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Dhruin April 13th, 2009 23:46

Spiderweb Games - Blog Update
 
Jeff Vogel's latest blog post argues that services that cap the price of indie games (Amazon, Xbox Live etc) are potentially damaging the indie games industry.
More information.

RampantCoyote April 13th, 2009 23:46

I've heard from many indie developers who now have their games on Amazon at half their previous price. In general, the increase in sales didn't even come close to doubling. They lost money in that experiment, and it's hurting them.

I don't know about Jeff's old rule-of-thumb: "Charge half as much as the comparable product being sold in boxes on store shelves." The difference in production values between an indie game and a "comparable" product can be pretty extreme. But still - it seems to work okay for him.

Yeesh April 14th, 2009 00:23

I love this blog. I feel Jeff's in danger of becoming one of them controversial loudmouth types who have legitimate points but say them with too much derision, but this hasn't happened yet, and then again what do I care?

Certainly from the game designer's perspective and from ours, work-intensive niche games deserve pricing flexibility. Who's to say what a particular game is really "worth", but the fact remains that niche games have small audiences who compensate for their low numbers with a willingness to pay higher prices*. So by limiting niche games' prices, amazon and apple are penalizing niche devs without increasing their sales numbers. Boo!

On the other hand, from the online retailers' perspective, the price controls are important. Think about this: iTunes would not be as popular if bands (or music compnaies) had had any input into individual song prices**. Anyone who likes anything could come up with a reason those songs or that software should be worth more, and that means no one would want to be the song or game selling at the lowest or lower price points. Spiderweb games have a reputation for being extremely deep and LONG and good, so sure I'm won over by Jeff's contention that his games are worth more than the limits the retailers impose. But then "worth", to us here at the Watch, means something other than it means to people who make shiny pretty games that last 6 or 7 hours, and of course "worth" to us also differs from what "worth" means to the majority of game buyers. So if Spiderweb games should not be subjected to an arbitrary cap, then who is to say that ANY game should be subjected to one? It all depends on what you value more in your games, and NOT in how much the games cost to make.

But the online retailers know what they are doing, and they don't want all these games to have high prices. Since it's pretty subjective which games are "worth" more, they instead just put blanket caps and make no exceptions***. Again, they do this because the alternative is for not just a few games but MOST or ALL games to have prices that are above the point where the online retailer feels they need to be for the overall collection to work as a coherent store.

Anywho, what do I know? But I think there's reason to the online retailers' madness, although I certainly sorry that it works to the detriment of a shop like Spiderweb which I of course respect and which I hope keeps flourishing.

*Or really, lower prices than AAA titles, but higher than $5 or $10 a game. Although of course for some games we pay even higher prices than AAA titles. Dominions 3 is years old, but you still have to fork over $55 I think.

**Yeah, I know they've changed that somewhat now, but the change come AFTER the 1 billionth sale so I think the point stands.

***Note that I actually have no idea what I'm talking about, but this follows from what Jeff's writing.

Gorath April 14th, 2009 04:11

Quote:

Originally Posted by Yeesh (Post 1060943401)
[…]On the other hand, from the online retailers' perspective, the price controls are important. […]

I think you've just given one major reason why the current pricing system is totally fucked up.
As you correctly said (or implied), portals nowadays are no longer publishers. They are no longer doing anything to get the game sold to people who don't know about it, apart from putting it in a couple of their feature lists on the front page. As soon as the sales slow down the game is pushed off the lists and one of a 1000 in the back catalog.

So portals in general are only e-tailers - but they behave as if they still were publishers.

I don't see a reason to treat an e-tailer differently than a conventional offline retailer. The one taking the financial risk sets the wholesale price. He ships finished goods to the retailer. Then the retailer can sell for whatever price he deems appropriate.
It would be absolutely stupid to let a retailer decide about the most important variable regarding a developer's success. No retail manufacturer would ever let this happen. He would never agree to "n% of m$, with m to be determined by the retailer". There is always a fixed price, a lower bound or a connection to an index.

GothicGothicness April 14th, 2009 17:03

I think what you guys do not know, is how much of a difference getting a game on a portal could make. We are not talking double or tripple,,,, we are talking much much more. I know from my friend, she could not make a living by her games until she got them on portals at that time her profit grew a lot. The reason for this is that the portal has signed up members, and when they play one type of game they love they are recommended other simular games on that portal……… which is a kind of marketing……

Yeesh April 14th, 2009 19:24

@Gorath
I find no fault with your analogy to offline retail, but we know that things are different enough in the online world that different rules can and do apply. Most importantly, can you really look at mega-e-tailers like Amazon and iTunes and say they are "no longer doing anything to get the game sold?" Like GG says, just being in those stores leads to sales in a way that being in an individual chain, even a national one, would not. I mean, maybe Walmart is analogous, but even that's stretching it, because Walmart doesn't provide an in for indies, and Amazon and iTunes do just that. In spades.

