(Translator's note: the article was written in February 2015, but, it seems to me, it has not lost its relevance.)

This week we announced the release date and cost of the Axiom Verge . I worked on this game with Tom for about six months, and if I’m so happy to release the game, I can only guess how thrilled Tom has been working on it alone for five years !
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Most of the reviews were positive, but a couple of people had questions about the choice of the price of $ 19.99. In fact, I am not writing this blog post to justify the cost. Rather, I will focus on thinking about the pricing process, because many developers over the years have asked me for advice on how to approach pricing for their games.

How pricing should work ... theoretically

The simplest economic pricing approach is fairly straightforward. Somewhere in the world there is a group of potential buyers. Each of them makes an independent assessment of how valuable your game is to him. If you have complete information about the maximum price level for each customer, you can choose a value that maximizes your profit (price x number of units sold; the higher the price, the lower the quantity will be, and vice versa), and hence the income. In the case of digitally distributed video games, after the creation of the game is completed, maximizing profit and revenue is one and the same, because all costs are redeemed or fixed. There is no growing cost of producing additional copies of the game and influencing your decision making.

Any buyer, whose maximum possible price is higher than yours, concludes a bargain for yourself. For the one whose maximum price is equal to your price, it does not affect the purchase or rejection of it. Some developers and publishers are trying to make sure that none of the buyers do not make a very profitable deal. To those whose willingness to pay is very high, they offer to purchase seasonal access, DLC or other high-profit goods in order to receive this additional profit. Personally, I think that such things are difficult to do with taste, but it seems that UbiSoft, EA and Zynga have no problems with it.



UbiSoft: “People get too much pleasure for which they have not paid. This should not be allowed! ”

Consider that in this theoretical model, one of the aspects on which pricing should not be based is the development budget. I often hear the argument that AAA games should have a higher cost than indie games, because they are more expensive to produce. A little thought, you can understand that for many reasons it does not make sense. Firstly, if the price of the game is too high, it will make you earn less money, because the number of customers will fall, regardless of the development costs. Many people think that the higher the price, the more money, so developers who exhibit a high price tag are greedy. Secondly, why should a player care about how many people worked on the game? If I had a magic wand and I could create games of such a level and quality as Skyrim or GTA: V instantly and completely without effort, would it mean that the impressions of the game would become less valuable? If I spent 20 million dollars to create the application “Farting pillow”, does this mean that it is worth paying more for it? No, of course not.

Inconsistency between theory and practice

The economy allows us to make accurate discoveries in a wide range of business decisions, because it does not go deep into the details. However, when it comes to the real world, other factors should be considered. And, by the way, not only economics as a discipline is to blame for this. Here is the XKCD comic ( here in English):

Problem 1: games are perceived goods

One of the biggest problems is that games fall into a category called “perceived goods”; this means that customers cannot determine their value until they have tried them. Books and movies fall into the same category. Consumers are trying to smooth over this problem by relying on expert reviews, recommendations from friends, demo versions, user ratings, but these are all imperfect solutions. Developers and publishers who believe that the maximum willingness to pay is irrationally high (this means that they know that players expect to get more pleasure from the game than they actually get), tend to keep this information secret for as long as possible. That is why publishers prohibit the publication of reviews of their games prior to their release or pre-orders. The opposite is also true - given that the standard practice is to release the game immediately after passing the certification, Sony and we are trying to get the reviewers to get the game almost a month before it is released.

Problem 2: own benefit and group benefit - the problem of price incentives

Imagine that you are at a football game. Something important is happening, so you get up to see better. It maximizes your own benefit. Now the viewer behind you has a choice: stay sit and see nothing, or stand up to see better. If he chooses to maximize his own benefit, he decides to stand up. And so on. In the end, everyone will stand, but no one will see more of what they have seen before. Everybody is just inconvenienced.

The same happens with price incentives (i.e., with discounts). When sales fall, it is rational to reduce the price of goods. Every developer who has made a discount gets a lot of money with it (in fact, most of the income). In 2011, Gabe Newell said famous words : when they lowered the price by 75%, their income rose 40 times!

