05 September 2011

Money Talks

Apple completely changed the mobile game business with the App Store. In the old days, game developers essentially sold their games to the mobile carriers, who would then add the title to the menus which were called “decks.” Navigation on most phones was pretty cumbersome, so if you weren’t in the first page of the menu, you didn’t get many sales because nobody would see your title. And, I use the term “title” on purpose, because the decks were text-only. Players had to choose your game solely on its title. This meant that many games were licensed, on the theory that if you liked Wheel of Fortune on TV, you’d like it on your phone. (Or at least you’d know what it was.) The App Store means that developers can sell directly to customers without a title-picking gatekeeper, and can use graphics (the icon and screen shots) and ad copy to help sell. (And you can do external marketing because you can link to the App Store.)

One feature of the App Store that resembles the old decks is the top 10 lists. Placement there can make a huge difference in sales. And people discovered that one way to get there was to be so cheap that your game is an impulse buy (increasing sales, which got you in the top 10, which meant you could stay in the top 10). So in a kind of prisoner’s dilemma, a race to the bottom began, and today many games sell for just a dollar or two.

It’s kind of odd for what are presumably the best products to be priced so cheap that people might buy them and forget to launch them. Because most of the time outside the App Store, price is loosely correlated with quality. Filet mignon costs more than hamburger — but it’s a better cut of meat. Normally, you expect a $4 product to be better than a $1 product, even if you aren’t in the mood to spend $4.

Of course, software costs money to create, and you need to sell an awful lot of it to recoup your investment if you’re only getting $1/copy (less Apple’s 30% cut). So not everyone sells for $1 (especially if a product isn’t of extremely broad appeal). Microeconomics suggests a smooth demand curve, where as price increases, sales decrease. I don’t think the App Store fits this model precisely. Not only is there the top 10 effect, but you need to price in increments of $1. And, the prices are all so low that there’s as much psychology as economics involved. Below some price, an app is an impulse buy. $1, $2, maybe even higher, is not a big barrier to purchase.

$1 is the lowest price, but are there any others that make sense? I’m heavily influenced by tech columnist Andy Ihnatko, who discussed this in a talk. After closely following the App Store, he concluded that there are several sweet spots for pricing: $3, $5, and $10. Obviously you’ll have fewer customers pricing an app at $5 (compared to $4), but mostly you lose customers going from $3 to $4, so you might as well pick $5. $10 is notable as the highest price where an App Store listing alone is enough to sell someone — more than that and you will need some additional form of marketing

So what happens when you put these two factors (price = quality, special price points) together? I haven’t done a totally comprehensive survey of the App Store, but premium games are often $10 when new (and often more in iPad versions). When I first noted it, Chaos Rings was $10; it’s now down to $7 but Chaos Rings omega is $9. Final Fantasy III is $16, as is Final Fantasy Tactics.

And I certainly think of King of Dragon Pass as a premium game. There are no ads. It was designed for 40 hours of play, and insane repeatability. The artwork is really good. And many of the testers didn’t run into bugs at all. It’s also a single purchase — you’re not going to get nickel-and-dimed with in-app purchase. On the other hand, while it’s a great game, it may not be for all people —  you actually need to read to enjoy it (even though I’ve seen a 3 year old choose to launch it multiple times).

There’s another important feature of the App store: ratings. Apps that are impulse buys get a disproportionate number of 1-star ratings. Presumably people end up buying things they don’t actually like, and then take it out on the app. (This is even worse for free apps.) Andy Ihnatko claimed that ratings are one of the most important things people use when deciding to buy, so it’s worth thinking about how to avoid bad reviews from people who aren’t really your target market in the first place.

We thought about all this, and also ran it by our testers for confirmation (none of whom objected to our decision). We’ll start King of Dragon Pass at $9.99 (far less than it’s ever sold for before).

In summary, many games use price to say, “Look at me!” We’re using it to say, “This is an awesome game.”


