At the time, I had good reasons for doing so, but they were simply hypotheses that have been disproved.
Now, I could just leave it at that, but I'm opening up a debate between my current, enlightened self, and the Ian Stocker of one week ago. (We can call him "Dark Ian.") His arguments appear in italics, followed by my responses (as modern, enlightened Ian).
Let's begin with the question I've been asked many times before:
"So your games are 240 MSP. Are you insane?"
I don't want to be part of the race to the bottom. If they offered 10 cent games, do I need to offer that? I'd rather not compete on price. Besides, $3 is nothing! It's a latte, a Big Mac, 1/20th of Skyrim. There has to still be a market for $3 games on the console!
The market exists, but sadly, that market is not XBLIG. I'll explain why in a minute.
But...I don't make "99 cent" games. I make niche games, targeted to a specific audience who is willing to pay more. Also, doesn't the high price tag denote quality to separate me from lower-priced games? Consumers associate high price with high quality. I have data to prove it!
Your beloved niche audience won't get a chance to try your game, because they won't download the demo. Simply by being on XBLIG, you are associated with other $1 games, like it or not.
But look at the Soulcaster series. There's a 25% demo-to-purchase conversion on them! If I went to $1, I would need a 75 percent conversion to make the same amount!
You're getting a fraction of the downloads of the 80 MSP games, because people look at the price tag and move to the next one. Customer gut responses? "How arrogant." "Nothing is worth 240 MSP!" You wouldn't need 75 percent conversion if you were getting 5x as many downloads.
If you were to look at interviews or tweets from me as recently as a week ago, you'll find me saying some of these things. Well, not anymore.
The Hypothesis
I love studying pricing psychology. I even considered myself fairly well-educated on the topic when I set my prices--see my well-reasoned (now debunked) arguments above. This makes this confession and change of heart even more humiliating, but don't worry, I'm still egotistical enough to write an article containing a debate with myself.
So what was I missing? The fundamental problem is that I was looking at pricing tactics that work when the price is in U.S. Dollars (or whatever native currency). And Xbox Live does not deal in that. It uses use Microsoft Points. To explain the subtle effect on the consumer mind, I'll draw an analogy.
Let's turn back the clock to 1989, a time when you had to leave the house to play the best games, and some of you were still in diapers.
I'm 10 years old and I show up at the arcade with a $10 bill. When I look at this $10 bill, I think of the lawns mowed and weeks of savings. But it's all worth it, because LOOK AT THE GAMES. So I go to the change machine and cash it in for quarters. Now I have a massive handful of small metal disks. This is no longer "money." These are individual tokens, each one granting me entry into one of the magical worlds available here. (Some arcades give you tokens instead of quarters, but the same psychology applies: once they're converted to quarters, it's no longer about price. It's about number of plays.)
Every game is one quarter. The ancient Pac-Man machine, the brand new Street Fighter II machine -- all one quarter as the entry fee. But wait, what's this game asking for two quarters? I don't care what it is, they're asking me to give up one extra token! Nothing is worth that. I don't care what the game is. Moving on!
You see where I'm going with this. In the world of XBLIG, the consumer thinks in terms of tokens, each one being 80 MSP, which grant access to one of the games. Except, what's this? Here's a game asking for three tokens!? Screw them! Not even downloading the demo for that! Who do they think they are, that they are worth three other games? And look at how pimp this 80 MSP game is. I just can't justify three tokens for one game... that's just... wrong.
(If you're part of the generation that started visiting arcades in the mid '90s, after everything was converted into exercise machines, you might be thinking: "But everything costs four quarters." Well, don't throw a wrench in my analogy, it's all about price expectations. Plus, Street Fighter II didn't come out until 1991. I was making sure you were paying attention.)
Next, let me next respond to something Kairi wrote in her indiegamerchick rant, to ratchet up the conflict level a bit. She writes:
"My point was WHY is a $3 game acceptable on Steam and not on XBLIG? It's because a Steam game goes through wringers that games on XBLIG don't. People feel confident with a Steam purchase. They don't with an XBLIG, and that's totally justified."
I agree, quality control is more reassuring on Steam. But I would take it a step further. Back in the realm of native currency, with flexible pricing, the customer thinks of the price in a totally different way. $2.99 actually does compare itself nicely to a latte. And with games priced flexibly at a broad range, there's no precedent, like there is with XBLIG: "One game costs 80 Magic Seal Pelts, and thus ever has it been."
XBLIG is its own world. It has its own set of rules for pricing psychology. For example, conventional advertisements in the real world do little to spur sales. Ask anyone who's had their game featured on the dashboard. Downloads go up anywhere from 200 percent to 500 percent. Soulcaster was mentioned twice in the Penny Arcade news section -- a rare gift more valuable than many forms of advertising. Change in downloads after that? Not noticeable. XBLIG lives in its own world.