But when everyone makes discounts, the inevitable fall to zero begins. Players are accustomed not to pay full price. This sinner is also found behind me. Thanks to bundles and discounts in my Steam account, there are already more than 200 games, many of which I have not even played. (And I don’t even remember about many of them that I have them. Once I saw a game on PAX that I really liked. At home I decided to buy it, and found that I already have it.) In PS Plus I already collected a bunch of PS4 and Vita games that I’m not even going to play. In the App Store, buyers are in doubt about whether to spend 99 cents on the game.



Full comic (and here in Russian)

Someone might argue that these games brought income from my purchase, which otherwise would not exist, and this is a fair comment. But at what cost? If everyone will consider discounts as an ordinary matter, will there be more buyers willing to pay the real price that will allow developers to live and develop a sustainable business?

By the way, the reverse is also true. Waiting for discounts, players seek their own short-term self-interest. They can get a freebie thanks to buyers who paid the full price (or thanks to developers who are not enough for food) and get the same games, but for a small fraction of the price. Unfortunately, this is bad for the players as a group. If players tend to buy only at a huge discount, they will inevitably face a decline in quality. To see an example, just look at the App Store.

There is another weighty argument (except for short-term self-interest) for the purchase of games during sales, immediately arising in the head. Since games are a perceived product, and no one can assess their value until they try them, it is reasonable to pay as little as possible in advance. I think we all bought games that we hoped were great and that were thrown after playing just 5 minutes. While there is no high-quality mechanism to adjust the price after passing the game, the only solution would be to wait for discounts. I thought about ways to improve this situation. Perhaps add a virtual jar to tip after passing the game? Maybe offer more additional products? Or go the other way - to set the full price, but give buyers the opportunity to get their money back if they played the game no more than a certain period of time. (Something like a demo for which you pay in advance). (translator's note: as you know, Steam introduced a similar system on June 2, 2015.) None of these solutions is perfect, but developers, marketplaces and players should be given serious attention to this issue if we all do not want to drown in the ocean of garbage.

One of the ways out in a situation where the advantageous for the individual and the beneficial for the group differs is the general conspiracy and the choice of prices for the goods of each of its participants. Fortunately or unfortunately, there is no (legal) way to commit such a conspiracy. I can only ask developers to rightly determine the value of their games and go all out to stick with it, setting reasonable prices. Players must make an effort and decide how valuable these games are to them; not what their price will be, but what they cost.

Problem 3: many substitutes

Economic theory describes two pricing models. The first, described by me above, is suitable for situations in which the products actually have no obvious replacement. If buyers want your product, they will pay the price you set. Another model is used for consumer goods. A grain farmer cannot come to the market and convince buyers that his grain is better than all other sellers. He cannot set the price for his grain. He just comes to the market and looks at the current price.

Therefore, setting the price for your game, think about whether it is unique, or is consumer goods. Do you sell a product that no one else can find? Or is it a game similar to the millions of others already released? If the latter, you have no choice but to set the current price. If the first, then your task is to convince people of the importance of your game. If buyers think that the price of Axiom Verge is too high, they can simply buy other games. But these games will not be like Axiom Verge . (I will not address the topic of piracy now, it is worthy of a separate post.)

Problem 4: players are already accustomed to expect discounts

Every time I read about the release of a new game, I will surely find someone's comment that he will wait two months before the 50% discount. In the case of a PlayStation, users now usually write that they will wait for the game to be available for free in PS Plus. Buyers paying full price look like losers. I have already said good and not very kind words about my previous employer, Nintendo. But this seems to me to be a very correct strategy for many years - they sent the world a clear signal that they should not wait for price reductions. If you want to play Super Mario 3D World on Wii U, you know that it will cost $ 59.99 (I will not touch on the theme of the "used" games market either, it needs a separate post.) It doesn't matter that the game one and a half year; Nintendo has managed to create a game for which there is no suitable replacement, and it sends a clear signal that it will insist on the price the game deserves.



"Porsche: you can't replace it."
Frame from the film Risky Business (1983)

Yes, I'm so old.

What is the solution?

The first step to a real solution to the problem takes place much earlier than the reflection on price. He is to create a game in which you can not play (must-play game). Of course, all developers are striving for this, and this is much easier said than done. But suppose you succeeded. What will be the next step?



