Pay What You Want — a Sustainable Business Model?

revealingheart writes "As 2010 comes to a close, it could be remembered as the year pay-what-you-want pricing reached the mainstream. Along with the two Humble Indie Bundles, YAWMA offer a game and music bundle, and Rock, Paper and Shotgun reports on the curiously named Bundle of Wrong, made to help fund a developer who contracted pneumonia. More examples include when Reddit briefly let their users donate an amount of their choosing for upgraded accounts when they were having financial difficulties; the Indie Music Cancer Drive launched Songs for the Cure for cancer research; and Mavaru launched an online store where users can buy albums for any amount. Can pay-what-you-want become a sustainable mainstream business model? Or is it destined to be a continued experiment for smaller groups?"

Comments

Publicity worked for Humble Bundle

[devxo]

Humble Bundle is a success because of the publicity it gets. It gives them lots of sales, but the same model doesn't work without the publicity and if there would not be nothing special about it, well they would get all the reporting from gaming websites and sites like slashdot. Remember that if user pays $5, it's less than $1 per game. The normal prices were at least $20.

Re:Publicity worked for Humble Bundle

[Peeteriz]

On the other hand, for virtual goods with near-zero marginal cost, if some user pays $5 for the bundle then it often is $5 more profit than with the normal prices.

Re:Publicity worked for Humble Bundle

[Monkeedude1212]

I don't think it can function without the fixed price system working in sync.

Sooner or later more people will get used to paying less than $60 for a game by using a digital download like the Humble Bundle and sales through Steam. I don't think I can ever justify paying even $40 for a game ever again, just in my experience. I've now come to think that full feature titles are only worth about $20 - and if they aren't on sale throughout the year, they will be eventually. When I can get any number of indie titles for 5 or under, that's even more reason.

Eventually it'll reach a point where I think $20 is almost too much, and that $5 is average, and that a "Pay what you want - oh sweet, only $1" scheme might take over. Which won't be nearly as profitable.

I need those higher up publishers ripping people off in order to keep my perception of a games worth in perspective.

And then years down the road, pay what you want turns into basically freeware.

Re:Publicity worked for Humble Bundle

[click2005]

Big game publisher manipulation has set a perceived normal prices of at least $20.

FTFY

I do agree with what you said though. I paid $25 for HIB2. I played Osmos but the rest are of no interest to me. I paid that much mostly because I applaud what they're doing but I doubt I'd do it as often especially if there were hundreds of these packs.

I also think that if there were hundreds of these kinds of deals that people's perception of a 'normal price' would change. This is especially true for these games kinds of games as they're suited for the smartphone market that isn't yet controlled by the big game companies.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Exactly. Once your product is complete the costs are almost nil.

Most game development costs quoted these days are hollywood accounting, marketing and a pissing contest.

A million people paying $1 each beats 200,000 paying $5 because of the increased exposure you'd get.

Re:Publicity worked for Humble Bundle

[hedwards]

Bad argument.

That's just a variant of the slippery slope fallacy. At some point the price of a game will reach a point where it's considered to be a good deal. And that point is for most people way below $60. Sure if you're young or have few responsibilities paying that much and getting a really long game might be worthwhile, but for most people that's a lot of money to pay for a game that you're likely only going to play for at most a few dozen hours.

Hollywood can sort of get away with that because it does cost a lot of money to make a quality film in most cases, and trying to cut corners does hurt the experience. But with games it's different a game which costs $1m to make doesn't necessarily end up being more fun than a game which only cost $10k to make.

I suspect that the price will hit a stable equilibrium somewhat over $10 a copy, or at least that's my suspicion. It's cheap enough that most people pay more than that for a decent meal at a restaurant, but with more actual time to enjoy it. It wouldn't be much of a shock to me if the equilibrium point ended up sticking around $20 or so.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Due to high production cost most games even at the $50 and $60 level loose money. It's easy to say make nothing but hit games but no one has pulled that off yet. It's like movies people like the big budget stuff. If Call of Duty sold for $5 they couldn't sell enough copies to pay the production expenses and it's the biggest hit going. The system used to be market driven in that budgets were determined by potential profits but soon the reverse will happen in that profits are starting to drop so budgets and quality will drop as well. In 10 years the big budget games may disappear between steep discounting and piracy. Everyone will just have to get used to low budget games since they don't want to pay for the big budget games.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

PLAY BRAID

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

I don't know. For whatever reason people seem to judge video games more harshly than other forms of media.

Music and movies usually sell for around $10 for an individual album or film (I'm just ballparking here). That's about an hour of entertainment for a CD or about two hours for a movie. Games these days usually take about 5 to 10 hours for one playthrough, so it kind of makes sense that they cost about 5 times as much (in terms of entertainment per dollar). So I'm not quite sure why people are upset at the price of video games; compared to other forms of entertainment they are similarly priced.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

The price is irrelevant. The only thing that matters is if the developer is making money. If $1 results in profit worth the effort, the price is fine.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Sorry but you "zero cost" people are talking utter bullshit. Support, patches, maintaining a community, marketing, hosting, payment processing, running a real-life bureaucratic nightmare (i.e. a business), all that annoying shit you need to actually survive while you make the next game and so on don't grow on trees for free. How about you publish a game and run a business yourself, then come back and tell us how everything is free and runs by itself?

Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that. It's only really viable if you get a huge volume to compensate the massive decrease in per-sale profit. For one of those games it's likely around several dozens of bundle sales to compensate one full-price sale (low average price divided by 5 games, minus donations and fees is hardly anything). Without the publicity to back it up, it wouldn't work.

Re:Publicity worked for Humble Bundle

[monkyyy]

quality and budget are not connected, budget is connected to quantity such as how many run back and froth missions there are

Re:Publicity worked for Humble Bundle

[hedwards]

$10 for a CD is overpaying by quite a bit. They fought tooth and nail to keep the price artificially inflated at $18 per disc for so long, eventually Steve Jobs and piracy was able to convince them to lower the price, but even at $10 a disc, you're still over paying. A lot of the extra money goes to the process of creating popularity and over processing performers that ought not be allowed anywhere near a microphone.

Movies tend to be different as it's hard to know what they ought to cost.

Re:Publicity worked for Humble Bundle

[hedwards]

Perhaps they shouldn't be making big budget games without making them worth the cost. I know that's a bit simplistic, but if you make a game that you have to sell for $60 a copy in order to break even, then you damn well better make sure that it's bug free or at least free of significant bugs. It's more than a little bit insulting to be charged that much and end up with massive bugs and gameplay which is at best half baked.

Spend the money on gameplay and making the game fun, then the graphics necessary to make it work. Blowing many millions of dollars on graphics and marketing without worrying about gameplay issues is a great way to ensure that you're not going to be making any money. Back when most Nintendo game news seemed to come out of Nintendo power, I'm sure that worked fine, but now that you can get reviews of a game within hours of release, that kind of astroturfing doesn't work very well.

Re:Publicity worked for Humble Bundle

[devxo]

And lots of games - especially multiplayer, strategy and sandbox games - tend to last much longer than that 5 to 10 hours. For example my Steam account shows I've spent 500 hours for Modern Warfare 2, which comes down to $0.12 per hour. And don't eve get me started how much I've spend on Civilization series..

As it is, games are really quite a cheap form of entertainment. You can easily spend the same amount on a bar night and it may not even be any fun at all.

Re:Publicity worked for Humble Bundle

[Kjella]

The business has plenty of this problem on its own, just recently there was a huge crash in the media over artists now selling their CDs direct to grocery stores for 99 NOK (about $16.50 including 25% VAT) instead of the normal full price of 150-200 NOK ($25-$33). Angry Birds set a whole new standard for what a $1 game for an iPhone can and should do, suddenly games have to really justify costing $2-3 on the phone. Several people I've talked to have now made dollar games their price point, they generally don't buy anything above it. Without being crap I might add, many try to push the "only full price stuff is good and the rest is cheap crap they try pushing on you" and the lie is becoming too obvious. Either way you're going to lose sales, the question is just whether customers rejecting your offering or paying you too little is the better choice. I'd say that since it's pretty much sunk cost there's no such thing as selling yourself too cheap, it's just about making the people who would pay good money for it actually pay good money for it. Like I'm planning to buy Dragon Age 2 at full retail if the reviews are decent no matter what, but I'd happily take it for less if they're offering...

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Not really. I'd be more likely to play an album many times over before getting bored with it (compared to a game).

Besides, it's not a good metric - $ per hour of entertainment, since according to it, music and film are nearly worthless but lame casual games with "infinite" replayability are solid gold.

Re:Publicity worked for Humble Bundle

[icannotthinkofaname]

Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that.

I know I'm probably falling for a troll here, but can you prove that those who paid less for a game through a pay-what-you-wish thing are guaranteed to have paid full price if the cheaper option wasn't available?

