The race to the bottom and beyond

There is a part of our industry that is very fashion-led. It follows bandwagons.

A successful game or business technique comes along, and then, a bit later, so do a great many others.

This may be sensible, but it is not always the right thing that is emulated. Look at those that copied Elite all those years back. They thought it was successful because it was a space-themed game when, as most of the fans knew, it was successful because of its open nature.

One such recent bandwagon is game pricing, driven by the nature of many of the cheap – and free – games for iOS and Android. The trouble is, in general their price has corresponded to a low cost of development and a small amount of content, so it made sense.

As expected production values and so development costs spiral towards console games, it raises a challenge.

Especially as we now have a handheld market that considers £2.99 a high-priced game, with the expectation of a cost of 99c/69p if not free, with a substantial free play-time to draw the player in.

In the late 1980s and early 1990s we had a problem where a study showed that a high percentage of players’ screen hours were spent playing the free ‘cover-disc’ demos then the rage on a number of magazines.

TAKE COVERS

There were even whole games given away for free. This was associated with a drop in total spending on paid-for games. The trouble is that for any one game, there was an advantage in having the cover demo as it raised awareness of the game and many would buy it, but the overall affect on the industry was to eat into sales, as game players only have a finite amount of time to play games (yes – even teenagers), with many just playing the free cover demos.

We have a similar problem now. This is in effect a variant on the prisoner’s dilemma for the industry, where if everyone behaves selflessly then everyone benefits.

The trouble is the current fashion to give away a large section of the game for free has been set by successful games like Cut the Rope and Angry Birds – but as ever more games do it, the conversion rate of game downloads to sales overall will continue to drop, as people’s available gaming time is consumed by these free games.

In the 1990s this gradually got better as, sensibly, the amount of free content given away decreased.

PAYING THE PRICE

This all relates to the initial purchase price – ‘freemium’ solves this, I hear you say. For many types of games it does; it matters little if the purchase price is zero.

Freemium – i.e. games with no initial purchase price funded by selling content through microtransactions – appears to work well for certain kinds of games. Even linear story-based games can be bludgeoned to work in a similar way; by giving away the first section, then charging episodically thereafter.

It is a difficult thing, to appear to leave money on the table by not charging any cover price, but that is the trajectory we are currently on as an industry, and where it leads is problematic for all of us.

In other industries they have a concept of customer acquisition cost. This dry-sounding term is the total cost of ‘goodies’ in the form of incentives, free use, discounts, freebies and so on, that are given away to convert a casual inquiry into a regular customer. In the gambling business it is typically over $100 per customer. Excluding marketing, we are so far used to this cost being negligible, but in the freemium world it certainly is not.

Effectively it is as if the cover price for the game reduces beyond zero, and it will make the cost of launching a game in future excessive if we are not very careful indeed, stifling production of new games.

We need to pay attention to the Prisoner’s Dilemma – just maybe holding a cover price, even at 59p/99c and going no lower, will help us all in the long run?