Without this picture can not do. Underpants gnomes business plan: “1. Pants abduction 2. ??? 3. Profit! "

The second step is to acquaint the players with your game and convince of its uniqueness. This is also a difficult task, about the solution of which entire books have been written. Some of them offer to explain his vision to the world and make him look at the game with your eyes. Others advise to share the game with as many people as possible so that they can evaluate it themselves and tell their friends about it. Still others recommend leaving a space for the imagination of the players so that they do not feel completely cognizant of the game. But let's say that you did it. What next?

The last step consists of two parts. First, you need to set the price, which is really worth the game. If your game is better (for those who, as you think, will be interested in buying your game!) Than Titanfall , The Order: 1886 or Destiny , and you convince people of this, then let their prices be your bar. Not necessarily limited to what other indies do. (Another digression: you can talk about it endlessly, but the term “indie” has lost most of its meaning. It can mean anything from programming students as a hobby to developers like Double Fine. So why try to fit into such a broad framework? games?)

The second part is a bit counterintuitive. Let people know about their plans for discounts on the game. I will not go so far as to recommend no discounts at all. Price promotion helps to renew interest in the game and get users to talk about it again. In the second step, people can remain who only partially recognized that the game is as good as everyone claims, and the price reduction can give enough motivation for them to try it. As I said, you need to use this method fairly moderately so that players do not feel that they should just wait for a discount. And if you tell them when the next discount will be, they will be able to make an informed decision based on this information on whether the discount is worth the waiting time.

Let's look at an example: how Axiom Verge used all these steps

Step 1 - quality / positioning. Of course, I can be biased, but it seems to me that Tom Hap was able to make something unique from Axiom Verge . This is a type of game for which there is no genuine substitute. But of course this is not for me to judge. As I mentioned earlier, we will strive in every way to ensure that as many review authors who want to get a copy of the game as possible get it much earlier than the official release. If we run out of codes for PS4, we will provide them for the PC version. We will ask them to hold their reviews and not publish them earlier than a week before the release, not to hide the results of these reviews, but in order for all authors to have enough time to complete and write detailed reviews. (I'm not completely naive. Of course, some of them play only 5 minutes and write a review of their impressions. But I hope that there will be a minority of them.) We will see what they can say about the quality of the game.

Step 2 - talk about the game world: well, in fact, we tried to do the best of what we have. Tom has prepared a mountain interview for the press. Every month we laid out for the press a lot of gradually expanding builds, so that journalists could learn a little more about the game each time. We showed the game at exhibitions such as E3 and IndieCade, and are going to tour all over the country to show the game over the next couple of weeks on GDC, PAX East and SXSW. Sony has given us tremendous help by providing a forum for discussing the game on the PlayStation Blog and displaying it at the points of its retail sales. With a big advertising budget, we could spread information even more, but I think we did everything we could.

Step 3 - Having fully completed Axiom Verge 5 times already, I am absolutely sure that buying for $ 19.99 is a good bargain. (Again, bias!) We have not announced our plans for price incentives so far, so I can do it here. Sony has just announced that Axiom Verge will be participating in the sale of Spring Fever. All the games of this sale during the week from their release will cost 10% cheaper for PlayStation Plus subscribers. I am pleased with this, because if there is someone worthy of a discount, then of course, these are our hottest fans who have supported us all this time! After the first week I will not make discounts on Axiom Verge for 6 months after the release. This means that the first discount is possible in October 2015. More precisely, we have not yet decided whether there will be a sale in October. We just decided not to give discounts before this period.

Announcing our plans, I strive to resolve two issues: first, I hope that people who want to pay the full price will not think that they made a mistake. Secondly, I hope that players who consider $ 19.99 too high a price will be able to make a more informed decision. If they want to wait for the cost reduction to, say, $ 14.99, then let them judge for themselves whether the $ 5 six months are worth the wait. For some, it may be so, but for someone not. And this is quite normal. I want buyers to make informed decisions with as much information as possible, and I don’t want players' disappointments. Because we want people to enjoy what they buy. And in this we are all unanimous.

PS from the translator: Axiom Verge was released in March 2015 and received very good reviews. On axiomverge.com, it still sells for $ 19.99 (there are discounts on other sites, of course).