Valve's Newell: One-Price-For-Everyone Business Model 'Broken'

Fysx writes with recent comments from Valve co-founder Gabe Newell about how he thinks the traditional video game business model is flawed: "The industry has this broken model, which is one price for everyone. That’s actually a bug, and it’s something that we want to solve through our philosophy of how we create entertainment products. What you really want to do is create the optimal pricing service for each customer and see what’s best for them. We need to give customers, all of them, a robust set of options regarding how they pay for their content. An example is – and this is something as an industry we should be doing better – is charging customers based on how much fun they are to play with. Some people, when they join a server, a ton of people will run with them. Other people, when they join a server, will cause others to leave. We should have a way of capturing that. We should have a way of rewarding the people who are good for our community."

Comments

Re:Hrmmmm, interesting

[definate]

Sorry. I made the fatal mistake of RTFA, and just Re-RTFA just in case I missed it, and I still don't see it. Nowhere is he talking about micro-payments for extra content or eye candy. Also, this isn't "a lot of payment strategies" your examples are "different products". There is a HUGE difference.

I have no problem with these different products, such as paying for eye candy (like more hats in TF2!), or paying for DLC. No problem there, and this isn't what he's talking about. Also, this isn't price discrimination. You could loosely apply third degree price discrimination, but this would be more like "You bought a more expensive variant of the game and it comes with a golden hat, which can't be purchased later".

What he's talking about, is proper price discrimination, and he offers these two examples:

"charging customers based on how much fun they are to play with"

" how much people want to pay for items. Some people are happy paying a dollar. They’ll pay a dollar over and over and over again, others want to be different, others want to run servers and create mods. Each one of these people should represent a different monetisation scheme for the community as a whole."

While the latter is a possibility and they're already doing this (such as "free to play this weekend", "DLC", "WoW pricing model", etc), the former, is what everyone is discussing.

Okay, so your per game rating means they can't apply discounts beforehand, additionally it's open to the biggest weakness of "how do we rate 'fun'". Do you know an easy way to calculate this? A way which isn't open to gaming? A way where you don't give the trolls a very nice weapon? A way where the administration overhead doesn't increase disproportionately? A way which allows you to trust servers that you don't run?

Quite frankly, you're saying I have an "inability to see it implemented", where as you've got what I like to call entrepreneurs myopia, it's like marketing myopia but it's where you don't think through the entire solution, systematically, and instead jump to simplistic solutions which don't necessarily reflect reality. We all get it, especially entrepreneurial types (Read: ADD/Bipolar types).

Also, this sort of analysis is what I do. Implementing different revenue models, is extremely difficult, and requires looking at each stakeholder (particularly the ones which are customers or associated in that way), then considering how they make their buying decision, considering what all the incentives produced are, what sort of proportions these would be produced in, and what the sum of these two would be. You're bound to get a lot of this wrong, because incentives aren't obvious, until a lot later. The dotcom boom was a perfect example of this, many different revenue models which on the surface seemed good, but underneath was a house of cards. Though hopefully we likely wouldn't make the valuation feedback mistake again (Well, at least as obviously).

"Brainstorming" I've found to be useless, you just get a pile of ideas (which are never in shortage), instead of rigorous analysis. Which is what's actually required!

Anyway, I sort of went off on a few tangents here, it's hard to stay on track when discussing such complicated ideas, in essentially an open forum (and they are complicated ideas, when you look at them in full).