If you can prove this, I recommend you apply for a job on the RIAA's legal team. From what I read here on /., they could probably really use proof of this idea.

And just to disprove your statement with one (admittedly, anecdotal) counterexample already: I know I've come across games before on Steam that were $20, for which I would have been willing to pay $10, or that were $10 and for which I would have paid $5. Therefore, I am not guaranteed to pay full price if the cheaper option isn't available. Therefore, your statement is false, and you cannot know how many full-price sales you lose to events like Humble Bundles.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

If I ran linux I would buy the Humble Indie Bundles, no question. I have yet to try them on windows and there is a lot more competition on windows, which is why I have not tried them.

on music my understanding is that typically a band gets less than 10% (often down around 2-5%) of CD sales. Me giving them $2 through a link on their site is much more profitable than me refusing to pay $15 and either not buying it or pirating it. I would love for most artists to have a link on their site so I could do this. I feel I owe them money but I am not going to the a store and buying the CD and then ripping that CD just so I can use it. I can download it faster and usually before I can buy it. Nine Inch Nails gives away most his new work for free or really cheap directly from his site using FLAC and no DRM. Some times he gives away the first so many songs then you can buy the deluxe album for $5 or something of that nature.

I often wish I could give $5-$20 (depending on the game) directly to the people that made it and maintain it. I do not wish my money to go to the *IAA, Wal-Mart, etc though. If they would sell it to me for the same price they sell it to Wal-Mart for using torrents or something similar I might could handle that. I never have been to the steam website that might be acceptable. I already had a great place to get my games and moving from $0 cost scene releases to steam was something I never looked into, my way was already working quite well. I do wish I could go to somesite.com and click a paypal (or something better) link and give a few of these guys $5-20 though. Most games I download never get played or only get played an hour or two, there is some I feel I owe them money, but I do not feel so bad I need to go buy a lesser copy at a store to make up for it that I would never use since I can pirate a better version usually.

Re:Publicity worked for Humble Bundle

[bobeau]

It was also a good idea for them to publish average prices. I bought the bundle after they put out a "raise our average" bonus deal. It also influenced me to pay a little more than I might have without that mild form of social pressure. As far as the argument that my paying less than "full price" means lost money for them, I can say with certainty that if not for PWYW, I wouldn't have considered buying any of the games at whatever the original prices were. As it is, I judged how much I'd actually play each game, and what value I put on it. So yes, better $xx.xx than nothing. If my only option were one game at $20 or no games and get on with my life, I'd pass on the game. Just my perspective.

Re:Publicity worked for Humble Bundle

[sg_oneill]

One of my favorite resturants is run by a Hindu group (No , not the Hari Krishnas) , and has a "Eat as much as you want, then pay what you think its worth".

Its a great system , with people paying anywhere between $5 to $50 , usually depending on their wealth.

According to the people at the resturant, it means the rich dudes sort of subsidize the poor customers who can't afford to pay high prices, and everyone gets on fine. The resturant itself actually makes enough that it can afford a premium river-side location in one of the most exclusive parts of down-town.

I usually pay about $15

Re:Publicity worked for Humble Bundle

[hairyfeet]

I'm sorry but I think you're wrong, and here is why: We PC gamers enjoy one of the largest catalogs on the planet and thanks to Windows backwards compatibility I can play games from 20 years ago to games released yesterday. There is also a great wealth of places where one can get quality titles, even AAA titles, for quite cheap, such as the Good Old Games Xmas Sale where nearly 300 games are marked down, many half off. This not only makes for a truly staggering amount of choices, but it means that even guys without tons of disposable income such as myself can literally have dozens of games installed we haven't even gotten around to trying yet.

That means the indie developer really needs to find a way to get noticed, the "pay what you will" model does that. Hell I just paid $5 each for Evil Genius (damned fun BTW) and Unreal 2 SE, so some indie guy I never heard of trying to sell me a game for $20 doesn't stand much of a chance. Sell me a fun game for $5? Not only will I remember the guy, I will happily spread the word to friends and on places like /. just like I like to plug GoG simply because they have great prices with NO DRM and great service.

Everything has a price, and the price of the ultra low barrier to entry for PC games means an endless sea of games put out every year. Some good, some bad, but most frankly never even get heard of and die alone, not because of the game itself, but simply because trying to be heard with the endless shouting of a bazillion other developers is damned near impossible. The "pay what you will" model helps a developer starting out or who has a game they think is good but just not getting exposure to get that much needed foot in the door. any marketing type will tell you the hardest thing to do today is build a brand with so much media vying for our attention. This new model gives a chance for the little guy to do EXACTLY that, and without having to accrue a ton of upfront costs like advertising, as the gamers will do that for you. Seems like just good business to me.

Re:Publicity worked for Humble Bundle

[jthill]

At least several indie games are under continuous development. AI War and M&B Warband are two of my favorites anyway, and they're almost continuously upgraded. The (huge community of) modders on Warband actually complain about the pace. Diffidently. Fully aware of how good they have it. But they do at times, because it's hard to keep up. AI War changes even more dramatically -- since it's 2D sprite art they can move quicker on the game itself. And move quicker they do, there are huge additions and rebalancings. Both of those games absolutely rocked when I bought them, and they're f'ing awesome now. Warband, for instance, is constantly in the top-20 active games on Steam and that's not where most people play it.

So, no, don't take it for granted that indie developers have moved on or are just raking in the dough. The good ones got that way because their developers loved them, and many still do. So go halfies on a nice meal for them, ok? They're busting their butts for you.

Re:Publicity worked for Humble Bundle

[tnk1]

Actually his point is valid, it all depends on the numbers. If you have a game that 100 people would have bought for say 20 dollars then you have 2000 dollars in sales. However, if you assume that "pay what you want" customers will average only 5 dollars, then those 100 people who would have paid 20 dollars then will only pay 5. That cuts your "guaranteed" sales to 500 dollars. So now, the people who weren't going to spend the money at all at 20 dollars need to make up the 1500+ dollars. That is another 300+ buyers. (I use the + in this case to point out that there is no point in this pricing method if you are just going to make as much money as you would have with a regular pricing model.)

If you look at that, you are making a big presumption on just how many people out there would buy a game if it is simply cheaper, even if you might do so. In this case, 3/4 of your customers need to have been people who wouldn't have bought the game to begin with solely on the cost factor.

That probably will work for some games, but honestly, given the fact that millions of people do shell out for expensive games, its more likely that your indie game didn't sell for other reasons such as: no publicity, significantly less polish, no franchise tie-ins, etc.

Bear in mind that people, even hardcore gamers, have only a certain amount of time in a day to play your game. They will want to play the games that they have bought as much as possible to get their money's worth and if the game is really, really fun, they'll play it constantly because they like playing it. Eventually they will tire of your game and move to the next one, but if you consider that a 60 dollar game could net you hours and hours of play, as well as even some social advantages to playing a popular game, that 60 dollars is actually not that much of a price to pay for the amount of recreation provided.

So yes, you may well be willing to buy a game if it is half price, but I think your experience is at best anecdotal, and at worst, you aren't considering the realities of your own spending and time availability accurately.

Another issue with the model is where the expensive games come back to bite the indie games on the ass. Right now, many games out there which retail for 60 bucks, I could just pirate from the internet if I was too poor/cheap to pay for it. Now, while this actually *does not* cut into the sales of the big gaming companies, since the cheap gamer would have never shelled out the money to begin with, it *does* cut into the indie gaming developer's pockets. Why? Very simply because that gamer, who would usually be more likely to spend money on your less polished, but proportionately cheaper product, now gets high quality games for free. Its a lose-lose for indie game developers on that front. That means that there is a whole segment of the unpaying masses that have a limited amount of time and a ton of free, high quality content to fill it with. Is that segment small or large? Its hard to say, but it does need to be considered.

In the end, I feel that the pay as you want model is very simply a gimmick to play to a certain segment of gamers. If a small number of companies tout their liberal pricing policies as evidence that they are "different" than everyone else, that's old school PR value, not a new and interesting way of doing business and that is not a put-down. Such a strategy can definitely work on that small scale. If the whole indie industry turns into that? Well, then it just it won't work. You will find that, as you might expect otherwise, the better indie games will win out, and that would have happened if the price was 20 dollars or 5 dollars.

Re:Publicity worked for Humble Bundle

[supersloshy]

I do agree with what you said though. I paid $25 for HIB2. I played Osmos but the rest are of no interest to me.

Woah, none of the other 10 games in the bundle (they added the first 6 if you paid more than the average)? World of Goo, Braid, Penumbra, Gish, Machinarium... practically every single game in both bundles is worth playing and completing. You need to at least play World of Goo; that's amazing.

Re:Publicity worked for Humble Bundle

[cheekyjohnson]

lame casual games with "infinite" replayability are solid gold.