In your own example, you cut out the publisher. True, these mega-e-tailers aren't acting like publishers, but then neither are the developers. We have a new model. There's no reason that pricing power which used to belong to publishers should shift to the devs rather than the e-tailers. Amazon doesn't provide a damned thing that Spiderweb can't, for example, in terms of the game you download. So why should Spiderweb want to sell games on Amazon? Because Amazon DOES increase sales big-time. In return for this sales bump, Amazon demands price caps. If Spiderweb doesn't like it, they can keep selling games the way they have been, and lose all those potential sales. And complain about it. I'm only saying let's not pretend Amazon isn't bringing anything to the table; if they weren't, why bother having this conversation?

@Indy game publishers, and anyone who can influence them:
This is so stupid. While I was typing this out, I figured out the answer. Just frigging cut your content up into sizes where (price cap) X (# of chunks) = (what you want the game to sell for), and this whole issue vanishes. Duh. Just make Geneforge 5 Chapter 1, 2, and 3. Tada!

Gorath April 14th, 2009 20:29

Quote:

Originally Posted by GothicGothicness (Post 1060943494)
I think what you guys do not know, is how much of a difference getting a game on a portal could make. We are not talking double or tripple,,,, we are talking much much more. I know from my friend, she could not make a living by her games until she got them on portals at that time her profit grew a lot.

I am aware how much of an effect the portals have. And I can't help the impression they are shamelessly abusing their power, to the disadvantage of indie devs.
Please ask your friend how his/her numbers have changed since Amazon entered the business in February. The numbers from ca. a dozen indies I've seen - Jeff linked to a couple of articles, the rest can easily be found - mostly indicate that they earn less since then. Meaning the price cut does not lead to a big enough sales increase to compensate for the loss.
This in combination with the ongoing downward spiral for indie game prices leads me to the conclusion that it's no longer clear selling through portals is still a promising business modell.
Imagine your friend releases a new game. On day one a big portal decides to sell it for 0.99$, as a loss leader for something else. But oops, it's not even a loss leader because your friend gets the usual 35% royalty deal. Then most other portals will follow suit and either match the price or refuse the game. Result: Your friend is out of business because he/she cannot recoup the budget from 35 cents per unit.

Let me repeat: It's bad business to give away control over the pricing structure. Whoever takes the financial risk has to maintain control over the pricing. Negotiate rebates based on volume targets, use the whole spectrum of price negotiation mechanisms developed since Athens was the capitol of the world. But maintain control over the price. If you give it away your business is a hostage in the retailers' hands.

Unfortunately I don't see enough leverage for most indies to push this through. The opposite will happen: The portals will tighten the screw until somebody stops them. Which will not happen anytime soon.

The only way out I see would be a competing portal run by, say, the 50 most successful indies. The portal gets all their games exclusively (apart from direct sales!). All other portals can license from the new portal. Of course the portal would refuse to make deals without a minimum wholesale price.

Quote:

The reason for this is that the portal has signed up members, and when they play one type of game they love they are recommended other simular games on that portal……… which is a kind of marketing……
Word of mouth. The best marketing available - but it's not based on effort by the portal here. ;)

RampantCoyote April 14th, 2009 20:37

A friend (and former employer) of mine developed a humorous 'space station tycoon' style game called Outpost Kaloki. When they finally got a major portal to pick it up, they were thrilled. First one major portal picked it up, and then several did. These guys were jubilant.

And then their royalty checks started coming in. They were devastated. The sales were something like an order of magnitude below their conservative estimates. They almost abandoned the whole idea of indie game development altogether.

Fortunately, the story ended happily, as they managed to show the game to the Microsoft team in charge of rolling out the XBox Live Arcade for the XBox 360, which was due out in a year. Since they were a launch title, and the game kicked butt, they did well with the revamped XBox 360 version. But sales of the PC games - even through the major portals - remained much worse than merely disappointing.