I spent the last 18 months blind to this. I dismissed the low sales as turmoil within the marketplace (which, don't get me wrong, there is plenty of). I had just written off making money on XBLIG, turning my attention to PC ports: PC, that promised land where dollar bills fall from the sky. In the meantime, through a combination of pride and negligence, I missed out on plenty of potential revenue. I was the three-quarter arcade machine in a room full of one-quarter machines.
I'll close with a quote from software engineering guru Joel Spolsky: "The truth is, the only way to determine how much someone will pay for something is to put it up for sale, and see how many people actually buy it."
As an entrepeneur-programmer-nerd, I listen when Joel speaks. And as usual, Joel is right. So today, I'm lowering the price of Soulcaster I & II to 80 MSP. (I would do the same for Escape Goat, but I have to wait 50 days to change the price on that.) Let's see how it goes. It's yet another hypothesis, and it would be extra humiliating for me to have to come back in a month to eat these words, but either way, I'll report back.
I dedicate this article to my fellow XBLIG devs, especially you guys on Twitter. Keep it real.
Thanks for sharing this Ian! I appreciate you sticking to your guns, if that's worth anything to you.
I hope that Microsoft eventually finds a good balance for promoting small developers on their platforms, it seems that the Windows 8 integrated app store might be a step in the right direction. Just have to wait a number of years for it to be any kind of standard.
You're forgetting one thing. On XBLIG most sales are made through one of Top lists - usually Top Downloads. Sadly, Top Downloads is ordered by raw sales numbers, not by revenue. Thus 50% reduction of sales results in exponential reduction of trials due to lower position on Top Downloads. IMO this is the most important factor why 80 MSP games are the most successful.
I gotta tell you though, as a little guy indie on iOS, your "$2.99 actually does compare itself nicely to a latte." comment makes me chuckle. Just like on XBLIG, there are plenty of people who will call your game overpriced if you dare to ask, say, $1.99 instead of $0.99.
I maintain though that setting your price at the minimum is foolish, because you have nowhere to go. You can't stimulate downloads with a cut-price sale, for example.
It's all speculation here though. To have a game that barely rises into the attention span of the market, then sit dormant for ages before you have a sale which raises some interest but then falls back and doesn't get much attention until the next sale, or to garner a lot of attention and perhaps not see as much income from that game afterwards?
Of course, that is a narrow view. If you are seen and played often, it would generate more interest in your future games, and visibility would not be as much an issue. On the other hand, some folks just like building intense wargame sims that cater to a small audience, and I do not begrudge a life like that.
If you do want a small hardcore audience, you have to be VERY careful with that.
This is an excellent point, and made me realize that the "normalized price" in the customer's mind is just as big a factor as the arcade token mentality.
Because XBLIG doesn't allow price changes more often than every 90 days (which is why Escape Goat has to stay at 240 for another month), short-term sales aren't really an option for this marketplace. Even if you do drop the price for three months as a sale, nobody will know what the original price was, and you lose out on the perceived extra value effect sales have.
Great article, and an interesting perspective. I'm glad XBLIG exists, but I'm never very motivated to actually make a game for it, especially after reading stuff like this. It seems way too crowded.
Despite the strange things that go on in the XBLIG world, I'm still tempted to take a shot at it. (At this point, I don't really have a lot to lose, so why the heck not?).
Thanks for being so open about your thoughts and sales stats. Without actually having a game on the market, I think it can be a bit tricky to see what it is actually like.
I hope that Microsoft eventually finds a good balance for promoting small developers on their platforms, it seems that the Windows 8 integrated app store might be a step in the right direction. Just have to wait a number of years for it to be any kind of standard.
I maintain though that setting your price at the minimum is foolish, because you have nowhere to go. You can't stimulate downloads with a cut-price sale, for example.
Of course, that is a narrow view. If you are seen and played often, it would generate more interest in your future games, and visibility would not be as much an issue. On the other hand, some folks just like building intense wargame sims that cater to a small audience, and I do not begrudge a life like that.
If you do want a small hardcore audience, you have to be VERY careful with that.
Because XBLIG doesn't allow price changes more often than every 90 days (which is why Escape Goat has to stay at 240 for another month), short-term sales aren't really an option for this marketplace. Even if you do drop the price for three months as a sale, nobody will know what the original price was, and you lose out on the perceived extra value effect sales have.
Thanks for being so open about your thoughts and sales stats. Without actually having a game on the market, I think it can be a bit tricky to see what it is actually like.