"Lame" is subjective. You can play games that you like for a long, long time. I don't think he meant every game.

Re:Publicity worked for Humble Bundle

[geminidomino]

OT, but Speaking of GOG...

Holy shit! I've never fired up Rise of the Triad on Christmas before.

You've not truly enjoyed "God Rest Ye Merry Gentlemen" until you've done so in 16-bit pseudo-midi...

Re:Publicity worked for Humble Bundle

[geminidomino]

That's what I don't get. Everyone said that World of Goo was the best game in the bundle. I tried it, really REALLY didn't like it, so never bothered with the first bundle, even during the PWYW event...

Re:Publicity worked for Humble Bundle

[nabsltd]

That probably will work for some games, but honestly, given the fact that millions of people do shell out for expensive games, its more likely that your indie game didn't sell for other reasons such as: no publicity, significantly less polish, no franchise tie-ins, etc.

The key point you are missing is the "it's just $X" issue that causes $0.99 iPhone apps to sell millions of copies.

Once the threshold is low enough, you get a vastly greater number of people willing to pay. Then, if your product is good, word of mouth will keep the sales up. If you have more than one good product, you might even start to get loyal customers who will buy simply because of your brand.

Also, "pay what you want" allows people to treat the product as shareware...pay $5 for 5 games and then play for a while and realize two of the games are "worth it", so you "buy" the five pack again, this time paying $20-30. Of course, this model really does only work for items where the marginal cost to produce another copy is very small.

Re:Publicity worked for Humble Bundle

[geminidomino]

Besides, it's not a good metric - $ per hour of entertainment, since according to it, music and film are nearly worthless but lame casual games with "infinite" replayability are solid gold.

Sounds about right. If you're paying $20 for a movie or $10 for a CD you're only going to watch/listen to once, then yes, you're wasting money. And if the "lame casual game" has infinite replayability, then it IS a good metric because if you're playing it that much, it means you actually enjoy it despite what leetsauce gamers like yourself may think of it.

Re:Publicity worked for Humble Bundle

[AusIV]

There is an important distinction between "cost", which you're talking about, and "marginal cost", which the GP is talking about. Marginal cost is the increased cost of producing one additional unit, and for digital goods marginal cost is very nearly zero. The only marginal costs you mention are support and payment processing, the rest are more or less fixed costs. The marginal costs for selling a digital good with minimal support are very, very low. Once the fixed costs are covered, selling an additional unit for $5 will be very close to $5 profit.

There's definitely a matter of balancing opportunity costs. It would be silly for a company with a highly anticipated title to offer that game at a name-your-own-price rate. But once sales have started to taper off, it makes sense to lower the price and get something, rather than keeping prices up and get nothing. This can serve to get people talking about the game again, and may lead to sales at regular price once the sale ends.

I don't believe that pay-what-you-want is a sustainable business model, but I think it's a great way to milk some extra cash out of a title that isn't selling much and it can help bring hype to a game.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Sorry but you "zero cost" people are talking utter bullshit. Support, patches, maintaining a community, marketing, hosting, payment processing, running a real-life bureaucratic nightmare (i.e. a business), all that annoying shit you need to actually survive while you make the next game and so on don't grow on trees for free. How about you publish a game and run a business yourself, then come back and tell us how everything is free and runs by itself?

Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that. It's only really viable if you get a huge volume to compensate the massive decrease in per-sale profit. For one of those games it's likely around several dozens of bundle sales to compensate one full-price sale (low average price divided by 5 games, minus donations and fees is hardly anything). Without the publicity to back it up, it wouldn't work.

Support and Patches?

Don't release a buggy ass half finished product and those two considerations go away. If you mean content updates, we call those Expansions and pay more money for them, maybe you've heard of the latest one, Cataclysm?

Maintaining a community can be as little as free. Warhammer had a completely fan maintained community until they got shutdown when the owners of the then neglected IP decided to try again. And even if it isn't, consider it an investment, mediocre games with good communities will flourish as the player base recruits their friends while good games with terrible communities will wither away. Putting effort into making your customer base happy is a worthwhile endeavor.

Marketing is a legitimate cost, but you don't need to spend the GDP of a small nation to get the word out, if your game is good people will tell other people. If your game is shit sales will plummet. The 100 million dollar marketing blitzs companies use are to hype the game up enough that release date sales will cover them, before word of mouth has a chance to get around.

Payment Processing? Are you fucking kidding me? Yea its a cost, directly related to how much money you are taking it. Non-issue. If you are making money its a small fraction of each transaction (that is frequently passed on to the customer), if you aren't selling product you have bigger problems than service fees.

Running a business? I think you maybe forgot how most of them start. Entrepreneurs. One man operations. See StarDock. Protip; if you aren't raking in millions, don't higher a staff that requires bureaucratic management.

5 better than nothing is not flawed at all. Five dollars is objectively better than no dollars. The benchmark you are looking for is if that is a sustainable price. You seem to have fallen into the trap of thinking that game developers are magically entitled to riches by virtue of existing, regardless of quality of product. The market is not supposed to set you up for life after you release one game, if that is your career you make and release another game after the first. You don't automatically make millions.

Re:Publicity worked for Humble Bundle

[pinkushun]

I'm not a big gamer anymore, but Machinarium took me back to adventure game days! I played till the end. The quality of details is stunning, with attention to each character's actions, puzzles and the rich environments. The complete soundtrack is no exception!

Re:Publicity worked for Humble Bundle

[Dhalka226]

And of course even with publicity, the more common the scheme becomes the less valuable it's going to be to any individual group.

I can say I've bought a number of games on sale from Steam over the past month or so (and particularly the past few days). Two for $20, two for $10, two for $5. Three of those were games I knew nothing about; one was recommended by a friend, and the other two were me looking at the prices, looking at the game descriptions and screenshots and going "hell, that looks like it's worth the money." In that same time period I've bought 0 games priced over that amount. But really, if somebody bludgeoned me over the head and said "welcome to the demand curve" they would be right. The cheaper shit is, the more of it I am willing to buy. This is no surprise.

How does this apply to "pay what you want" schemes? The same. You'll get a lot more sales at a lot less dollars. So will it work? Ultimately I think it depends on the project. If you're selling something that only costs a few hundred thousand dollars to make, you could do nicely for yourself. A lot of $1 and $5 showings would add up fairly quickly. If you're making a mega-budget, top-of-the-line video game with a $50,000,000 budget, you're going to have a lot of trouble recouping that cost, particularly as more and more publishers take up the scheme and the novelty and publicity wears off.

Likewise, the more successful something is beforehand the better it can do. If a successful band uses this scheme, even with only $1 a pop they could make quite a strong return. They'll have a lot of sales and only a moderate production cost to overcome. Call of Duty: Modern Warfare 2 sold about 20 million copies last year. Assuming you could have done slightly better with a pay-as-you-go scheme, let's say 25 million sales at an average of $3 (mostly a mix of $1 and $5) -- about $75MM. Does that recoup the costs? I don't know, but it would have to be pretty close at the least. Chances are it does. Big game houses aren't going to become uber-rich on a scheme like this, but assuming there is a decent market for their game it seems as though they could at least fund development and make some profits like that, and that's a very big deal.

The bottom line is there will be more pieces taken out of a similar-sized pie. If I usually spend $150 (about 3 games) per year, I'm probably not going to spend significantly more than that with nothing but pay-what-you-want schemes; rather, I'm going to get more for it. Depending on how much I allocate to each thing I purchase, I might even run out of things I want enough to pay for them. As always, there will be people it works for and people it doesn't. Previous success will be an advantage, small production costs will be an advantage. Is it the future? For small publishers, probably so, especially for their first titles. For big firms of whatever medium, probably not. They want the profits, both selfishly and to absorb risks and failures in other areas.

Re:Publicity worked for Humble Bundle

[hairyfeet]

Isn't GOG great? You can gift games to your friends, the prices are crazy cheap and even cheaper now that they are having their Xmas sale which IIRC lasts until the 27th, all the games work on BOTH x86 AND x64, and NO DRM AT ALL, no phoning home crap, no stupid ring 0 drivers that can break your OS, oh and for the Linux guys out there they even have a list of games that work on Linux so you can even give games to the FLOSSie in your life. You can redownload ANYTIME you wish, they have tons of extras like wallpapers, avatars, all kinds of cool stuff you get when your purchase, and their forums are top notch, with everything from walkthroughs and mods to tutorials on just about everything in a game.

So please, if you care about PC gaming, spread the word about GOG far and wide. Tell your friends, family, post on places like /., anyplace you can spread the word. Because the ONLY way we are ever gonna do anything about the nasty DRM infections, and yes they ARE an infection, as a repairman I can't even name how many virus like symptoms I've traced back to bad DRM schemes, is to vote with our $$$ and GOG lets us do that. With GOG I keep all my games on a TB USB drive, I can carry them with me when I visit family, and even without a connection it all "just works". I was always a "CD and a box" kind of guy but GOG really changed my tune. I have NEVER had a more easy or satisfying purchasing experience online.

