Pricing Games and DLC Based on Demand

Previously, this was something that could not be done. Retailers did give publishers sales details for their games, but the data was always a few weeks late. Not only that, it’s hard to change the price at retail. The retailer might have to update the price stickers on all the game boxes and then make the same change in their database. However, with digital games becoming a possibility, many with no retail presence at all, publishers can now price their games perfectly with demand. They don’t seem to be doing this though.

I can only guess it’s because publishers are still stuck thinking like a retailer selling games. You see with digital distribution services, the system can automatically track various statistics and provide more frequent updates than retailers. In addition to how many people bought their game, publishers can now see how many people visit the digital page for their game, how many people have the game on their wishlist, how many people added the game to their cart but later removed it, and more.  All this gives them an extremely accurate picture of demand for the game.

With this data I believe publishers can perfectly cater their game prices to demand. They can create a desired “demand curve” on a graph. This is basically a snapshot of where they want demand at any point in time after release. By lowering game prices whenever demand drops below a certain threshold, they can perfectly fit actual demand with desired demand. This will maximize their profits while at the same time maximizing consumer interest in the game.

They shouldn’t drop the price forever though. At a certain point, demand is so low that a price drop won’t make much difference. Before they even release the game, they should have an idea for the minimum price they will sell the game. For a $60 game that might be $20. Then, they simply watch demand and lower prices as needed to fit their demand curve they created beforehand. I think companies are finally starting to do this with the base game, but they still want to keep DLC prices at full price for all time.

Downloadable content (DLC) or other microtransactions should go down with time as well. There is no reason to have the base game go down but not the DLC. It makes sense for certain games not to do this, for instance, a cash shop in a MMO. Certain items will have continual demand simply due to the nature of the game such as Plex in Eve Online. Other DLC such as Section X in Star Wars: The Old Republic should go down in price. Once that content is old news, no longer the latest and greatest content, the price should be lowered.

In the future, game and DLC prices will go down regularly with time. Almost everyone will be able to get games or DLC for the right price that they can afford. They might just have to wait a little while. This is far better than the old retail-only days when you either bought it at full price or didn’t get it at all. I know lots of people who just didn’t have enough interest to buy various games at full price, but I know they had enough interest if it were half price. A little bit of money from a consumer is better than no money. By the time a game would be priced low enough, retailers had already replaced it on the shelves with the newest full price games.

The NPD Group will always be “irrelevant”

A popular story last week was a statement made by EA’s Labels president Frank Gibeau on the NPD Group’s sales tracking:

My point is it’s an irrelevant measure on the industry. It’s totally irrelevant. We don’t even really look at it internally anymore.

Statements like this have been pretty common over the years from both gamers and industry insiders alike. The game industry has changed since the year 2000. More and more people are buying games online instead of in stores. On top of that games have grown outside of the US and Japan. There is a massive games market in China. The European games market is now bigger than the US games market. Back in 2000, the NPD Group’s reports were capturing about 80% of the games market. These days they are only around 40% of the market. You could say 80% was representative of the market, but at 40%, that is no longer the case.

A lot of people are criticizing NPD Group for this. I mean how can they keep releasing reports and getting the media into a frenzy every month when their reports are not representative? Well, the NPD Group is not stupid. They know digital sales information is desired, and they want the information too. The problem is this information not available. I do not think it will ever be available. You see, there are not enough middlemen in digital sales.

In the retail sector, there are publishers and retailers but also shippers and manufacturers. If a publisher does not release retail sales data, the NPD Group can turn to the other three, the middlemen, to get a good picture of the overall sales. With digital sales there is no need for shippers and manufacturers. Consumers just download the games. Without that information, they really cannot do any analysis on digital sales.

Online there is the digital storefront middleman. Websites like Steam, Gamersgate, Green Man Gaming, and Good Old Games all exist as middlemen in between the publisher and the consumer. So far, however, they have been reluctant to release sales information. I believe this is because they do not want people to see how much money they are really making, lest the market become flooded with copycats and they make less money, but even further down the road, these middlemen will not exist either.

There is nothing stopping publishers from making their own digital storefront. Consumers can access their storefront just as easily as a middleman storefront. There is no place for the middleman in that situation. We already see this with EA’s Origin. For the most part EA games sold online are exclusive to Origin. You might be able to buy them on other websites, but you have to activate and play them through the Origin client. Eventually, all games will be exclusive to their respective publisher’s platform.

