Aggressively low game pricing = x40 sales increase

[weemadando]

True, it works mostly with heavily promoted sales, but you have to wonder the volume that some games might have sold had they chosen to launch at ten bucks instead of sixty, but with a heavy campaign behind them like this.

There’s a lot we don’t understand about pricing games. But as more and more evidence pours in, the most common pattern appears to be: the less you charge, the more you make. There are so very many examples of this, from iOS pricing phenomena, to the extraordinary revenue generated by the Humble Bundle pay-what-you-want schemes. Further to this come comments from Valve’s boss, Gabe Newell, who recently explained how erratic pricing results can be, but the undoubtable success of offering massive discounts. And perhaps more surprisingly, they seem to have discovered the importance of using the phrase “Free to play”.


It seems Valve are constantly experimenting on us. Newell explains how the various offers that have appeared on Steam are as much science as they are capitalism. As reported by Geek Wire, Newell discussed the difference between silently discounting a game, and making a big fuss about a sale. When they quietly lowered prices, they found it to be elastic (sales increase proportionally, so the overall revenue remains the same), but…

“The sale is a highly promoted event that has ancillary media like comic books and movies associated with it. We do a 75 percent price reduction, our Counter-Strike experience tells us that our gross revenue would remain constant. Instead what we saw was our gross revenue increased by a factor of 40. Not 40 percent, but a factor of 40. Which is completely not predicted by our previous experience with silent price variation.”

This experiment was successfully repeated with a third party game, and the result is the non-stop flow of heavy discounts you’ll now see on Steam. It’s no coincidence that the already massively discounted GTA games, being priced at 75% for all of them ever (now £5) is the number one best selling title on Steam.

More peculiar is the discovery of the difference between saying something is “free” and saying it’s “free to play”. Newell’s explanation is not entirely clear, but it seems that the latter implies some greater level of content and long-term support for players. He says,

“The most recent thing that also is really puzzling is that we made products available for free on numerous occasions, without significantly impacting the audience size. We recently said, we’re now going to do something different, we’re not only going to signal that it’s free but we’re going to say, ‘it’s free to play,’ which is not really a pricing signal, even though that’s what you would ordinarily think it is. And our user base for our first product that we made free to play, Team Fortress 2, increased by a factor of five. That doesn’t make sense if you’re trying to think of it purely as a pricing phenomenon.

Why is free and free to play so different? Well then you have to start thinking about how value creation actually occurs, and what it is that people are valuing, and what the statement that something is free to play implies about the future value of the experience that they’re going to have.”

And being free to play, rather than simply free, seems to bring with it profit. Newell reports that since TF2 has become F2P, they’re seeing a conversion rate of players of 20 to 30 percent, going from getting the product free, to spending money on hats, etc. Why? No one yet knows. As the bossman concludes,

“We don’t understand what’s going on. All we know is we’re going to keep running these experiments to try and understand better what it is that our customers are telling us. And there are clearly things that we don’t understand because a simple analysis of these statistics implies very contradictory yet reproducible results. So clearly there are things that we don’t understand, and we’re trying to develop theories for them.”

Make sure to read the rest of Geek Wire’s transcription, which also includes thoughts on piracy, and Valve’s impressive success in Russia.

[Andrew_Fireborn]

It's... honestly not that surprising.

When something goes on sale 'silently,' only people who know about the product are likely to see it, and of those people, the majority will likely have already purchased the product.

If you put media/effort behind it, you're going to make a wider audience aware of not only the product, but it's temporarily cheaper to obtain state. This will obviously increase impulse buys. Though, a repeatable ~40x increase is quite impressive.

The "Free" versus "Free to Play" conundrum is more interesting to me. I'm jaded by the various NCSoft/Korean "Free to Play, Pay to Win" MMOs that come out every so often. So, the phrase is, to me, a connotation that they will be trying to nickle and dime me as hard as they can.

But, I can easily see how this can give the implication of continued support for a product that is "Free to Play."

Of course, TF2 is something of a unique case. Virtually all of the content can be obtained freely. (Main exceptions being promotional items prior to, I think, the Shogun: Total War pack. Where they stopped being simply reskins or hats.) But, because of the randomness of the drops, and the extremely low drop cap, it can take quite a while to get an item you want. Subtly encouraging people with excess money to pay for the exact item they want.

Although, their prices are downright extortionate. Especially the hats, which are often high enough that you'd be able to get the real deal for just a little bit more.

[Stark]

It's not hugely transferrable because Steam has a huge population of people so stupid they buy games they never, ever play, but it's pretty obvious. They don't address that their prices are attractive as they are relatively lower; changing prices across the board would almost certianly not have the same effect. However, other services aren't as interested in competition due to closed playpens - PSN and XBLA have no competitors, for instance, and so can sell shit at absurd prices all day long.

And free to play is a model that's been proven for years. Turns out if you give people something fun to do for free, they'll buy other stuff even if they don't have to. Buying xyz consumable in an MMO is even less lame than buying a hat in TF2.