Oh and be sure to sign up for the newsletter. They will not send you anything but notices about sales and new releases, and their sales are killer. I mean where else can you buy everything from Far Cry to Rise of the Triad, and with nearly all the games under $10, and many under $5? With that Xmas sale now is the time to load up on games! Well I wish everyone a Merry Xmas, I'm gonna kick back and enjoy me some fragging courtesy of GOG!

Re:Publicity worked for Humble Bundle

[pinkushun]

Breaking it down even more, from www.humblebundle.com

Average purchase: $7.77
Average Windows: $6.64
Average Mac: $9.06
Average Linux: $13.78

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

$10 isn't necessarily "overpaying" but there is a healthy mark-up on the manufacturing cost. Keep in mind, you need to factor in how expensive it is to record an album, and even if that cost is low (if it is an independent artist) how many units they'd need to sell in order to turn a profit. I'm with you on $18 being ridiculous, though. Trent Reznor broke up with his label over the pricing scheme of Year Zero (specifically the australian release).

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

While there is cost incurred producing this data, once it is made and released, the cost of mass production/replication is so low that it is, for all intents and purposes, zero. You can argue until you're blue in the face that initial cost has to be accounted for, but if you invest a hundred million bucks into designing a car, once it's complete and available, if anyone can press a button and make as many copies of that car as they want, there is no real value beyond what the button-pusher is willing to yield. Infinite economies of scale undermine any initial (or on-going) investments.
Your "publicity" argument applies to anyone selling software the old way as well. No marketing, no sales. Perhaps if they've made enough, the "Humble Bundle" group can start advertising more traditionally?

Re:Publicity worked for Humble Bundle

[ThePromenader]

Hear hear. We're dealing with a new 'virtual distribution' market model here, but it seems that a) consumers are slow to adapt to it (namely in their 'value judgement' of the product they're buying) and b) it is facing a lot of opposition from the 'old market' heavyweights.

It used to be that we were willing to shell out tons of $$$ for a product we thought was 'magic', but those years of ignorance are well behind us - no longer can we be duped by a multi-million dollar ad campaign; it's the product quality that counts in the end - Vista is a great example of this. These days development costs have gone down, and it's becoming harder and harder to justify a high price for software - companies that still tried to do so through more coercive methods than simple market demand (Quark xPress asking a 'ransom-esque' price because of its hold over the late-90's printing industry; 'no alternative' profiteering (Adobe, but today even their prices are going down)) are either failing (quark did) or changing their tactics.

When I buy software I ask myself three questions: 1) Is it fun, 2) does it make my life easier, and 3) does it help me make more $$$ (and this could be grouped with question 2). All software without exception I want to try (without limitations) before I buy - and for questions 1 and 2, I have no problem paying a price for and app that a) is good and b) I know I'm going to spend a lot of time using. Question 3 is a bit more of a touchy issue - I'm willing to shell out even a lot for a software that allows me to create with twice the schwing in half the time (compared to my production standards until then) - but even this feeling of obligation fades when the 'stuff the product does' becomes the norm. The question still remains: if development costs money, and I like what the developers are developing and want them to continue, how much should I contribute, and, more importantly, how much do they ~need~ to continue developing? Answering this would simplify things greatly for the consumer's value judgement - and conscience.

Re:Publicity worked for Humble Bundle

[ThePromenader]

Addendum: when it comes to 'fun' category, I could care less if an author/actor/musician becomes a billionaire because of his 'entertainment value' - all that matters is his/her worth to ~me~. Yet when you throw market-manipulating corporations into the question (film industry, publishing houses, RIAA), I begin to hesitate: do all those taking a share of my contribution ~deserve~ what they are getting?

Re:Publicity worked for Humble Bundle

[Ihmhi]

Give a game away for free (or damn near), and charge for a service. See: EVE Online.

Re:Publicity worked for Humble Bundle

[geminidomino]

Speaking of Linux... If you buy the Humble Bundle, can you DL it for both Windows and Linux without buying too, or just one or the other?

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Are you talkking about the restaurant in Singapore, I think near City Hall or isit Raffles Place.....

Forgot the name, but I recall eating there a couple of times. Excelsior Hotel wasn't it?

A Hindu Vege place, as I recall.

Re:Publicity worked for Humble Bundle

[sonamchauhan]

Nitpicking: he didn't say zero cost. He said "near zero marginal cost".
Doesn't that mean the cost per additional sale is near zero
Not denying the rest of your post

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

You say there's no point going with the $5 model if you make the same amount of money as with the $20 model - but with the $5 model you have 4x as many customers if you've made the same money. That's 4x as many people to buy your next game, spread the word to their friends, etc.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Conversely, I know of several people (including myself) who have paid at or above full price even when given the option to self discount. In particular, I've supported Cliffs GSB above his recommended price, and (now mostly defunct) BadBaddie's Lunar Pack at double their original. Pay want you want cuts both ways: sure, it makes the games trivially cheap for those who would take advantage of it, but it also allows those of us who want to support the indie devs the opportunity to do so (without needing to send a personal check).

Also, remember that most games (even indies) make the vast majority of their money within the first six months. Most of these titles are far older than that.

Re:Publicity worked for Humble Bundle

[hedwards]

It's fairly typical for them to get less than 35 cents per copy, assuming that they're a big star, and more likely they'll get less than a quarter a copy, after the recording studio makes them double pay for production costs and hides the profits. Not to mention making the artists pay for breakage and other costs that should be the studios to pay.

I wouldn't be griping about the cost of albums so much if there was a meaningful amount of the overage going to pay the talent. But a significant amount of the money is going to marketing, fixing the incompetent vocals and over compressing the music.

Re:Publicity worked for Humble Bundle

[yariv]

Even if the average price is 5 dollars, why would you assume this is the average price for those willing to buy for 20? I would guess their average would be significantly higher, in fact quite close to 20 dollars.

Re:Publicity worked for Humble Bundle

[Gabrosin]

It's not that each copy has a near-zero cost, it's that producing each additional copy has a near-zero cost. All of the things you mentioned are important, but their costs don't scale significantly as more people acquire the game.

I don't think "pay what you want", in most cases, will be sufficient to recoup the initial costs of a game's development. But I do believe that after a game has been out for several months, and initially excited buyers have already dropped their money on the game, moving to a pay-what-you-want model at that point to squeeze out cash from any who remain interested but didn't believe the game was worth the initial price might be viable.

Re:Publicity worked for Humble Bundle

[Bigjeff5]

You're failing basic supply and demand principles here.

For computer games, supply is effectively infinite, so we can ignore that side of the equation, and we need only look at demand.

The question is, is $20 the optimal price point?

Taking your example, only 100 people will pay $20 for the game. At $30, say the number drops to 50. Sales just went from $2000 to $1500 by raising the price. However, if the $30 price point only has 10 fewer purchases, well now your sales went up to $2700. In this case, the $20 price point is clearly too low.

On the other hand, if $20 is too high then things will go something like this: the price is dropped from $20 to $5, and 900 more people are willing to buy the game at the drastically reduced price. That's $5000 for selling 1000 copies at $5 vs $2000 for selling 100 copies. The $5 price point is the clear winner here. To continue, dropping the game to $1 may only increase sales by another 3000 copies, sounds like a lot, but that only gets you $4000 total - a loss from the $5 price point. On the other hand, dropping down to $1 may actually boost sales to 10,000 copies, a clear win.

Each product has an ideal price point, where the demand for the unit and the price needed to match that demand produce the greatest possible profit.

This is why stores have sales. Think for a moment about Black Friday - the most profitable shopping day of the year. It is called Black Friday because it is the day when most retail stores go from being "in the red" - i.e. no profit for the year - to being "in the black" - profitable. How can this be, when it is the day when retail items are at the lowest price they will be all year?

The answer is demand. You will always increase demand for a product by reducing the price. For almost all products this also means an increase in profit. The question is not whether reducing the price will bring in more money, the question is at what point will reducing the price stop bringing in money. With retail sales there are hard limits - things cost a certain amount to make, so the price cannot be reduced below that and still make money (on that item - you can sell for a loss to boost sales of other items, for an overall profit gain - see Xbox 360 vs Wii for a good comparison of the two strategies). With digital sales the limit is simply a number that needs to be met (the cost to make the first copy), the hard limit (bandwidth & server costs) is so minimal as to be insignificant.

This also illustrates the genius of retail sales. At retail, an item initially sells for its highest price. Once most of the people who are willing to pay the high price have purchased the item it goes on sale, bringing in a whole new set of customers who were not willing to buy at the higher price but are perfectly willing to buy at the new, lower price. Depending on the nature of the item, the new price could become the permanent price, or it could go back to the old price. Either way, once sales level off, there is another sale, and a whole new slew of customers come in to buy the product.

