App Store pricing


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In the 1980s I was in charge of marketing at a couple of big game publishers. Imagine and Codemasters. The main market then was games for the Sinclair Spectrum. And Uncle Clive did not run a platform holder business model, he just sold machines. So the game market was a total free for all. And if you had the right skills a game could be written quickly and cheaply. So the barriers to entry in this business were very low. Which meant that there was a massive amount of competition.

In economics there is something called price elasticity of supply, which says that if there is a big supply of something the price will come down. We see this at the supermarket as different fruits and vegetables come into season. And we saw it with Sinclair Spectrum games. Eventually they came down to just £1.99 which, considering that physical product had to be manufactured, was a phenomenally low price. Also the Spectrum suffered from a huge amount of piracy, both professional counterfeiting and schoolboy duplicating, which was a further driver towards low prices.

One really brilliant effect of the Spectrum free for all was product differentiation. To be different to the competitors people would try anything that had a small chance of working. This led to an explosion in creativity and much of what we know as gaming today is descended from ideas that first surfaced then. For instance John Gibson and David Lawson at Imagine invented the Real Time Strategy genre with the game Stonkers. Certainly there was vastly more variety in Spectrum games than there is in PS3 games today.

And yet in a sea of budget £1.99 games it was still possible to succeed selling at far higher prices (at the time called full price games). Games like Daley Thompson’s Decathalon, Rambo and Miami Vice. These games were not necessarily better than the budget equivalents. But they were brands. And customers were buying more than just the game, they were buying into the brand experience, for which they were prepared to pay a multiple of the budget game price.

The same happens with the grease that women put on their faces. Scientist say that there is little or no difference between the cheapest and the most expensive. It is just grease. Yet the price difference is phenomenal. From just a few pounds for half a litre to £50 or more for a tiny pot of the stuff from the main prestige brands and many hundreds of pounds for a small pot of the most expensive stuff. And millions of women willingly spend their hard earned money on the stuff. Simply to have the brand experience. In fact they are buying 90+% brand and less than 10% product.

Now the Sinclair Spectrum days are with us again with the Apple App Store. It is not just me that thinks this, Neil Young is CEO of ngmoco, he experienced the Spectrum market first hand and he thinks that App Store is the same. So we have the same explosion in creativity and we have the same collapse in prices, this time to 99c because there is no physical product to pay for. The collapse in prices is exacerbated because so many Apps are self published and the author/publisher tends to be very unsophisticated about marketing. They think that price is the only way to compete and they know nothing about building a brand. Or, if they know about brands, that advertising is the only way to build one.

What is happening on the Apple App Store is going to become the standard for the industry. The other platforms are being forced to move to the App Store business model. Even major established consoles like the Sony PSP. So the flowering of creativity and downwards pressure on price will be across the board.

Which will lead to an explosion in proper marketing in the game industry. Some people think that game marketing is buying lots of advertising, preferably on television. This is part of why AAA boxed console games are so expensive. The people who do this are marketing dinosaurs. Proper marketing is a far broader and more subtle craft. We will need a lot of it if we want people to pay more than 99c for a game. And we should be starting by nurturing the concept of celebrity within the industry.

4 comments ↓

#1 woodins on 08.13.09 at 3:48 pm

Then we need some decent celebrities lol.

We Brits have uncle Pete promising that Natal will cure cancer and world hunger, and Im just waiting for the announcement that Fable 3 will give every gamer three wishes.

On the other side of the pond, we have CliffyB, by far the sexiest and coolest games developer around (hey, he may be a gaming geek who spends most of his time in a development cave, but he exudes testoserone and the look of a seasoned sexual predator). If I hear another “Bono style” quote come out of his mouth I’m gonna scream . . . . . . .

#2 Docred on 08.13.09 at 6:08 pm

Now I need to go boot up the Spectrum Bruce :) I can remember a similar situation with vic-20 and C64 software…$50 or $60 per game, and after a while under $10 as the market was flooded. Almost the wild west days of game software development in a sense.

The move towards lack of a ‘physical’ product or store coupled with the net has leveled the playing field again and enabled the small and independent people to compete, though as you say, branding and marketing are key components that many people don’t fully understand. Its not about the best…for example, most of the music we listen to on popular radio isn’t the most technically proficient or imaginitive…its catchy, trendy and marketed well. The really talented musicians are necessarily the ones who will sell millions.

#3 Lucas on 08.17.09 at 10:41 am

As a Spanish nostalgic Spectrum player, usually checking Xbox Live Arcade, Wii store, Kongregate, Steam indie titles… this was exactly one of the things I was asking myself some weeks ago.

Years ago Spain was one of the more prolific european countries making videogames. Today we are at the very bottom, so maybe moving to cheaper, more imaginative titles would be really good for our own industry.

On the other hand, I would like to know your thoughts about the future of the console online stores.

I’ve been working several years on a AAA title for Xbox360, PS3 and I’ve realized that, except for big, strong, IP driven studios, it doesn’t make sense trying to make money in this market. Too risky.

If you want to reach the console market it’s easier to keep your studio alive working on several smaller downloadable titles.

But I wonder if during the next few years we are going to see not only small, sort of spectrum evolved, “indie” titles in these online stores.

If now it is possible to download a full Xbox or PS1 game, will the developers try to make PS2 quality games and sell them on these stores? Will this be an opportunity for modest studios to move somewhere between AAA and indie development?

Maybe the cost of making a PS2 title, even today, are too big in order to get benefits just selling your game online. But we are going to see how people start moving from retail to online, and then this situation may change.

#4 Bruce on 08.17.09 at 11:24 am

Lucas,
We are seeing an explosion in the number and variety of available gaming platforms, at the same time we are seeing an explosion in game genres and the range of viable business models. Everything works if you do it properly.
For a developer it is best to have realistic ambitions and to concentrate on making really great product.

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