Wednesday, February 10, 2016

How to Sell a Video Game Part 2

(Here's part one if you missed it:

Last post was all about the difference between variable and static pricing. As you'll recall, variable pricing is where the producer sells the same (or mostly the same) product to consumers at different prices. When talking about the videogame industry specifically, the big advantage from such a practice is being able to treat your customers as a group, instead of single customers. As long as the average sale price for each customer is high enough, the producer can make his profit, even if some people don't pay a cent.

What's the advantage to treating customers as a group instead of solo purchasers? While also utilizing the traditional advantages to variable pricing, it makes great use of social connections. Put simply, people like to play with their friends and to look good to other people. Take two friends that want to play a game together. Because they will only play together, there's no sense to treat them as two separate customers. Instead, it's better to treat them as one single customer.

Before the internet was a real thing for gaming, their options for a single purchase would mostly be console games, often using split-screen or having everyone on the same screen. One game, one purchase, but multiple people playing at the same time. As far as PC games go, outside of illegal activity or the rare two players on one monitor game, the only company I know of that had anything similar that I know of was Blizzard games and their spawning mechanic. Same idea applied though. Best example for a game targeted at a group instead of a single player was Rock Band/Guitar Hero. The game plus peripherals was expensive, but the combined experience was a lot of fun, and with the purchase split across the group the cost was very similar to other games.

Now with the internet, producers have more options to sell to customers and still target them as a group. Broadly speaking, I'd split the methods into three major groups (though possible overlap is always available): ads, cosmetics, and power. As well, all the old traditional possibilities are still available, but have the possibility of being smaller. A producer can sell a content expansion same as before, but only sell, say, $5 worth of content while getting the same percentage of profit as with the old $30 expansion. The old practices didn't disappear, but instead get smaller and more targeted.

Ads are simple to explain, just about everyone is familiar with them, because it's been the sales method of choice for public entertainment for decades. TV doesn't ask you to buy an episode before you watch it, opting to show ads along with the show to generate their revenue. Doing it with games works in a similar manner. The interesting bit with this method is there's no decision needed in order to "purchase" the content.

Seems small, but think of how much you care about a small decision to buy a $2 coffee. It's only $2 right? How hard can the decision be? Surprisingly, it is a difficult decision to make. All money is precious, even small amounts, and for most people a small amount of money still requires the thought any other purchase will take. The small amount of money actually ends up working against the producer, because rather than go through the decision making process on the worth of a game, it's often easier and better to skip the process entirely. It's only $2, it couldn't be worth that much to you to have you go through the decision making process. Hence, the big advantage to selling via ads, is you can skip that process entirely. Usually, it's made better by offering the option to skip ads entirely, for those that want to make that decision. Again, more options to sell to customers is better.

For me and my game, the plan is to sell via ads with the option to disable them for a price. I don't expect to make a game that's worth all that much, so I imagine the "worth" of the game would only be ~$1-$3. I could sell it straight for what it's worth, but given how unknown both me and the product are, I wouldn't expect to get many people past that decision threshold, even if they would deem my game worth the time if they had the chance. Why not sell cosmetics or power as well? Short answer: a singleplayer game like mine doesn't have enough social connection to make cosmetics valuable, and the game isn't setup right to take advantage of selling power while not annoying legitimate players.

If people really want to hear more analysis about selling cosmetics and power in games, feel free to let me know and I could do another post about them. Until then, I think this mostly answers the question of my choice of sales decision.

Final note: Please, if you found this interesting, make sure to like, share, and subscribe. They're really small actions, but it's surprising the effect they have on spreading projects around. Thank you, and hope you enjoyed reading this.

Monday, February 1, 2016

How to sell a Video Game

As some of you may have heard, I'm currently working on producing a little Android game with a friend. The interesting bit is whenever I talk about the game, there's two questions that are almost always asked: "What's it about?" and "How are you selling it?". The first is quick and easy: It's a little town building game. The second, while also quick to answer, is interesting because it is being asked. Not too long ago, if one were selling a game, it'd be sold the same way every other game would be sold. Now, things are a bit different.

Games are traditionally sold like any other product. A producer constructs a game, a store buys the game from the producer, and the store sells the game to a customer. One price for everyone, barring the occasional sale and markdowns due to age of the product. Additional content to a game, such as a new campaign or a map pack, would be sold similarly. This made a lot of sense for the time, especially as a substantial portion of any game's price was tied up in the physical bit of the game. Cartridges weren't cheap, especially later on as they were used to add additional capabilities to the consoles. Now, I can download a game for maybe pennies. Development time is expensive, not the actual content itself.

Importantly, I think it should be said that selling to customers should be a 2-way deal. Both sides should be happy, and a good sales strategy should take that into account. Only a few are really built around "exploiting" customers, with the other strategies being variations on the same principle: get the best product to the customers at a reasonable cost. A developer needs some way to get money if he wants to produce content. Finding a better way to gather that money allows him to make more content for those same customers to consume and gain a better life.

Moving back to how games are sold, even though the traditional market still functions traditionally in many respects, some new aspects have crept in. Most especially, smaller direct transactions have entered the market. Often termed "microtransactions" or "DLC" (downloadable content), these come in many different shapes and sizes and have fundamentally changed how game markets. Sometimes, some games have even completely eschewed the traditional market structures in favor of newer models. On the mobile market, at least for Android, you've seen the traditional market disappear entirely.

So, why the interest in these new models? In large part, they're done to cut out the middleman and allow for variable pricing. Any given store will usually take a good chunk of any sale for their cut. Steam takes about 30% of any sale for themselves, and last I knew sales in a more traditional store would take more. Not having to pay that bit is huge, especially give that modern software for handling money transactions safely is fairly cheap in comparison.

Explaining variable pricing is more complex, though it is covered in any basic economics course. Essentially, the idea is that game producers have a monopoly on the sale of their game, and so can charge any price that they choose. The cost to produce each individual item sets a general floor for the cost, but given it costs pennies to actually sell, the developer can ignore that, and so only cares about the demand curve. A demand curve is simple, for any given price of the product, you can expect some number of sales.

Here's an example. Say we know for certain that this graph is accurate. What price do you sell your game at? If you only have one price available, you look at where the price x items sold creates the biggest value. Here, that's the $20 mark, where you'd make $4,000. Great huh? But there's a better way. What happens if we sell to everyone at the $30 mark, and sell to everyone else at the $20 mark? You'd make $5,000 instead. That's a good amount more money, through no change in product. The trick, then, is how to actually make the sale such that some customers pay more than others.

Traditionally for many types of products, the common ways to do this are through sales and brands. Some people will pay extra for a brand name, while others don't care and will buy the same, unmarked product. Sales are another, where savvy customers wait for the right time to buy, while others don't care and pay extra. Both work, and are used to some extent in video gaming, but there are better ways, some exclusive to gaming.

These methods, I'm sorry to say, will have to be explained in an other post. As always, if you have questions or comments, please make sure to leave them and I will get back to you. I hope you enjoyed this bit, and make sure to check out my youtube channel at