This allows the retail stores to extract the full profit at each stage. For my example, it would combine the $30 profits, $20 profits, and $5 profits. You would end up with $1500 for the 50 who would buy at $30 or less, another $1000 for the remaining 50 who would buy at $20 or less ($2500 for the first 100 sales), and $4500 from the remaining 900 who would buy at $5 or less. Once the money train has dried up, you can then even drop to $1 to catch the remaining 3000 people, for another $3000. This brings the total profit to $10000, and eliminates the risk of dropping the price too low.

As you can see, in my example the last two bumps were the most significant, but for other products that could easily happen at other price points. For example, a polarizing game with a core of fanatical fans but not many others who would be willing to purchase the game no matter the price. You might only get 100 people to buy,

Re:Publicity worked for Humble Bundle

[Bigjeff5]

Well, the musician will likely never become a billionaire thanks to people buying his CD, but the author and actor might.

Seriously, the music industry is fucked in the head, the vast majority of mainstream artists can't make a buck without touring 350 days a year.

Re:Publicity worked for Humble Bundle

[svzurich]

Yes, you can. Humble Bundle includes all version of all the games listed, and many have soundtracks. You get the Mac, Linux, and Win versions of all the games without restrictions on downloading. Also they now give out keys to add your Bundles to Steam, Desura, and Onlive. It really is the sweetest deal. with GOG coming just behind them. For as little as a penny you can get a tremendous value of games for 3 different computers OSes and they go out of their way to make it convenient. Plus if you pay more than the average price ($7.80 by its close) they gave you the first Humble Bundle for free.

Re:Publicity worked for Humble Bundle

[supersloshy]

You need to like puzzle games (and cute things) to like it. It's not exactly action-packed (except in the later levels) but yeah, just a cutesy puzzle game.

Re:Publicity worked for Humble Bundle

[Anonymous Coward]

Bravo. Good explanation.

Re:Publicity worked for Humble Bundle

[gr8dude]

If you're on Windows, can you tell me if you'd buy this one? http://private-disk.net/

Note: I'm one of the authors, if you could take some time to describe your thoughts about this, I'd be very grateful.

The reason I ask is because the "three step decision-making process" you describe does not seem to be universal. For example, I expect games to be fun, but I don't expect an IDE or a video player to be fun, I expect it to work. Can you elaborate on the fun part?

Point #3 is about making more profit, it is a reasonable requirement; but some items are important, even though they don't bring you any money. Ex: a better lamp can make you feel better and make you more productive, but you'd never say that the lamp actually gave you money.

Re:Publicity worked for Humble Bundle

[johny42]

What makes you think the retail stores have any advantage over digital stores? Nothing stops game developers from following the same model -- as far as I'm concerned, developers of the Humble Bundle games did just that -- all of the games were sold for several months for their full prices before they went "on sale" in the Humble Bundle.

The "pay as you want" could just be considered some kind of a "last tier" in the tiered system you described -- instead of selling products for some minimal price like $1, you can let people pay what they want, which probably gets you more money anyway.

Re:Publicity worked for Humble Bundle

[Dellama]

Get an Android tablet pc for celebraing the up coming New Year: On line shop: www.android-tablet-pc-wholesale.com

Re:Publicity worked for Humble Bundle

[Dellama]

Get an Android tablet pc for celebraing the up coming year: On line shop: www.android-tablet-pc-wholesale.com

Re:Publicity worked for Humble Bundle

[Dellama]

Get an Android tablet pc for celebraing the up coming year 2010: On line shop: www.android-tablet-pc-wholesale.com

Re:Publicity worked for Humble Bundle

[Dellama]

Do you want to get a gift to celebrate the upcoming new year? See our On line shop: www.android-tablet-pc-wholesale.com

Re:Publicity worked for Humble Bundle

[h00manist]

So, no, don't take it for granted that indie developers have moved on or are just raking in the dough. The good ones got that way because their developers loved them, and many still do. So go halfies on a nice meal for them, ok? They're busting their butts for you.

I got the Humble Bundle 2 at the regular price they posted. I just want the funding concept to work out.

Re:Publicity worked for Humble Bundle

[eennaarbrak]

I could just pirate from the internet if I was too poor/cheap to pay for it. Now, while this actually *does not* cut into the sales of the big gaming companies, since the cheap gamer would have never shelled out the money to begin with

So you're saying, if person A is willing to spend 60 bucks on a new game, and he gets the option to either pay 60 bucks or get the game for free, he will always choose to spend the 60 bucks?

I tried...

[pspahn]

I recently put a bunch of stuff that I don't want/need in the hallway with a sign asking for people to take what they want, but to leave any amount of cash under my door if they wanted to. One guy stopped by to give me $5 for my camping stove. No one else left anything. Oh well.

Re:I tried...

[Binestar]

this is like the guy who put a couch out near the road with a sign "Free" and it was there a week. Took the "Free" sign off and put a sign that said "$25" and it was stolen that night.

Re:I tried...

[adonoman]

This model works much better when you're dealing with people face to face. Had you set up a table and asked people to pay what they wanted, you would have either gotten a lot more money, or no one would have grabbed anything. People are a lot more "honest" when someone's watching, even if they know that there won't be consequences of not being so. This is why busking works, but you'll have a hard time selling music on line in a pay-what-you-want model.

Re:I tried...

[sakdoctor]

That's not how it's done these days.

You could have removed some key parts of the stuff, and sold them as "unlockable content".
Otherwise you could have done an advert supported model, with banner ads epoxied to everything.

Re:I tried...

[Anonymous Coward]

You were getting rid of shit that you knew had no real market value because you couldn't be bothered to sell it on craigslist or ebay, and yet you expect people to give move for your shit that probably hit the trash? You're an idiot if you go through life like this, wake up! If you want value, give it all to charity and take the tax deduction.

Re:I tried...

[pspahn]

A number of things I already sold on CL (and a few left to go). I think it's fair to ask for a buck or two in exchange for a decent baseball mitt, a wide selection of phone chargers, bookshelf, camping saw, worn once sneakers, etc. If they don't want to, fine, I was just surprised that my neighbors weren't as giving. But yeah, I didn't want to bother going through everything and posting ads for it all. I consider it my Christmas gift back to the world.

Re:I tried...

[blahplusplus]

"This model works much better when you're dealing with people face to face."

The truth is many games in the indie bundle are crap, thats why the bundle actually works. i.e. individually they are worth so little that most people would not regularly pay money for them.

I participated in the last one and paid more then then my fair share and ended playing none of them due to not really being that interested.

Re:I tried...

[Anonymous Coward]

You laugh, but this works. My parents have used it successfully to separately get rid of a refrigerator and a stove. The fridge had been sitting out for weeks, but it was picked up within hours of the $ sign going up.

In fact the guy started loading it on his truck, looked over and saw us, continued loading for a second, then thought twice and yelled over: "is it okay if I take this?" We yelled back "yeah."

My theory is that the "free" sign tells people it's worthless junk, and they don't want to haul it home just to find out it doesn't work. Attaching a dollar amount tells people that it's worth the effort of picking it up.

Re:I tried...

[Bigjeff5]

...but you'll have a hard time selling music on line in a pay-what-you-want model.

Seemed to work very well for Nine Inch Nails and Radiohead, they each made several million on their experimental attempts online sales. NIN used a tiered model (starting at free), while Radiohead was pay-as-you-want, but the concept is the same and the results are undeniable.

Musicians typically don't make much, if anything, on album sales. By cutting out the labels entirely both of these bands received 100% of the profit. Even if overall sales were a fraction of what the label could have done, the musicians still came out far ahead.

Re:I tried...

[DerekLyons]

but you'll have a hard time selling music on line in a pay-what-you-want model.

Seemed to work very well for Nine Inch Nails and Radiohead, they each made several million on their experimental attempts online sales.

Of course, having a large existing fanbase helps. So does being among the first to make this experiment which garnered a number of people who likely never would have bought their music in the first place
 

Musicians typically don't make much, if anything, on album sales. By cutting out the labels entirely both of these bands received 100% of the profit.

100% of the profit if there is any. They also now have 100% of the costs and 100% of work (where their former share was 0% and 0% respectively) regardless of the income.

Re:I tried...

[Anonymous Coward]

NIN and Radiohead are established artists who have had similar or higher sales before, have toured around the world, and record companies have invested millions in marketing them over the years.

For new artists pay what you want is much less attractive.

Is any business model sustainable?

[El_Muerte_TDS]

n/t

Re:Is any business model sustainable?

[hedwards]

Buying politicians and suing people that don't buy your product seems to be a pretty sustainable model at this point.

Re:Is any business model sustainable?

[monkyyy]

abusing 3rd world counties seem to as well

any with morals?