Getting onto a portal *can* make a huge difference for certain kinds of games. I can speak from both first-hand and second-hand experience, however, that it's no guarantee of success. If you can get into the top ten on a few choice portals and STAY there for a while, you will probably find it well worth the 65%+ commissions that the portals take. They have spent years (and lots of money) building their audience and marketing system, so there is great potential there.

But the majority of games appear, enjoy dozens or hundreds of initial sales the first week, and then fade into obscurity after that. If you have a game that doesn't align very well with the portal's audience, you can do better sales from your own site (if you put some real effort into marketing).

I think that this might be part of the reason Vogel isn't selling his more recent games via the portals - he can probably do better on his own. He's not the only one. And developers have told me that they've had games that have sold a ton on one portal, but barely register a pulse on another.

As far as breaking your content out into chunks: Good in theory, and it's definitely being tried with some success (see Penny Arcade Adventures, Sam & Max, etc.). But it's had its failures, too. If try and pursue an episodic format, you really have to build your game AND your business around that idea. You can't just divide a game into pieces arbitrarily and expect any reasonable results.

One other option that isn't pursued too frequently in the indie space is a tiered pricing scheme - where you offer a scaled-down version at a budget price, a medium-scaled version at a reasonable price, and an upscale enthusiast version for a premium price. I know of one developer who has done just that - Hanako Games' Cute Knight / Cute Knight Deluxe - where she offered the deluxe version from her own and affiliate websites, with only the original version selling on the portals. There have been a few other efforts at having a "collector's edition" for indie games, or offering soundtracks of the music, or whatnot….

So it's been tried, just not really fully explored.

The bottom line is that it's never as simple as it first appears. I don't think Vogel has the ultimate answer, nor do I imagine he'd claim he does. But I believe the portals are really pushing towards commoditized, disposable games - and that's part of why they are pushing the new, lower price points. They also push the one-hour demo size… because that's what works for the majority of the games that they sell, and they are really going for a "one size fits all" experience.

As a gamer, I don't want to play generic, commoditized, one-size-fits-all games that are the game industry's equivalent of fast food. At least, not that often. I'd rather play the cool, quirky, niche games out there that are more oriented towards my own weird preferences… which could and should command a higher price.

Gorath April 14th, 2009 21:14

Quote:

Originally Posted by Yeesh (Post 1060943518)
@Gorath
I find no fault with your analogy to offline retail, but we know that things are different enough in the online world that different rules can and do apply. Most importantly, can you really look at mega-e-tailers like Amazon and iTunes and say they are "no longer doing anything to get the game sold?" Like GG says, just being in those stores leads to sales in a way that being in an individual chain, even a national one, would not. I mean, maybe Walmart is analogous, but even that's stretching it, because Walmart doesn't provide an in for indies, and Amazon and iTunes do just that. In spades.

The things Amazon and iTunes do are comparable to BIG specialized retail chains with staff who knows their stuff. With the difference that they don't even have to pay all the costs related to physical product.
Big retailers have a big audience. Getting in front of such an audience often has a huge value. But this value is certainly different for different products, even more so in combination with a price cut. I've read about (a few) indies with increased earnings after the price cut enforced by the Amazon situation (-> positive value), but 've also read about (more) indies with significantly less income (-> negative value!).

Please not that indies were neither asked beforehand nor notified about the new lower price. Amazon bought Reflexive, integrated them into their shop and lowered the price. The only indies not harmed by this were the ones clever enough to negotiate a minimum price into their Reflexive contract.

Quote:

In your own example, you cut out the publisher. True, these mega-e-tailers aren't acting like publishers, but then neither are the developers. We have a new model. There's no reason that pricing power which used to belong to publishers should shift to the devs rather than the e-tailers.
I think you've got the perspective wrong. There is no "shift" in pricing power. Our whole economy is built on the principle that somebody produces a product and puts a price on it. That's not unusual, it's the standard. Then the market is either willing to accept the price or not.
For an indie game this would mean that the dev wants a market price of 19.95$ ( = RRP). He agrees to give shop A a rebate of 30%, Amazon 70%, a smaller portal 60%. All on the RRP. Or he simply asks for n$ flat. It's effectively both the same after the negotiations are over. Then Amazon can, say, buy the game for 8$. For how much they sell it is their own business. If they sell for 0.99$ you still get your 8$.

As of today, everybody here could write a book, list it on Amazon, set the price and let Amzon handle all formalities. All they demand is finished product, 60% when something gets sold and certain storage costs. That's better than the deals the typical indie gets.


