Epic Games On The Future Of Triple-A Game Development Marketing And Pricing

from the the-future-is-inevitable dept

In a pair of interviews with Develop, Epic Games’ Mike Capps shares his thoughts on some of the problems the industry faces by having focused on AAA game development for so long. According to Capps, this focus on AAA games, or games with large budgets and high production values, has led to the death of lower quality but still good AA games.

In the first interview, Capps was asked if the death of AA game development and the rising costs of AAA game development is good for the gamer.

No, no I don’t think so at all. Certainly as a gamer I don’t think what’s going on is a good thing. Triple-A is as much about marketing these days as it is about production values.

Take a game like BulletStorm, for example. That game was supported and well reviewed but just didn’t break out. It wasn’t a failure, but it wasn’t a success that could fund a series of projects either. That’s a game that I think people loved but it’s not one that gets the $100 million marketing budget, because that amount of money is only spent on a few sure-fire hits and annualised sequels.

There’s a lot of great games out there that don’t take off. How many games have you loved that sell less than three million units? There’s probably dozens. Those games can’t get made in today’s games economy. So no, I don’t think it’s a good thing that the middle-class of games have gone away.

Here he lays out some of the concerns over marketing allocation for games. While publishers will release a number of games during the year, the vast majority of the marketing budget is spent on only one or two hits. However, he feels that this is changing in gaming. Capps feels that there is a marketing shift from direct marketing to building a community behind games.

I’m not an expert here, but there is a huge impact from non-commercial marketing these days with things like Facebook and Twitter. If you don’t spam people then you can be very useful to your customers. We were not forward-thinking in that area, but we’re really driving in this space now and have more than one million Facebook fans.

But other forms of marketing and PR are starting to change things. The focus is changing from shoving TV ads in people’s faces to actually building a community.

I don’t know if there will be the same amount of TV adverts in five years’ time. No one gets fired for buying TV ads, because they make sense, but soon they will start to make less and less sense. I think what could happen is a lot of money can be saved with less TV adverts and that itself, perhaps, could free up more money to take more risks and be more creative.

Such a move can certainly help the viability of AA games in the market. Many game developers, specifically in the indie scene, have learned that building a community behind a game increases the word of mouth exposure of the game and the developer. As AAA publishers shift to a community focused marketing strategy, they will be able to focus more on the games themselves.

Moving on to the second interview, Capps feels that pricing restrictions on consoles are also part of the problem of less viable AA games.

I think another thing that’s changed is the way people are willing to spend their money. Consoles need to adapt to this. Game revenue has moved to the service model and the microtransactions model. Consoles need to start being comfortable with that. They need to be able to do something where small virtual items can be sold and bought for 20¢ without a long certification process and a price approval process.

Right now we’re not even allowed to change the prices of virtual content. We’re not even allowed to set the prices. I just don’t think this protectionist approach is going to be successful in a world where the price of virtual items changes on a day-today basis.

Double-A games will never come back unless we get rid of this notion of a game being $60 or not released. The console manufacturers need to let this happen. The best way of driving developers to PC is telling them they have no freedom in what prices they can set for virtual items. It would be great to have the level of freedom that, say, Steam gives you.

On the surface, this may seem contridictory to comments Capps made earlier in the year about how $1 games are destroying the games industry. Hopefully, Capps is just seeing the folly of that view point and instead feels as he is expressing now, that console manufacturers need too allow more price flexibility. While they probably don’t need to let prices drop to $1, having more available pricing options will only help some games.

As game development further moves into the realities brought by the digital age, there will be companies lost as they try to hold onto old business models that may have worked in the past but do not work today or will not work tomorrow. As Capps has shared, marketing and pricing are two aspects that will change the fastest. As gamers rely less and less on television and print media for gaming announcements and move more toward social media for that information, game publishers will need to adapt or they will be left behind. As console manufacturers continue to insist on complete control over game pricing, gamers will move toward platforms that allow for less expensive fare that provides just as much enjoyment. Times change and so do markets. Epic Games seems to be on a path toward success in this new age, how many other developers and publishers will join them?