New Business Models

[Anonymous Coward]

The future of business models seems to be written on the wall. Guilt your customers into paying more than they have to. Create artificial value by convincing them that paying more supports a fight against a common enemy. You have to invent those common enemies first, of course. "Big content" or whatever.

Only for charities

[Anonymous Coward]

How are you going to compete when your competitor can take your product for $0 and sell a value-added product for $10 ?

It's a great bargaining power to have with your customers. Pay us or else...

Seems to work for Restaurants

[mots]

In Vienna we have a pakistani Restaurant called the "Deewam", which is basically "eat as much as you want - pay as much as you want". Seems to work, it's well-frequented (mostly by students for obvious reasons) and it's been there for quite a few years. Maybe it's because you have to pay an actual person and look him/her in the eye. As most people don't want to look like assholes, they pay adequate prices.

Re:Seems to work for Restaurants

[adonoman]

Unfortunately, thanks to the GIFT, the drive to not look like an asshole doesn't apply online.

Re:Seems to work for Restaurants

[Anonymous Coward]

I can't (really) eat more food than can fit in my stomach. On the other hand, I could probably acquire more games in the next 6 months than I would reasonably expect to actually play in my life that will fit on a 1TB external drive or two (coincidentally not too much larger than my stomach). So, there are limiting factors with restaurants that aren't present with digital commodities.

Re:Seems to work for Restaurants

[Dekker3D]

They can also make more copies than there are people in this world, for free. Which is why you, filling up an 1TB drive, isn't a problem as long as there are enough people doing so and they are paying a non-negligible price for it. You'd still need to take time to sort out the good games from the bad, anyway, and games get incompatible and relatively ugly as computers change/improve.

Your point is a good one, but I'm not quite sure it applies.

Pledge Music

[lkcl]

pledgemusic.com - this is an alternative business model. kickstarter.com - this is an alternative business starter model.

however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing.

so under these circumstances, "pay what you like" actually makes sense.

and, remember also, you can always put advertising onto the "pay" page, which can, in certain circumstances, earn you more than you could for the data-based products being sold! there are plenty of sites which give you 10-step guides on how to do this... but as always, you always need to begin with that niche "good idea" in the first place...

Re:Pledge Music

[hedwards]

however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing.

That's not true. Unless your second product is something that sells indefinitely and results in you no longer having to develop new versions, that money ends up going to developing future versions and new product lines.

Re:Pledge Music

[Kjella]

however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing. so under these circumstances, "pay what you like" actually makes sense.

Sure, but what's the incentive for people to pay if they know you're going to make it anyway? Say you wrote the first Harry Potter book, and it's a smashing success. What's the incentive for people to pay you for books 2-7? They know that even if you make $0.01/book on the next one, you're still going to make a lot more money than quitting and taking a normal job. "Pay what you like" only has an incentive to pay if at any time you have a credible threat to quit, which means you have pretty much all the downsides but no real upside. Once it is known you turn a pretty solid profit, people's willingness to give is going to take a nosedive. Or it's going to turn into a situation where people think you cry wolf, you call out for more money but no matter how badly it goes you put out a next version or offer to do it for less anyway. Of course there's good and bad sides to it, but I'm pretty sure the "pay what you like" model is going to be more about "how poor pay would you take?" rather than "what do I think this is worth?"

Re:Pledge Music

[Trinn]

The incentive is simple.

If you have enough to give, and you appreciate what I do, there's a chance you'll give. If you don't have enough or don't appreciate it, you weren't going to give anyway.

If you do something for other people that they appreciate, and they see a way to help you, they'll likely do so, especially at low cost to them.

I Do This

[chromatic]

I've just done this with the book Modern Perl. Rather than punishing paying customers with DRM or trying to track down and stop copyright infringement, my publisher gives away electronic versions for free and asks readers to spread them to other people, to write reviews, and to consider donating a reasonable value for the information.

So far I've earned more money more quickly than I would have with the traditional publishing model.

Re:I Do This

[twisteddk]

I've just done this with the book Modern Perl. Rather than punishing paying customers with DRM or trying to track down and stop copyright infringement, my publisher gives away electronic versions for free and asks readers to spread them to other people, to write reviews, and to consider donating a reasonable value for the information.

So far I've earned more money more quickly than I would have with the traditional publishing model.

And this works fine for selfpublishing or if you're hugely famous. But theres an entire lobby of MPAA, RIAA and various book publishers who want s a piece of the cake, and if theres' only one slice available, then how can they afford to pay the author ? I totally agree that pretty much any business model is better than having a publicist steal majority of your income and running around suing Your fans over licensing fees and piracy. But that's the current business model. It will hopefully evolve soon. Unlimited streaming for a fixed amount of cash is a novel approach they're trying here in my country. And it's working pretty decently so far. But like in Russia, someone will start a fight over who gets how much, because streaming and purchasing is not he same thing etc. Always publisher vs. artist. Sad really.

Re:I Do This

[chromatic]

But theres an entire lobby of MPAA, RIAA and various book publishers who want s a piece of the cake, and if theres' only one slice available, then how can they afford to pay the author ?

In my case, I choose not to work with selfish publishers.

If I'm going to do much of the editing of the book and if I have to do most of the marketing for the book, then why would I work with a publisher who'll give me only 5% of the revenue?

Re:I Do This

[twisteddk]

I totally agree. Your work, your money.
But it's the age of greed, and a lot of people get suckered in by the big names, or their lack of marketing skills. But unfortunately it's usually the larger, more established publishers and companies that seem to be overly greedy and trying to protect a failing business model.

I have a friend who's a musician, and he has tried self publishing, with a pay what you think it's worth model for his music. It doesn't keep food on the table for him, even though he is pretty decent. But his physical discs also dont do this for him, it does however increase HIS cut of the takes, because he doesn't pay a publisher for distribution costs etc. And I know that a large group (Radiohead) tried the same thing in 2007 with their album "in Rainbows" (If I recall correctly). And from what I know majority of fans preordered the physical version regardless, and those who settled for the download version generally paid retail prices anyway. While there were some leeches getting it for a penny, on average the band had higher earnings on that one album than any of their predessors (to my knowledge).

So I'd say the business model works under the right circumstances. True, You may need to use a greedy bastard publisher to get to the point where you're famous first..... But I'm sure we'll find a way to get around that hurdle in time, too.

Subscriptions work better

[betterunixthanunix]

If you can provide customers with a service they actually want and benefit from, and which is of a reasonable level of quality, a subscription model is a lot more sustainable. I would like to see some free software multiplayer games in which the business model is based on subscriptions; not wrenching fees out of people the way a lot of MMOs do right now, but providing a multiplay server that is so good (in terms of policies, uptime, etc.) that people will pay to use it. Gamers would still be free to play on other servers, no-cost or subscription based, and the companies that run subscription servers would be competing to see who could provide the best experience.

Of course, the subscription model cannot work everywhere, but I would say it is probably more sustainable in the long-term than a pay-what-you-want model, at least given our current society (the one based on greed).

Re:Subscriptions work better

[Kjella]

If you're paying for a server you're only likely to get a server, not development. If people can play it for free without the subscription or use alternate servers, the incentive to develop is really low. You can funnel lots of your profit into development only to have the business being taken over by someone providing cheaper hosting. Unless you start with exclusive content, in which care you're quickly back where it's only one server/network worth playing on.

Old Hat...

[Mikkeles]

'Can pay-what-you-want become a sustainable mainstream business model?'

Like, e.g., most churches and Greenpeace?

Re:Old Hat...

[thegarbz]

Churches and Greenpeace can essentially be looked at as not for profit organisations providing a social service on behalf of the people and for the people. They also depend heavily on corporate donations and government tax breaks. The church didn't build up it's wealth from passing the hat around.

This won't cut it for a game studio where production costs are into the 10s of millions and the underlying drive for the business is to make a profit. If people started paying $5-15 for all their games, and there was no one to put through a massive donation to the cause the companies would quickly go bust.

Re:Old Hat...

[davev2.0]

Um, no. For most of history, churches have required a portion of a worshiper's income, known as a tithe. For most christian denomination, this is 10%. And, when the Church needed money to build all those cathedrals in Europe and the tithe was not enough, it sold indulgences, the right to sin.

Greenpeace is not a business and to be a member of Greenpeace one must donate to the cause.

Re:Old Hat...

[hedwards]

Greenpeace is not a business and to be a member of Greenpeace one must donate to the cause.

True, but you get to choose how much you donate and for practical purposes if you're not willing to put even a couple bucks in the hat, you're probably not interested in being a member in the first place.

Economics 101

[thegarbz]

Pay what you want is never a sustainable business model in a world where the customer is faceless. Once there's nothing preventing every customer from paying only $1 that's what they all will do. Currently the trends show otherwise because many people show their support or stick it to the man when paying. But long term there's nothing to motivate one person paying more than another.