  1. More important thn being a premium game, KoDP is a one-of-a-kind game.

  2. I must say that I see it as such an awesome game that I will buy it myself, even if I no longer have an Iphone.

    To be honest (and not look too weird), I'll buy a new Iphone someday )

  3. *sigh*

    Wanting to buy an overpriced phone I don't need for one game is kinda lame. (I still do)

    I really wish You re-released this for the PC too, I'd certainly buy a digital copy or two. 10 USD is also around what games are selling for on Good Old Games these days.

    I know, I know, I'm barking at the wrong tree with GoG.

  4. I assume you both do know that you don’t need an iPhone to play. It runs great on an iPad, or you can get a used iPod touch (2nd gen) for under $100 on eBay.

  5. I'm pretty sure sellers get far more than double the sales if they sell at $5. Does Apple give sellers this kind of market information around pricing and sales? There's no way I'd pay $10 for KoDP if I didn't already know about it and know its quality.

  6. You could be right, but I think the existence of games that sell for more than $5 says otherwise.

    No, Apple doesn’t. And it’s real hard to do real A/B testing.

  7. That might explain why some game pricing on the App Store seems to make no sense! Regardless, I'll be buying KoDP and encouraging others to do so. There certainly aren't any other 'real' strategy games on iOS to compare it to, but maybe you should consider some kind of promotion discount to reach the impulse-buy market depending on how things go.

  8. People frequently say pricing is a black art…

    With nothing to compare it to, it’s hard to say KoDP is overpriced :)

    I have certainly been thinking about promos, but I also find Marco Arment’s experience interesting (http://www.marco.org/2011/04/28/removed-instapaper-free): his Instapaper has *never* had a sale, but seems to be doing pretty well.

  9. Resolution is for iPhone only though, right? So I'll get pixelation on iPad full screen? That's my only concern with this price point is being frustrated with the resolution since I've only got the iPad.

  10. Hard to say if the price is right. I think the price is high, compared to other iPhone games. That said, I will buy the game, for being able to play an old favourite again, to support A# and David Dunham (whom I have not met, but seems to be a swell guy) and of course because this is a unique game that I know I will like even in tiny format. I know I bought a lot of games at $1, but played far from all of them. This is a game I know I will play.

    In the future a demo or a price drop might attract more buyers, but this game I want, even at $10.

  11. I agree that $10 is on the high side. To give you some perspective: at the $5 mark, my wife and I would both have bought a copy. At $10, probably only one of us will. And we are both devoted fans. OK, same profit margin to you, but I think the gap between $5 and $10 is people asking themselves, "Do I really need another draw on my time?"

  12. Interesting that you would start with a high price, with the implication that the price may drop in the future. You might find this discussion of the pricing on the release of World of Goo interesting:
    They launched at $10 for similar reasons, but in the analysis, wrote, "...if we could do it over again we might have launched at a lower price point and said it was a temporary promotion, essentially reserving the right to raise the price, but without angering early adopters." They also found that their revenue was higher at $5 than at $10, but of course there is no guarantee that that would be the case for Dragon Pass.

  13. Interesting World of Goo article. I haven't yet read about anyone who has actually started low and raised the price (though the suggestion comes up from time to time).

    BTW, I ignored iPad games when doing price comparison. I think KoDP looks pretty good at 2x (and playtesters didn't seem to mind), but we're taking pains not to call it an iPad game (of course, that will be pretty obvious in the App Store).

  14. Another annoying idea - what about the Humble Indie Bundles?


    They're "pay what you want" and still they make millions of dollars.

    The HIB games are usually multiplatform ones though. :/

  15. Jan, but we’re talking the App Store. Apple doesn’t run bundles.

    Interestingly, each game apparently made the developer $0.83 each, around the same as a $1 game on the App Store…

    (King of Dragon Pass was cross-platform on the desktop. Just not Linux.)

  16. I've actually seen prices that start low quite frequently, at least for iPad games. Usually it is part of some launch promotion--something like, "to celebrate the launch of our new game, we are selling it at 40% off for a limited time only." I assume that the purpose of this is to try to get some buzz going about the game on twitter, etc, possibly to try to get into the rankings, and also to create some urgency for people to buy the game before the price increases.

  17. Karptonite, do you happen to know which ones? I have not run across anyone actually doing and writing that up (just people wondering if they should have). My suspicion is that you would need to do additional marketing about the promotion.