Filed Under: marketing, pricing, video games
Companies: epic games

Despite Publisher Apprehension, Good Old Games Proves A Market For Old DRM-Free Games Exists

from the build-it-and-they-will-come dept

In preparation for the London Game Conference, Edge Magazine spoke with Guillaume Rambourg about the path Good Old Games has taken on DRM and what other game companies can learn from it. While Rambourg was light on the details of just what he will be speaking on at the conference, he remains confident that other publishers can learn from GOG’s experiment with The Witcher 2.

I will be sharing the sales numbers on GOG compared to the competition. I think the numbers will speak for themselves, what DRM-free sales of even a triple-A title can achieve. Our values are universal and they don’t only apply to older content. They apply to triple-A, day-one releases.

I certainly look forward to learning more about what this experience has to show other developers but I am glad he still leaves plenty to glean from this interview. He continues by explaining that publishers have always had the ability to do exactly what GOG is doing, but they refused to do it, citing unreasonable expenses for low returns. In the early days of GOG, they were met with animosity from publishers over the idea of releasing older games. These publishers didn’t want to dedicate time and resources to preparing these games to run on modern computers. They figured it was a losing strategy.

This is something that I have observed over the years. Very few PC game companies have released older games for any price. This led to the creation of a number of abandonware and warez websites. These sites have made available a good number of unauthorized games to the public. GOG specifically took notice of this and has actually used those sites to its advantage.

When we sign content for GOG, we contact abandonware websites and make them our affiliates. So they remove the illegal content, and instead they put a GOG banner and they direct sales and traffic to us. Step by step, we are cleaning up the market and we are making the back catalogue segment a visible, and viable, market for the industry.

This is a winning strategy. I have been to a number of these sites in the past and have observed that most of the well respected sites have policies in place to remove games that are available through legal channels and even link to that legal content when it is available. Not only does this build confidence in the abandonware site, it also builds a positive attitude toward the publisher that makes these games available.

The idea of releasing older games is a proposition that only recently took hold with most publishers. A lot of it had to do with GOG and Nintendo’s Virtual Console. Prior to these two platforms, most of the work done in bringing older games to modern machines was done by the fan community through the use of emulators and cracks. Most of those efforts were either ignored or attacked by the industry. Now that the experiment has been proven a success in most avenues, I would hope that game publishers will see value in bringing their older games back. The gamers want it. The publishers just need to provide it. Not only will this move provide more legal content for the fans of the games, it will also bring in more revenue that did not exist before.

Filed Under: drm, good old games, pricing
Companies: good old games

Netflix: We're Sorry About The Huge Price Increase, So, Uh… Qwikster!

from the two-for-the-price-of-two! dept

Reed Hastings is very sad. I know, because today I got a very somber email from the Netflix Co-Founder and CEO (also posted here). He’s sad about the very negative reaction of Netflix subscribers to the recent fee increase. He’s also sad about something called “Qwikster” and red envelopes.

I was going to write up a post analyzing the causes of Mr. Hastings’ sadness and how he plans to make things right, but then I saw this:

Exactly.

Frankly, I really don’t understand the point of this apology letter. If you’re not going to do anything to address the real cause of your (former) subscribers’ dissatisfaction, why even bother bringing more attention to the issue? Seems like when you say you’re trying to “make things right,” it might be a good idea to actually try to make things right, not worse.

Filed Under: apologies, pricing
Companies: netflix, qwikster

Massive Exodus From Netflix Over Fee Increase

from the surprise dept

When Netflix first hit its customer base with the rather massive fee increase, we noted just how loud and passionate the response was. A week or so later, Netflix boss Reed Hastings insisted that they were actually surprised that the response wasn’t worse, stating:

“Believe it or not, the noise level was actually less than we expected, given a 60 percent price increase for some subscribers.”

Perhaps he should have waited until all of his customers got over the shell shock. The company is now admitting that a lot more people than they expected have canceled their accounts. Somewhere in the range of 600,000 customers bailed on Netflix over this, making it just the second time that Netflix has had a net loss in subscribers month-to-month.

While Hastings also tried to spin the price increase into a story about how Netflix was accelerating subscribers’ shift to digital, that story is falling flat with partners like Starz bailing out.

It’s beginning to look like our original statement about the price increase was the most accurate. It was driven by the ridiculously high fees that Hollywood now wants, because it can’t stand the thought that a service provider like Netflix actually should get any value from helping to drive the market forward. Instead, the content is 100% of the value, and they deserve any and all profits (and then some). It’s a classic killing of the golden goose — something that Hollywood always tries to do. At this rate, it might just “succeed” in that once again.