To really maximise profits you need to charge what each customer will bear individually. So if the $90 price tag suits some customers, great. I won't buy a game for $90 so it's a lost sale. However if the publisher then comes along and offers me the game for a heavily discounted $45 all of a sudden they've turned a lost sale into more money in the bank. This works well in the game industry where the cost of production is a once off, and as such there's little cost added to progressively lowing the price to capture as many customers as possible.

I see this as being the future. Where I get my games a year after my compulsive gamer friends, for 1/3rd of the cost. It already works well on Steam with their bundle packs and discounts.

Re:Economics 101

[Anonymous Coward]

Pay what you want is never a sustainable business model in a world where the customer is faceless. Once there's nothing preventing every customer from paying only $1 that's what they all will do. Currently the trends show otherwise because many people show their support or stick it to the man when paying. But long term there's nothing to motivate one person paying more than another.

Bullshit. You're projecting your own behaviour onto your limited view of the market & sciety. As pay-what-its-worth / pay-what-you-want increases in usage, consumers will come to terms with the fact that patronage is necessary if they liked what they've got, and more so if they want more of it from the maker. I suspect you lack the ability to see beyond supply & demand of industrial economic theory, but need to start integrating the notion of infinite supply due to the inconsequential cost of distributed mass production, if you want to continue pontificating on economics.

Re:Economics 101

[Anonymous Coward]

You need to read the rest of the book on economics, not just the glossary, kid.

Re:Economics 101

[Anonymous Coward]

Tell me how supply and demand works in a market of infinite supply, big fella.

Re:Economics 101

[Kalriath]

It's not really infinite supply though. If people stop paying decent amounts for product just because "there's infinite supply", the fixed costs of that producer will bankrupt them. The flow on effect is that future entrepreneurs will see that as a possible outcome if they were to try it themselves, and therefore wont bother - so we in fact end up with less supply. It's not pure economic theory, but to be honest pure economic theory fails to take into account the one major variable - free will. Economists should be required to take psychology degrees as well.

Re:Economics 101

[Anonymous Coward]

But the already-made product is replicated en-mass at null cost by the consumer, therefore, as long as it is available by a consumer, there is supply.
Additionally, you are assuming that insufficient payment will flow, which was addressed a couple posts previously. Future entrepreneurs will either see opportunity or failure, and like any business, some will make it, some won't. They ability to crank out a crap product and turn a profit won't exist, so it is just as reasonable to argue that only a quality product will endure, making this shift in the market a positive force for consumers and upstanding suppliers alike. I have no doubt that those currently entrenched in media cartels will not employ the new model, so there will be less supply initially, but that will change as more players (who have not acclimatized to the incredible ROI the industry extracts ATM) come on board to compete for a smaller, but acceptable, piece of the pie.

Re:Economics 101

[Kalriath]

Your model still relies on ignoring a critical factor - like all economic models: free will. If a consumer can avoid paying a reasonable amount, they will. In real life, people don't consume a product and then say "you know what, I think I'd like to pay more for this!" - they pay as little as possible. Since there's no way to remove the fixed costs that all producers and distributors must incur, the inevitable result is a market with very few producers, and very few of them with the resources to produce quality product. The patron model doesn't work in the modern world, where people can delude themselves into believing it's a "victimless crime" to not contribute to the production of a good, virtual or not.

Generally, no

[davev2.0]

See, the problem is that people, as a group, are assholes. Given the option of paying what they want, they will underpay or not pay at all, even if they can afford it.

Mainstream?

[ghjm]

Yawn. Call me back when McDonalds, Burger King or Wendy's lets you pay what you want for a hamburger. That would be mainstream.

Re:Mainstream?

[JimBobJoe]

How about Panera?

steam

[luther349]

genuinely i go with steam for my games these days. have you seen the killer deals they offer. far cheaper then buying the cd and less drm hassle these days. as for this homebrew pack they have proven one thing. there is a market for linux has a mainstream gaming platform. in both of these experiments linux users always payed the most money. well windows of course got the most buys of course. and mac is just sad like a 1$ avg.

Re:steam

[0123456]

That's a good point. If a game on Steam is $20 and I think it's worth $5, I don't pay $20 for it, I wait for a sale when it's $5. So if it was 'pay what you want' I'd pay $5 for it and they'd get my money straight away rather than having to wait for a sale.

Re:steam

[luther349]

genuinely a 20$ steam game is 60$ in the store with crappy drm.

Free for all Christmas

[Anonymous Coward]

Humble Bundle: Coming to a torrent near you soon

Re:Free for all Christmas

[neminem]

Quoth 3 Dead Trolls in a Baggie (many, many years ago), who put up all their stuff for free on their site:
Of course, if you've downloaded this from Napster, screw you. You know what, free isn't good enough for you, you've gotta rip us off? That's okay, I will find you, and I will kill you.

reddit example is incorrect

[joe_cot]

reddit didn't say "pay what you want" for upgraded accounts. They said "hey, we really need some money", hinted that people might get something in return, and let them donate.

What they got was upgraded accounts, for a duration based on how much they had donated, and trophies saying that they were "charter members".

So there's a big difference there. For the Humble Indy Bundle, it's "pay what you want" and you get the same thing. For reddit, it was initially "pay what you want", with no indication as to what you were getting, and what you paid affected what you got.

Re:Yeah, we've heard this one before

[Shikaku]

http://www.humblebundle.com/

$1,710,374.77

I can't quite hear you over how wrong and haughty you sound, what now?

Re:Yeah, we've heard this one before

[rekenner]

The HIB earned each of the game makers about $100k.
On top of anything they had made for the games on Steam or other methods of sales.
And then HIB2 is raking in even more money. So, it doesn't always work, but it can very efinitely work.

It isn't a matter of opinion

[serutan]

Either pay-as-you-go will work as a sustainable business model and become the norm, or it won't. Debates among armchair economists won't affect the outcome. If IP stakeholders start attacking pay-as-you-go with PR campaigns, lawyers, and Congressional whores, then you'll know it's definitely working.

Only for Digital sales...

[RyoShin]

...and only for older/"smaller" items. With anything done over digital distribution, if someone pays $0 then you are out only the cost of the bandwidth used to transfer the item in question. With older items, which have already been sold at a regular price (and hopefully recouped production costs), anything anyone pays is a bonus, because more likely than not those people would never have purchased that item. I know that I would never have purchased any of the games in HB2 myself, but when I'm able to name my own price it becomes a different factor altogether. (The charity part helped, but if I was doing it for the charity I would have just donated to one of the charities directly.)

See, people like to feel in control, some more than others. By allowing someone to name their price, they're given an extra elation in governing the world around them. Most probably use this new-found power to freeload, but others will happily pay a price that suits them. I bet that if you did a comparison of what people paid for each "name your price" item, you'd find almost no correlation to the actual stated value of that item, because at this point the value of the item is out the window and it's about what the person is "willing to give up" that states what they pay.

In some cases this actually means they will pay more than the stated value because they get a bonus--not only do they get the power of pricing in the situation, they get to "show off" with what they think is a high number, regardless if it's really a high number to them or to the seller, so long as it gives the appearance of a high amount of money relative to the item. (Think big man in nice suit walks down the street, stops at a lemonade stand, hands over a five for a 50 cent glass, and walks away with a big smirk. Kids are happy for an entirely different reason.)

Especially for products that require no upkeep (i.e. they don't maintain servers or patches or updates anymore), once the producer has reached a certain profitability on the product it's to their benefit to do a "pay what you want" model. Not only does it give the product a second life as people report "hey you can get this cheap!", it can be used to build up towards other products or otherwise garner good will towards the brand. It also gives them a better idea of what people *want* to pay for the product, as opposed to what they're willing to pay, which may change how the pricing scheme and money put into the next product are set up.

Re:Only for Digital sales...

[Bigjeff5]

...and only for older/"smaller" items.

Huh, so you're saying Radiohead's latest album wasn't a success in spite of the millions of dollars in profit? Profit which they would likely never have seen a dime of if it had been sold in the traditional manner, mind you (the music industry is nasty to artists - it's incredible).

Obviously this isn't going to work for everything, but it works for a lot more than older or smaller items. In fact it works extremely well on popular items as well. In a brick and mortar store Radiohead's album would have sold for almost $20 dollars, yet they made a killing averaging $3 per sale, if memory serves. Not a small item, not old, very profitable.

Nine Inch Nails did something similar, though they used a tiered system instead of pay as you want - X number of tracks HQ free download, all tracks HQ download for $5, CD shipped for $10, delux with hardcover something-or-other for $75, and an uber-delux for $300.

Re:lifetime

[TaoPhoenix]

Let's just suppose that if someone finds a stunning new business model that gloriously gamelocks sharing itself, the world will rejoice.