Quote:

Amazon doesn't provide a damned thing that Spiderweb can't, for example, in terms of the game you download. So why should Spiderweb want to sell games on Amazon? Because Amazon DOES increase sales big-time.
See elsewhere in my posts. This is unproven and not undisputed. Plus selling through portals has other negative effects, for example no new customers for the indie (address data is not transfered!), lower price everywhere including the indie's own site (usually almost 100% margin), the customer expects a lower price ( -> he values the product lower). That's a very complex topic. I doubt there are general rules. Every indie has to decide this for himself.
It's only simple if you can say "every sold unit earns me x.xx$" or "The whole (special sales) project earns me 500k".


Quote:

In return for this sales bump, Amazon demands price caps. If Spiderweb doesn't like it, they can keep selling games the way they have been, and lose all those potential sales. And complain about it. I'm only saying let's not pretend Amazon isn't bringing anything to the table; if they weren't, why bother having this conversation?
Of course they are bringing something to the table. It's just not clear to whose table. ;)

Quote:

@Indy game publishers, and anyone who can influence them:
This is so stupid. While I was typing this out, I figured out the answer. Just frigging cut your content up into sizes where (price cap) X (# of chunks) = (what you want the game to sell for), and this whole issue vanishes. Duh. Just make Geneforge 5 Chapter 1, 2, and 3. Tada!
A good idea. Many indies will do just that. But on the other hand, as Jeff correctly writes, the more specialzed your product the more money you should ask for. Jeff would need ca. 4 9.99$ units to compensate for 1 28$ unit, due to the fixed costs (transaction fees, etc.). Is this possibe? Only Jeff can answer this. Please remember the target is to maximize your earnings, not the amounts of units sold.

Stanza April 15th, 2009 00:00

Maybe I missed it above, but for me a big factor is trust. I have no problems giving my credit card number to Amazon, and know from past experience if there is any problem with a seller, Amazon will refund my money and cancel the order.

I'll refuse to buy games from indies who use payment services I've never heard of, or ones I've heard of but have reservations over (like paypal). However much I may want a game, I'll pass it up if I'm not completely certain the pay system is legit.

That sense of trust is one significant advantage for the big-name portals.

Squeek April 15th, 2009 04:40

I liked Jeff's approach to figuring out how much to charge for a game, except he left out the first consideration. Just about everyone makes that same mistake, so it's forgivable.

Ask someone who's looking for a new job how much they feel they should be paid, and they'll invariably go into that same kind of analysis. That's fine, but it's the wrong way to answer that particular question. The only right way to answer that is to venture an opinion of what the market will bear for someone with your same skills and amount of experience. All other considerations are secondary.

That may seem nitpicky, but it can make a world of difference. One should always determine fair-market value first, IMO, and then go from there.

Dhruin April 15th, 2009 05:38

He did - he feels half of the price of a standard AAA game ($50 - $60) is fair market value. Beyond that, I'm not sure asking that specific question gains any better clarity in this situation. How does one compare the market for complex western indie CRPGs, when you are practically the only regular producer of such a product? What, exactly, is the market? Is it the 5000-10000 people who currently buy it, or the 50,000 that might buy it at $1.99 or the total pool of all game buyers? Which produces the most net income (ie, after expenses)?

GothicGothicness April 15th, 2009 11:26

Quote:

I am aware how much of an effect the portals have. And I can't help the impression they are shamelessly abusing their power, to the disadvantage of indie devs.
Please ask your friend how his/her numbers have changed since Amazon entered the business in February. The numbers from ca. a dozen indies I've seen - Jeff linked to a couple of articles, the rest can easily be found - mostly indicate that they earn less since then. Meaning the price cut does not lead to a big enough sales increase to compensate for the loss.
I agree with you there Gorath. But if you are an unknown indie, you're going to have to work real hard if you try to sell it by your own marketing only. One idea is to put the first game up cheap on portals, and build a fanbase, said fanbase would if they loved your game visit your website and buy the sequal directly from it.

I personally think this might be the best route for new developers.

BillSeurer April 15th, 2009 17:37

Quote:

Originally Posted by Squeek (Post 1060943559)
I liked Jeff's approach to figuring out how much to charge for a game, except he left out the first consideration. Just about everyone makes that same mistake, so it's forgivable.

Ask someone who's looking for a new job how much they feel they should be paid, and they'll invariably go into that same kind of analysis. That's fine, but it's the wrong way to answer that particular question. The only right way to answer that is to venture an opinion of what the market will bear for someone with your same skills and amount of experience. All other considerations are secondary.