Filed Under: movie subscriptions, pricing
Companies: netflix

Are The FDA & The Patent System Getting In The Way Of Saving Lives Again?

from the that-market-ain't-free dept

There was a somewhat horrifying article in the NY Times recently about some serious drug shortages in the US, especially for certain forms of cancer. There are a few efforts underway to deal with the shortages, but as the article notes, it’s pretty ridiculous that there are any shortages at all, since “the number of cancers diagnosed in a year was easy to predict.” Of course, the real problem is that in a claimed effort to “protect” people, the FDA has made it almost impossible for competition to exist:

A crucial problem is disconnection between the free market and required government regulation. Prices for many older medicines are low until the drugs are in short supply; then prices soar. But these higher prices do little to encourage more supply, because it can be difficult and expensive to overcome the technical and regulatory hurdles. And if supplies return to normal, prices plunge.

Left out of this paragraph, but equally important, are patents, which clearly hinder such competition as well. We’ve discussed in the past how the FDA can often get in the way of medical innovation. Even if it means well (and I’m sure it does), putting in place systems that make it too costly to create real competition does the exact opposite of its intended purpose.

Filed Under: competition, drugs, free markets, patents, pharmaceuticals, pricing, regulations

Killing The Golden Goose: Is Hollywood To Blame For Netflix's Poorly Thought Out Massive Price Hike?

from the what-blockbuster-and-walmart-couldn't-kill... dept

If you remember back a decade ago, Netflix was definitely the darling of the modern movie rental business, but there was concern everywhere that the “little startup” was about to get killed when bigger competitors entered the market. After all, Walmart itself created a near-identical copycat offering in 2002. In 2004, Amazon started kicking the tires on a Netflix-like offering as well (amusingly, Netflix broke the news of Amazon’s impending arrival in the market, effectively deflating some of the hype for Amazon’s own announcement). And, of course, all along there was Blockbuster. The king of movie rentals in the 90s was going to destroy Netflix with its own offering, leveraging its brick-and-mortar stores, according to the common wisdom.

Exactly none of that played out the way people expected. Netflix continued to grow, and successfully expanded into video streaming, rather than just DVD rentals, with a very convenient flat-rate program. Walmart gave up on its Netflix-like business in 2005, and actually handed over the keys to Netflix, to let it run Walmart’s online movie rental business. Amazon realized it couldn’t really compete with DVD rentals and never brought that business to the US. Blockbuster tried over and over again to compete, but never got much traction, went bankrupt, and eventually was bought by Dish Network earlier this year.

Meanwhile, Netflix has continued to thrive, and plenty of people have pointed to its online streaming, which represents a giant chunk of US internet traffic, as an example of how if you provide a convenient, user-friendly and well-priced offering, you can compete with unauthorized file sharing. With Netflix, the company seems to realize that it’s that convenience and access that people are paying for, rather than the content itself.

But, of course, as with so many things involving technology and services that make content more valuable, the copyright holders get jealous and start complaining that they’re not making enough. With Netflix’s growing power, the studios have been on the warpath to cripple Netflix in protest of the current pricing scheme. In some ways, they really hate some of Netflix’s early deals, which allowed the company to offer such a convenient and reasonably priced offering. Pretty much all of the later online streaming movie offerings are, instead, forced to play by the big studios’ rules, which makes most of those services totally undesirable.

This has also resulted in some fights with studios directly, and some studios even pulling movies from Netflix.

Given all that, it’s hardly a surprise that Netflix decided it needed to raise its prices around 60% for many users. AS you’ve probably heard, they’ve basically separated the physical DVD rentals and the online streaming, which used to be included with most accounts. Now you have to pay for each separately, so to get what people had before, their bills are going up quite a bit.

The result of this announcement has been all over the internet (including Netflix’s blog and Facebook page), and it would be safe to say that everyone hates the new pricing with a passion. It’s incredibly aggressive on the pricing front, but it’s not difficult to see why Netflix did this. First, the competitive playing field looks a lot clearer today than it did a few years ago. When companies have no real competition, they jack up prices massively.