It's always been obvious that you get more sales at lower prices, especially if you call it a 'discount'. 90% of indy developers are just retards/greedy. Even saying you want to sell at $20 and having a '50% off sale' basically all the time works.

[weemadando]

For me the shock was that it's 40x increase.

For smaller games and indies it's easily believed as it may be the only time they've had publicity, but for CS to have that kind of jump is honestly surprising.

[Steel]

And free to play is a model that's been proven for years.

Thats not what the article is talking about.

What he said is that doing the exact same thing (making a game available for purchase for free forever) creates vastly more interest if you label the game as "Free to Play" instead of "Free".

[Stark]

Why? People on Steam will literally buy anything, and if it's reduced to a couple of bucks every market shows people will buy it at a very low level.

Expecting that to be transferable to other markets or other products is probably a little credulous, even if you believe Gabe Newell (who I consider an enormous retard). The real laugh is idiots like the guys who make Dominions or that guy who ported KoDP to iOS who just don't get the curve of price and sales. Would Angry Birds have been so popular if it cost $10? Fuck no.

[weemadando]

I had just assumed that nearly everyone who has Steam would have already had a copy of CS.

And I don't think its 1:1 transferable, but I think that some publishers could learn (ans some have) that 60 isn't the only price point. The increase in the number of 40 buck releases is interesting, but the upward creeping costs of XBLM/PSN store content show everything you need to know about closed market economics.

Nerds pay 10? Try 15. They're paying that? Lets go higher, what're they going to do? Shop elsewhere?

And yeah, that KoDP pricing is prime indie idiocy.

[Stark]

If the price point wasn't xyz high number, these sales would have less effect. They'd still work, since when a game is cheaper than a bottle of coke people are going to buy it for no reason, but the contrast wouldn't be there. It's funny that the nature of XBL/PSN is such that they set prices, not developers, and they're almost certianly trying to create a market for 'better' games by guarnteeing revenues... which means Dungeon Defenders on mobile is $3, on XBLA is $20.

The KoDP guy even used really stupid rationale, like 'this guy on this blog priced at $10 and was fine' and 'I don't personally think I'd get more revenue at lower price point', which is why KoDP costs more than full 3D multiplayer shooters, branded culture icons, accessible Diablo replacements, etc.

Cheaper prices are good - but bigger sales are also good. Like I said, even on smaller markets like iTunes etc, it's very common to set a price and then constantly mark it down - basic marketing.

[Artemas]

what blows my mind is that it took this long for corporations to figure out shit like price equilibriums

its only been the last couple years that big discounts or price changes have been seen

a couple years ago the local game store still had the starcraft battle chest at like $80 or whatever a decade after it came out

despite being literally the same copy since 2000

it was even covered in dust

[Stark]

That's a special case, though - the EB I frequent with my constant returns sells Diablo/Starcraft battlechests at retail price really quickly.

There is apparently a limitless demand for those games, so there's no real incentive to lower the price.

But when you're making games or games in genres that aren't profitable at $60, there are alternatives.

HOWEVER ironically fat people don't like this idea - retail games at lower price ($30 or whatever) are drilled in the media for sucking, despite being cheaper, which cements the idea that you either make a $2 casual game or a $60 BLOPS KILLER. I played Cursed Crusade, for instance (launched at half 'regular' retail price) and whilst it wasn't very good it was fun and completely stopped at the start of act 5. Reviews? ASS FAIL DON'T PLAY IT WAH.

In other words fat nerds on IGN ruined the game industry. :V

[Artemas]

well yeah, blizzard stuff i guess is a bit of a special case

but seriously, before 3 years ago or so, there could be 2 or 3 year old games (that failed) at full price

if there was a price drop it was only like 25%

and only now are we seeing a lot of non-indie games selling for less than "real game" price at launch

its bizarre

[Stark]

Yeah it was around earlier this year non-AAA games launched at $80 instead of $100. I'm not sure how successful it is,though, given that they were all probably excoriated by the media and nerdspheres.

Maybe the retail market really can't support many price-points. The digital scene (i'm from the 80s i'm allowed to say that) is totally different, of course.

[Mr Bean]

Yeah it was around earlier this year non-AAA games launched at $80 instead of $100. I'm not sure how successful it is,though, given that they were all probably excoriated by the media and nerdspheres.

Maybe the retail market really can't support many price-points. The digital scene (i'm from the 80s i'm allowed to say that) is totally different, of course.

I don't know about Aussy retailers but Gamestop is notorious about not support multiple price points, PC games are 20$, 30$, 50$ or 60$ sales are non-existant, Console games are 60$, you will see USED games(Which they set the prices for) in there for 21.99$ or 17.99$ or 5.99$ but Console games are in the 29.99$ or 59.99$ areas only.

Sales happen only on used games, Best Buy and other such don't do sales period what you see is what you get unless it's a special occasion and most "sales" are fake sales when a price downgrade comes in they will advertise it as a sale, IE when Black Ops gets marked down 49.99$ It will be on sale for two months then they just list it for 49.99$ or however long it takes for the next round of price downgrades come through to get them the 5-10 games "on sale" they need in their advertizement.