That may seem nitpicky, but it can make a world of difference. One should always determine fair-market value first, IMO, and then go from there.

You are confusing a job with a product. When doing a job the employee usually has minimal, if any, costs. So whatever the employee makes is pure "profit". If I am producing a product there is some cost involved (fixed + per item sold) that I *have* to make back or I have no profit and am actually losing money. And if this is my job I also have to make enough to pay myself.

Squeek April 15th, 2009 19:12

Quote:

Originally Posted by BillSeurer (Post 1060943598)
You are confusing a job with a product. When doing a job….

I'm comparing the two, because everyone can relate to getting paid for their work. Your points are all worth considering, of course. But my point about fair-market value is that it's like putting the horse before the cart. It's best to determine that first.

@ Dhruin: It's an opinion, so no matter how hard it may seem to determine, it's never impossible. For some reason that rubs nearly everyone the wrong way (unless you're talking about antiques, and then they love it), but it's just the right way to start — at least IMO.

Yeesh April 16th, 2009 01:19

Quote:

I'll refuse to buy games from indies who use payment services I've never heard of, or ones I've heard of but have reservations over (like paypal). However much I may want a game, I'll pass it up if I'm not completely certain the pay system is legit.

That sense of trust is one significant advantage for the big-name portals.
I have been contemplating the following question:

How can Amazon, popular though it surely is, provide a sales bump to Spiderweb games? To be more pointed, How could there be anyone in the whole Interwebs who actually might pay money for a Spiderweb game, but doesn't already know about them? Amazon isn't Walmart; it's for people who use the frigging internet. So how do they not just download the game from Spiderweb?

So maybe this is one answer. But it's not a great answer. I mean, it seems like a stretch that someone would go through all the trouble of developing an indy RPG series and establishing credibility on all fronts, just to steal your credit card info. AND if you see a charge on your credit card you didn't put there, Visa or Mastercard will just take it off. But then it's true, you can't be too careful these days.

Benedict April 16th, 2009 17:07

Quote:

Originally Posted by RampantCoyote (Post 1060943395)
I've heard from many indie developers who now have their games on Amazon at half their previous price. In general, the increase in sales didn't even come close to doubling. They lost money in that experiment, and it's hurting them.

I don't know about Jeff's old rule-of-thumb: "Charge half as much as the comparable product being sold in boxes on store shelves." The difference in production values between an indie game and a "comparable" product can be pretty extreme. But still - it seems to work okay for him.

All depends on the utility that the market places on production values, Jeff's costs by basically totally forgoing production values may only be 5% of the costs of a comparable mainstream release, but if consumers only consider production values to be 50% of the total enjoyment of a mainstream release then he's pitching it well.

Actually thinking about it I probably place more than 50% utility on production values myself and I'm a loyal spiderweb customer, but the other aspects are so much better. Or to put it another way, if there was ever a release with Fallout quality graphics and Spiderweb quality plot lines & gameplay I'd happily pay far more than standard releases.

Benedict April 16th, 2009 17:20

Quote:

Originally Posted by RampantCoyote (Post 1060943530)
Getting onto a portal *can* make a huge difference for certain kinds of games.

Only certain types of games I'd imagine, I can't see indie games which are indie because they target a niche too obscure for the mainstream publishers to have cornered it doing well out of it, I agree with Jeff. Especially with the internet being what it is these days, the kind of demographic Jeff is aiming for will almost entirely be on the net and using one or more forums, information is disseminated so differently now.

Plus he's being going long enough that he must have such a high proportion of ongoing sales from existing customers so the sales increases would be smaller for him and make any price drop harder to swallow.

I would have thought that releasing some kind of teaser pack of older releases (e.g. avernum 1 & geneforge 1) through portals would do well even at prices so low it's basically giving them away. Direct sales for those must be pretty limited now so the price drop wouldn't have any real impact and it'd stand a good chance of luring in new customers who'd want to work their way through later releases at full price.

Quote:

As far as breaking your content out into chunks: Good in theory, and it's definitely being tried with some success (see Penny Arcade Adventures, Sam & Max, etc.). But it's had its failures, too.
I've been enjoying Penny Arcade but would much prefer it had they done it all at once.

zakhal April 16th, 2009 18:29

Matrix games releases lots of niche games mainly war ones and they are mostly all full priced. Last game I bought cost up to 60eur. Still they are doing very well, because there is a certain niche that always buyes them no matter what the cost. The games are designed directly for their taste so they will always be there to buy them. Also they sell them only through their own distribution so they get max profits and full control.


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