Second, however, I’d bet that Netflix is currently in a battle to control its destiny behind closed doors with Hollywood. The studios are demanding lots more cash than in the past, and Netflix seems to think that jacking up prices quite a lot is one way to get the necessary revenue. But Hollywood, of course, couldn’t care much less if Netflix survives. They still think that their endorsed crappy online services, with their DRM and massive limitations, is legitimate competition.

So while some are blaming Netflix for the giant price hike, I think it makes more sense to look at the studios and their unwillingness to fully embrace Netflix, always worrying that it would “take away” from their existing business lines.

Filed Under: internet, movies, pricing
Companies: mpaa, netflix

The Infinite Loop Of Algorithmic Pricing On Amazon… Or How A Book On Flies Cost $23,698,655.93

from the do-they-have-a-kindle-version? dept

Glyn Moody points us to an amusing story by biologist Michael Eisen, about two Amazon book sellers who (it appears) each used algorithmic pricing to set their own prices on books off of what the other one was pricing it at, leading to an ever escalating price on this particular book about flies. It started with someone looking up a copy of the book The Making of a Fly on Amazon to order a copy for Eisen’s research lab at Berkeley and noticing the odd pricing on a couple of used books:

And while everyone at first assumed a typo or some other mistake, they soon discovered it was likely something else:

Amazingly, when I reloaded the page the next day, both priced had gone UP! Each was now nearly $2.8 million. And whereas previously the prices were $400,000 apart, they were now within $5,000 of each other. Now I was intrigued, and I started to follow the page incessantly. By the end of the day the higher priced copy had gone up again. This time to $3,536,675.57. And now a pattern was emerging.

On the day we discovered the million dollar prices, the copy offered by bordeebook was1.270589 times the price of the copy offered by profnath. And now the bordeebook copy was 1.270589 times profnath again. So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other?s price. I continued to watch carefully and the full pattern emerged.

Once a day profnath set their price to be 0.9983 times bordeebook’s price. The prices would remain close for several hours, until bordeebook “noticed” profnath’s change and elevated their price to 1.270589 times profnath’s higher price. The pattern continued perfectly for the next week.

In other words, by basing the price on a specific multiple of each other’s price, they created something of an infinite loop of automated pricing. Of course, since it only seemed to check once a day, the loop didn’t spiral totally out of control (well, depending on your opinion of the value of a book on flies). Apparently, the escalation in price went on for another week and a half or so before someone finally noticed… but not before the book got all the way up to $23,698,655.93:

The book is apparently now available at a much cheaper “bargain” price, though you may want to pick up your copy for resale in the future if the “value” keeps appreciating.

Filed Under: algorithms, pricing

'Economics In One Lesson' Apparently Doesn't Include Pricing; Kindle Version Most Expensive

from the let's-try-that-again dept

Copycense, who has done a really bangup job in pointing out some ironic ebook pricing decisions, has another one. The book “Economics in One Lesson,” by Henry Hazilitt is available new from Amazon in paperback for $7.95… or at $9.99 for the Kindle. Apparently, “Economics In One Lesson” either doesn’t include a section on pricing… or whoever did the pricing on the book didn’t read that section…

Filed Under: books, ebooks, economics, pricing

Cheap eBook Authors Realize Even Cheaper Is Even Better

from the do-the-math dept

We’ve been covering how more indie authors are discovering that just releasing their works as incredibly cheap ebooks can be amazingly profitable. But just how cheap? Kevin Kelly highlights how JA Konrath, who is the leading experimenter in this arena, has just discovered that $2.99 might have been too high. As an experiment, he dropped the price on one book that was $2.99 down to $0.99… and saw sales leap from 40 per day to 620 per day. As Kelly notes (his original math was wrong, but now there’s updated math and more, including Amazon’s cut:

Do the math:

2.99 x 40 = 11.96

.99 x 620 = 613.8

Amazon pays out 35% for ebooks priced below $1.99, and 70% for ebooks that are $1.99 and up. So the math is:

2.99 x 40 = 119.60; x .70 = $83.72


.99 x 620 = 613.80; x .35 = $214.83

I don’t think publishers are ready for how low book prices will go. It seems insane, dangerous, life threatening, but inevitable.

It’s not even that publishers aren’t ready for how low book prices will go… it’s that they still don’t even realize that the prices are going to go down at all. Instead, many of them are still looking to make the prices go up, not realizing the umbrella they’re creating for disruptors.

Filed Under: business models, ebooks, pricing, sales