As you know publishers are big marketers. When a game sells well they are happy to make a big announcement on the success, but when a game sells poorly, you do not hear a peep from them. So NPD Group cannot get information from the middlemen right now. Even if they could get access to this data someday, it will not make a difference. Publishers will force those middlemen out of business eventually, and publishers will never release detailed sales data on all their games.

The NPD Group has no options here. They either continue what they are doing reporting retail sales only, or they abandon game sales tracking and focus on the other industries they analyze. I think retail sales do have their place though. Even if retail sales go down to 10% or 20% of the market, they can still show some trends in the industry. Just know that we will never have an accurate overall picture of the industry.

A Revelation on SWTOR’s Free-to-Play Model

In my last post I wrote how EA/Bioware’s current free-to-play model discouraged me from spending any money in their cash shop because there was no way to permanently unlock endgame content. A press-only conference call happened recently with new details on the free-to-play. It got me thinking about the business model again, and I experienced a revelation on the three audiences EA/Bioware is catering to.

The first audience is obvious: the subscriber. This is as it is now and has been since the price drop during summer. You pay $15 a month; you get access to the game. With F2P coming they will also get extra Cartel Coins (the virtual currency) to spend in the Cartel Store (the cash shop). Most subscribers will have fun spending their free coins on pets and mounts while getting all the content automatically with their subscription.

The second audience is the single player. This person treats the game, not as a MMO, but as a single player RPG. They want to explore the planets, listen to the voice acting, and see the class story. They might want to see every class’s story or they might just want to see one story, but they are not interested in paying a subscription fee. For these players, SWTOR is essentially a $60 single player game.

I have seen some preliminary prices in the Cartel Store for unlocking restrictions, and it looks like $60 will be enough to unlock all the “quality of life” restrictions for the leveling and story content, things like extra quickbars, inventory slots, cargo hold (bank) tabs, and character slots.

Certain things cannot be permanently unlocked like lockbox rewards from quests and reduced xp gains, both of which require recurring fees to remove. For the most part though, your $60 gets you a single player RPG with 8 class storylines. Eventually, when new class storylines are added, the single player will be able to buy them as DLC, basically an expansion to the game that continues their characters’ stories.

The third, and last, audience is the weekly pass player. This is the player that has completed the class story on one or more characters. They have completed their single player RPG. There is no new story DLC available,  so most of them are done playing for the moment. Some of them, however, will be interested in some endgame content. That is where the weekly pass comes into play. These unlock one endgame progression path: Flashpoints, Warzones, Space Battles, or Operations. For $10 a month they can get access to one of these.

Now that is not a good deal. Bioware has made the subscription path a good deal and the single player RPG path a good deal. The weekly pass is not that good a deal. This what I have a problem with. At endgame, you will always be renting access to content. It does give more freedom with the subscription. You can choose to have access to Flashpoints one week and Warzones the next. If you get busy the last week of the month, you can skip the weekly pass and save some money for the month, unlike a subscription you have to pay for the full month in advance.

These weekly pass players are what EA/Bioware hopes will switch to the subscription. They have probably received $60 from that player as they did the single player stuff. If they want to continue playing, there really is not much for them to do but move onto endgame content, all of which requires a rental fee. Once they have tried out the weekly pass a few times, they will quickly see that the subscription is a better deal for endgame content. As I said before, some of them will quit and wait for the next story content, but some of them will transition to subscribers.

I am currently planning to try the game out as a single player RPG. I do not have much interest in the endgame content. It is basically the same as World of Warcraft, but I feel WoW has a much better endgame than SWTOR ever will. This will depend on the pricing though. Based on the pricing EA/Bioware revealed during the press event, they consider 100 Cartel Coins to be equal to $1.00 with the best deal being $40 for 5500 coins. Assuming $20 gets you 2500 Cartel Coins, that is a total 8000 Cartel Coins for $60.

Once free-to-play is out, I will be logging on my trial account that has been converted to a free account and looking at all the pricing in the Cartel Store. I have a feeling most of the restrictions can be removed for 8000 Cartel Coins. There might be a few that cannot be afforded with that amount of coins, but they are things mainly for endgame like Artifact (purple) gear equip access.