  18. I believe, although I'm not certain, that Days of Wonder did some discount with the launch of Ticket to Ride. I can't think of other specific examples, but I subscribe to a couple of iOS Blogs, including AppAdvice, and I know that I see with reasonable frequency games launched that are "discounted for the first 48 hours" or something.

    Also keep in mind that when sites like AppAdvice announce sales, they will often say whether an item is the "lowest price ever". So, for example, charging something like $6 on launch for a limited time would still allow you to put it on sale at $5 at some point in the future, and say that it is the "lowest price ever".

  19. Just an idea... is there any mac software that would let you use an Iphone application in a kind of emulator ?

    I should checkthe current Xcode test tool, maybe, even if I imagine that it will only permit to test a code, not a final app ?

  20. by the way :


  21. The beta for KoDP was one of the few games I could enjoy on my crawling 3G... I've since made the upgrade to a 3GS, and would gladly pay $10 (more than I've paid for any other iphone app), but then again, I know what I'm getting into. If you go with premium pricing, link the 1 year tours in the app copy, so potential buyers can at least partially try before they commit. (potentially saving some low votes from the wrong demographic.)

  22. Grégory: No, there’s a simulator, not an emulator. I believe that’s what’s used for http://www.pieceable.com/viewer however. I will need to investigate this further.

    Sarafan: I’m fairly sure there is no way to do what you suggest — Apple is pretty restrictive about try-before-you-buy. (In-app purchase is a partial workaround, but doesn’t fit that well with KoDP’s design.)

  23. Oh, i meant links to the pc/mac one year tours for the original game.

    Then again if someone is too lazy/illiterate not to enjoy KoDP, their are probably too lazy/illiterate to bother testing before buying, realizing dragon pass is not some sort of dragon-tossing angry birds clone, and then down voting out of ignorance.

  24. Sarafan, ah, didn’t even think of that, the original isn’t going to give a good impression of how it feels on the device (even if the basic game is the same). We do try to show more about the game on our web site, though I doubt even 1% of people use that App Store link.

    Your basic point is spot on. Even if we chose the wrong price, KoDP is a unique game, and trying to market it like the majority of App Store games would have been a worse mistake.

  25. Big fan of KoDP here - love the game, and what it stands for w/r/t unique narrative design - and I definitely support a premium price for this game.

    At the same time, I have to admit that while I'd happily pay $10 if KoDP had native iPad support (note - I'm aware of the challenges that would entail), but seems a bit pricey just for iPhone/Touch. I'm pretty busy these days, and not in mad rush to play, so might end up holding off for a price drop.

    FWIW, $5 would be an instant buy for me. re Marco's arguments, I think they're spot on. I love, love, love Instapaper, but also wasn't quite able to pull the trigger for a paid version until he dropped the price from $10 to $5, which to me just feels like the right price.

    Anyway, wish you the best with this version of KoDP - hope it does great, and garners much-deserved attention.

  26. I spent three hours or so playing KoDP on iPad at 2x size, and it looks great. There's some pixelation, of course, but given the nature of the artwork it's not a problem. It would be nice if the text could be smaller on iPad to reduce scrolling (and therefore accidental selections), but that's a nitpick.

    I feel fine about paying $10 for it, but I'm not really the target audience - I know what I'm getting, having played the PC version before. The only thing that iOS gamers will have to go on are reviews.

    Speaking of which, I should write one!

  27. David & Karptonite, launch sales on the app store happen all the time. Look at Puerto Rico or Edge Extended, to name two examples from the last weeks. I'd like to play KoDP on my iPad, and I read several user comments, that the upscaled text is less than ideal in 2x. And there's a lot of text. While I don't care much about the price tag (having played computer games for 23 years I've shelled out quite a lot of money as you might imagine), I think in that price region on the app store you would at least expect some iPad-friendly adaption.

  28. I think a big problem is lacking a demo. There's many games that I wouldn't play for free and there's no way to tell. One of the pretty space games has great graphics and production values but the controls are impossible. Found that out on the free demo, wouldn't play the full game for free. But I don't regret paying full price for this game.