Putting a price on items that are free to produce
Align
Remain Calm Join Date: 2002-11-02 Member: 5216Forum Moderators, Constellation
Remain Calm Join Date: 2002-11-02 Member: 5216Forum Moderators, Constellation
in Discussions
<div class="IPBDescription">Like ebooks</div>Just had a weird idea on the subject that I thought I'd put up for discussion, can't really imagine all the effects myself...
---
Basically, take any market where the products might as well be free for all the labour it takes for you to enjoy them, like ebooks (since copy-pasting text is pretty much free).
All the products are available to buy at once, but the kicker is they start out really cheap and get more expensive as more people buy them.
The two obvious results will be masses of people jumping at new releases to buy them while the price is low, and something like "Hmm, this book costs $100... but 2 million people have bought it, so it must be pretty good".
---
This is inspired by stuff like Steam having sales at 75% and making crazy amounts of money off of it, and more recently indie bundles where you set the price.
---
Basically, take any market where the products might as well be free for all the labour it takes for you to enjoy them, like ebooks (since copy-pasting text is pretty much free).
All the products are available to buy at once, but the kicker is they start out really cheap and get more expensive as more people buy them.
The two obvious results will be masses of people jumping at new releases to buy them while the price is low, and something like "Hmm, this book costs $100... but 2 million people have bought it, so it must be pretty good".
---
This is inspired by stuff like Steam having sales at 75% and making crazy amounts of money off of it, and more recently indie bundles where you set the price.
Comments
With that said, I guess it's possible if the demand is high enough. It always boggles me that people in New Zealand can pay over 100 bucks for a game, but then you realize that the consumers support this price by willingly buying the game. You can also see retro games going for ridiculously marked-up prices, but this is only done by a small percentage of gamers.
Anyway, everyone seems to have a "breaking point" when it comes to prices. I think setting a price closest to this breaking point when releasing a product would net the most cash overall. The advertising, hype and word of mouth around a release at this time can be just as convincing as the fact that 2 million have bought the product before. Then again, I guess it depends on the circumstances.
But the idea has merit. As we've heard said several times, the biggest threat to an author/musician/games developer/whatever is obscurity. I'm prepared to claim that word-of-mouth is the best kind of advertisement you can get, but it depends on people actually having bought your work first, and this is where this could come in. Sell the game cheaply to draw people in, then mark the price up (within reason) once more people start buying. As long as you're forthright about what you're doing so people don't get surprised by the increasing price, there should be no backlash.
It's similar to what Mount & Blade or Minecraft did, but with more granularity. And there's no denying that it worked for them.
Interesting idea to do the opposite of price skimming though. Kinda reminds me of what UWE has basically done in gaining popularity and exposure through a free mod and moving onto a retail game with a moderate price. The problem is ofcourse lost opportunity cost where people who would have been willing to pay more end up paying less. Different people put different values to the same item so there are really many different 'breaking points'. The most cash is not always earned by setting price at the highest 'breaking point' although increased popularity does consolidate this range.
I can see how your idea would work if it was a popular multiplayer game or something that inherently relies on population in creating value to the consumer. Increases as popularity increases kinda like WoW - i probably wouldn't bother playing it if no one else was playing etc. If it was just like an ebook where my enjoyment of it didn't increase if more people also bought it, then i don't see a model of price increasing working unless you were also providing like a sense of security (what steam provides with its centralized distribution platform. e.g. sheeple buying from steam even though its more expensive most of the time). (Also related to branding)
I have quite often thought of the biggest threat for new companies making games (or pretty much any other media tbh), they can easily drown in the flood of other similar products.
Often this is solved on flash-sites and android market and such by having a whole section just displaying the new games, but the amount of people using those sections is quite a minority compared to those that just gets the game that they heard well about and others liked.
However, enforcing your idea on those products would most likely make more people take risks in getting unknown games, as they are so cheap the price is negligible. One might argue that this would steal away costumers from the games that otherwise would have reached the skies like minecraft or angry birds, and it might be correct, but I think its also possible that as the cheap new game is so cheap the customer would get it AND the more popular one that he/she wants.
What I cant figure out is how this would have any different positive effect than if the service instead of forcing prices on products, it had a way to sort stuff by price & release date (so that even if something is cheap, it drops down the list if it gets old), where the companies are smart and start with a low price and then raise it as they get popular.
That way people who wants a cheap game could look through this list and give the new ones a chance to spread via their word of mouth, and the older proven games would be found as someone actually searches for it as a friend recommended it.
The ability to make limitless copies is taken into account in the development process.
Games take an awful lot of money to make, and an awful lot of time, same is often true of books, an author might take years to write a good book, he needs to earn back his living for those years when the book goes to market. Films are much the same as games.
So just because you can make limitless copies, doesn't mean you can easily break even, at some point you need to strike a balance between getting more people to buy it, and getting them to pay a decent amount of money for it. Selling low and burning market share in order to hopefully increase the market share by a greater amount than you burnt is a risk.
The potential is to have the product just-profitable on release and have it get more expensive daily up to a sensibly priced cap (parallel to the regular market). This creates a sense of "sooner is better" which can make people buy it simply so they won't have to pay more for it later.
Which is why this would work best for small/unknown authors and such. The biggest risk to them isn't underpricing their product, it's not selling it. If you write a book and fifty people buy it you're just not going to see any noteworthy money from that whether you sold it for fifteen bucks or for one. But if you sell five hundred books for one dollar each and then increase the price to five dollars, and those five hundred people go out and tell two thousand of their friends "this book is cool, you should buy it. You should buy it right now, it's five dollars now but it'll cost fifteen dollars once enough people have bought it..." well, you've got a potential landslide going. By the time your book reaches the endpoint of fifteen dollars you actually have a market to sell to, and NOW you can start taking profits in.