Does the price reflect the hard work of indie developers? This provoking question isn’t new both for the indie game developers and gamers. Two sides are constantly clashing against each other on the matter of price, where indie developers always have to defend their games to earn a living. But despite the growing controversy over price formation for indie games, KapKan Games tries to work out the more or less sustainable basis for a price formation to help developers to charge adequately their games.
First of all, as a developer working on your first startup project, you should understand that pricing your indie game isn’t as straightforward as you may think. Whereas tangible goods may be assessed with a relatively simple mathematical formula where the price can be expressed as the lines of materials + overhead + time = price, services can’t go the same path.
Customers assess games owing to what they feel they are worth. Thus, having gathered enough information about people’s readiness to pay, you may successfully maximize revenue and therefore profits. But as you understand the price won’t be based on the willingness of people who’re ready to pay the highest price, it tends to be somewhere in the middle. It means that there’s a constant consumer surplus or, in simple words, money that people who highly value your game are ready to pay on top of the set price. There’re some ways the developers charge for extra joy such as seasonal passes, DLC, etc., but all this is worth considering since the price is set.
One good thing in game development business is that when the game launches, you don’t need account any incremental costs for the production of video game copies. Despite this, setting a price is a daunting challenge for most indie developers unless they work out their own strategies.
You have to bear in mind that the higher the price you set is, the lower the number of copies you sell and vice versa. And the theoretical approach in price formation doesn’t reflect the development budget at all, what the majority of developers who’ve spent months or even years on them, may refuse to accept.
The stereotype that AAA games should be priced higher than indie games because they cost more to produce is fortunately vanishing. The main reason lies in the correlation between the price and the amount of sold copies. If a game price is too high, you’ll sell fewer copies since the number of buyers goes down, regardless of your game production expenditure.
Focusing on a game price formation let’s mention an average indie game price itself. With reference to the recent speech of Sergey Galyonkin, the founder of Steam Spy, an average price for an indie game on Steam is hardly reaching 9$ per copy. Moreover, average sales are 21,000 units. Unfortunately, it doesn’t mean that it’s slack now, on the contrary, if nothing is done, it might become a tendency.
There are numerous factors involved in deciding how to price any game. Let’s outline them and see how they reflect the price.
1. Games are intangible goods.
While consumers try to tackle this problem searching for expert reviews, friends’ recommendations, ratings and so on, which rarely works, some developers and publishers are interested in keeping this information from people for as long as possible. It stems from the belief that players’ expectations may differ from the amount of joy they will really have. Whereas quite many publishers prefer keeping back their reviews until the game launches or the pre-orders are in, the common practice is to let players get their hands on the game almost a month ahead.
When the benefits of your goods are hard to quantify precisely, it can feel quite nerve-wracking to set high prices, even when they reflect the high value you provide. To ask a competitive price you should have the personal and professional confidence, which comes with experience.
Therefore, charge with confidence. It doesn’t mean taking the price from the head, as any price should be backed up by value. An in-depth market research should be the base for decision-making. Investigate what similar games are charging, and what consumers expect a game from your genre and of your scope might cost. The first game from a game development studio might be priced lower due to the desire to become recognized, while a second or third one might gain them enough money as consumers become fans of their work. Remember that building a fan base around your game is vital. That’s what is often neglected by fledgling developers. If you aren’t sure that someone who runs into your game with no information will be ready to pay that price, it doesn’t always mean that the price is high. It happens because gamers can value games only after they experience the joy it brings. You have to work hard to promote it and show how they may benefit from it. Although, not all developers are ready to push the promotions forward and prefer to reduce the price. Here arises another tricky question: whether to follow the mass hysteria or stay calm.
2. The floods of discounts make developers and publishers reflect the situation.
When sales have slowed down, most of indie developers consider as rational to reduce the price. They prove their choice by examples of other people who gained a fortune by reducing their prices.
Although going this way, you risk participating in a race to the bottom. Consumers become trained not to pay full price.
The aforementioned price under $9 makes it harder to justify a $20 or $30 game. This tendency is hard to row against and leads to an increasing pressure on developers, who strive to be noticed.
While some developers regard a redused price as a way to a wider visibility, others keep cool and say that they can do the same at a higher price. All this is a matter of strategy. Whether you want your game to bring long-term profit and therefore business to be sustainable, stay calm. But when you are suppressed by such things as paying your rent and buying food, the idea of short-term profit might be rather attractive.
Regardless the plans you may come up with, let people know them. Your honesty will obviously gain you respect from gamers. The reduced price helps attract interest to a game and get people talking about it again. Moreover, there are gamers for whom it is the only motivation to have a try and see that the game is as good as everyone says. When you as a developer or publisher fail to make discounts sensibly, gamers get used to them and just wait for discounts. On the contrary, if you can tell people when you plan to reduce the price, they can make an informed decision about whether it’s worth waiting for a discount or not.
3. Originality fetches a good price.
Be objective while pricing. Compare your game with others in your genre and assess it for the originality.
There’re two primary economic models for how to set prices. The first one, which I described above, is for situations where you have a product that is unique. If people appreciate your product, they will pay what you’re charging for it. The other model is developed for commodities. A farmer can't go to a market and convince everyone that their products are better than anyone else’s. They can’t set the price for their products. They just show up at the market that day and see what the going rate is.
So when pricing your game, think about whether your game might be distinguished among others or it’s like a commodity. Are you selling something you just can’t find anywhere else? Or are you selling a game that has a lot of substitutes? Whether it’s the latter, you really have no choice but to price it at the average rate on the market. Whether it’s the former, it’s your job to make sure people understand why your game is so important. If people think the price is too high, they can go play other games. But those other games aren’t your original one.
Although game pricing is a bit tricky, to make an informed decision is still possible. Let’s outline once more the actions you may take deciding on the game price.
The term “indie” has lost a lot of its meaning. It can mean anything from minimalist indie games to Double Fine. So it’s up to you to decide where is yours. What KapKan Games knows for sure is that the belief in success is of vital importance in any deal. Good luck!