You and AC have remarked upon one clue: there is in fact a large yet limited amount of people-time available. If, while you were not playing the game, it went somewhere else and did something, you wouldn't miss it.

Remarking on all the game closures lately, games don't get turbo-shared if they aren't popular for that point in time. Just thinking...

Only for goods where the marginal cost of...

[PinchDuck]

distribution approaches zero. Other than that, you still have to cover the cost of goods sold and may never make a profit.

Re:Only for goods where the marginal cost of...

[Bigjeff5]

In other words, it's good for everything digital.

Which is what the summary was talking about.

Just a form of price discrimination

[Anonymous Coward]

PWYW is just a special case of price discrimination, with the caveat that your revealed price is going to likely be below your personal utility for the product, whereas the goal of other types of price discrimination (such as car dealers) is to extract precisely your personal utility.

there would be something special about it

[unity100]

if it is good. it is so with any product/service. if its good, its special and it will sell.

Banalization

[Anonymous Coward]

I think the source of the success of the Humble Indie Pack is that there aren't many deals like it. If all of a sudden we had a huge library of products we could pay what we wanted, it would lose some of its magic, and the model would begin to be a bad idea when average payment AND number of buyers fall.

At least, that is my theory.

hairyfeet eats his own words (3 times in a ROW)

[Anonymous Coward]

http://it.slashdot.org/comments.pl?sid=1916240&cid=34612834

http://it.slashdot.org/comments.pl?sid=1916240&cid=34647708

http://slashdot.org/comments.pl?sid=1922942&cid=34665368

"3 strikes you're OUT..."

hairyfeet eats his own words (3 times in a row)

[Anonymous Coward]

http://it.slashdot.org/comments.pl?sid=1916240&cid=34612834

http://it.slashdot.org/comments.pl?sid=1916240&cid=34647708

http://slashdot.org/comments.pl?sid=1922942&cid=34665368

"3 strikes you're OUT!!!"

Mod Parent Up

[amentajo]

Thank you for a comprehensive, readable explanation of the supply-and-demand model as it applies to digital (and other) sales. May this post be modded up to +5 Informative.

Only to create a buzz...

[Anonymous Coward]

It could work, but only to create an initial buzz and a loyal following. But it's not sustainable as you need to set a price point to meet your financial obligations once it becomes your primary source of income.

Re:Yeah, we've heard this one before

[Anonymous Coward]

What are you talking about?
NIN's Ghosts I-IV tiered pricing model was a huge success.

The Humble Bundle business model?

[h00manist]

I have a business, helped my wife open hers, and had others before. A business has a monthly ongoing cost, generally salaries and bills. A project has a one-time cost. A software project can be developed as a one-time project, then consume no more financing, just eventually some additional support. So eventually that becomes another project.

The one-time cost for developing a small game project, say X dollars for developers for Y months, could find initial funding, which would be a calculated capital risk, then "humble bundle", "auction", or "sell" the program source code, with the promise to release the source if the original funding, plus X for the initial capital risk-taker, becomes available.

So if I have a small software company, our monthly costs are 100, and we can do a game in 12 months, developing the game will cost 1200. Some investor could come up with that for us to do no other profitable work for twelve months, or we can take that risk ourselves if we can find some time+money. That could all be recouped later though a sale. The risk is that we could fail to complete the project, plus it could fail to sell successfully. Somewhat difficult risks, but which can be calculated.

For smaller projects, or for doing them with more time, developers themselves can take the risk and capital costs, doing it in some fraction of their time they decide to do risk-projects, and not doing actually-paid-work to pay for their fixed monthly costs. Then releasing it as closed source, and advertising release of the source once reaching the sales amount equivalent to their time+labor+risk they invested. This would convert their risks, the potentially-earning-work-time into actually-earned-work-time, plus would release the source. Plus, they have their regular daily work, such as developing corporate databases, or whatever regular work is available. In fact, it can be done by a group of friends. Keeping in mind, of course, that potentially-earning-work is not actually-paid-work, so there is +risk, that must be always kept in account, and in mind. People always ignore the risks, justifying it with "be optimist", or "don't be negative". Risk is not a monster, it just has to be taken into account, otherwise people fight later on and there are problems. Risk is, well, risky. The risk can be reduced and become small, if there is available time, hard work, intelligence, experience, dedication, teamwork, creativity, etc.

FairPay -- a Sustainable Variation on PWYW

[rreisman]

I suggest a radically enhanced variation, FairPay, oriented to ongoing relationships, especially suited to online sales – that is sustainable and could solve the current crisis for digital content pricing.

FairPay combines Pay What You Want (PWYW) with consequences that make it fair to sellers by giving them a complementary level of control. It works where there is a subscription or other ongoing relationship of continuing sales, by tracking how fairly each individual buyer pays over a series of transactions.

Seller protection comes from their control over when to extend such offers. For buyers who pay fairly, the seller continues to extend more FairPay offers. Buyers who do not pay fairly must expect to lose the privilege of continuing to buy on a FairPay basis, and be left to pay a conventional set price for future purchases. FairPay can drive incentive programs in which those who pay well rise above the pay wall and gain increasing levels of preference and flexibility, and those who do not pay well drop down to reduced offers -- or a hard pay wall.

Because of this feedback cycle, this FairPay process can be very powerful for an ongoing series of sales. This is especially suited to digital products/services with their low marginal cost, for example:
--Any digital subscription service, such as newspapers, magazines, music, video, or services
--Individual digital items (or bundles) from a catalog of songs/albums, videos, books/chapters, articles, etc...
--Even for non-digital items, such as an ongoing series of movie previews (much like the Freakonomics PWYW movie preview)...

The process begins with one or a few low-value items (or a short subscription trial), to test how the buyer sets prices. If the prices are reasonable, a few more items (or subscription extension) are offered. As the buyer builds a reputation for pricing fairly, more FairPay credit is extended (but never so much that there is too much risk that the buyer is done and will pay nothing for a valuable bundle). So it might better be called Pay-What-You-Think-Fair, because that is the result.

FairPay retains the flexibility and participation PWYW offers to buyers, and improves on it by letting buyers set prices after receiving and using the product/services, after they know its value. This reduces pricing risk to both buyers and sellers. At the same time, FairPay feedback processes enforce clear penalties for unfairness.

FairPay also exploits price discrimination in a mutually beneficial way, to set prices that work for buyers with different price sensitivities and value perceptions. This expands the total market and increases revenues and profits.

FairPay enables sellers to go beyond freemium, to appeal to buyers with dynamically adaptive hybrids of free and paid service.

Details are at www.teleshuttle.com/FairPay. A blog with comments and specific examples is at www.FairPayZone.com.

Fungus Post-Ecology

[Databass]

I think a point that has been undermentioned is this: all the games in these bundles are at the end of their life cycle. Aquaria, World of Goo, etc have all been around for years. Everyone who cares enough to know what they are and shell out cash has already done so. Aquaria already had plenty of sales, World of Goo already had a Pay What You Think is Fair sale. Their usual mini-markets have been tapped out.

So, along comes Humble Bundle. With absolutely nothing left to lose, each penny they bring in after that is a miracle penny from heaven, and every piece of publicity they bring in is someone they didn't reach before. New Players get to try the games "they'd been meaning to get around to" or had never heard of, now at a price they pick so will find fair. It's kind of like roasting up some BBQ beast, eating off all the meat you can carve, and then burying the scraps- only to find that you can get extra mushrooms to grow and eat even more off your feast.

Would you take a new game and bury it directly hoping to get mushrooms? That's doubtful. You'd want to tap your primary market first. Is the mushrooms phase likely to detract from the BBQ phase? Not too likely. People with a hankering for fresh BBQ game content probably don't want to wait around through the life cycle of the game to eat the older mushrooms. Everyone hungry to pay for delicious bacon still will- those willing to settle for mushrooms didn't really crave the BBQ experience enough to pay for it anyway.

Re:Yeah, we've heard this one before

[Anonymous Coward]

"still couldn't pull off the Pay What You Want model"

wtf is this retarded bullshit? Radiohead's and NIN's free albums were huge fucking successes.

http://www.nme.com/news/radiohead/40444
"According to reports most fans chose to pay nothing to download the album. However, it still generated more money before it was physically released (on December 31) than the total money generated by sales of the band's previous album, 2003's 'Hail To The Thief'."

http://arstechnica.com/media/news/2009/01/free-nine-inch-nails-albums-top-2008-amazon-mp3-sales-charts.ars
"Nine Inch Nails, for one, and Trent Reznor & Co. produced the bestselling MP3 album of 2008 at Amazon.com, even though the music could be had for free."

"Oh, no, we were super successful, but think HOW MUCH MORE successful we'd have been if all those people who didn't pay had paid oh, what a failure that was, oh how sad we are."

I don't care how smart and successful a person who thinks this is, it's a stupid thing to think.