Right before a combination of epilepsy, gravity, and IKEA conspired to destroy my brain, I had touched off a debate on Xbox Live Indie Game pricing.  It began with my review on Pingvinas and continued on with my editorial on pricing.  This resulted in my biggest day for traffic ever, and some very awesome point and counter-point discussions in the comments section of those posts.  Pretty damn civil ones too.  I’m so proud of you guys.

Well, now Mr. Ian Stocker, the creator of Escape Goat, wants to weigh in.  At first, Ian was supposed to offer a counter point to my theory on pricing.  Then he changed his mind and sided with me.  Sigh.  Imagine if that happened all the time.  If two guys were debating for the Presidency and all of a sudden one guy said “wow, shit, that other guy is totally right.  Hey everyone, did you hear that?  I totally agree with him.  You should vote for him!” 

Well either way, Ian’s article was both insightful and entertaining and the perfect way to kick off Tales from the Dev Side.  Plus, we’re giving away two copies of Escape Goat.  Read below for details.

Magic Seal Pelts

by Ian Stocker

My name is Ian Stocker, and I wrote three games in the last two years for XBLIG: Soulcaster I & II and Escape Goat.  All three were released at 240 Microsoft Points ($3US).

This article was originally going to be a sort of postmortem on Escape Goat, and I had all my notes together for what I wanted to talk about, until last night’s Twitter discussion took place.  Then Kairi wrote her editorial, and it became the hot topic.  So instead of talking about my production process, which I’ll save for another day, I’m going to give my take on pricing.

It all started last night on Twitter.  Ben Kane reported his 15,000 sales of DLC Quest alongside CSR Studios’s 35,000 sales of Dead Pixels.  I chimed in with my melodramatic tweet that Escape Goat has sold “literally dozens of copies”, which got Kairi’s attention.  After some discussion, she published an article asserting that, to paraphrase, all XBLIG’s should be 80 MSP.

Knowing I was changing my topic to pricing, Kairi added some dramatic foreshadowing to her article.  I had been called out, to answer for my 240 MSP price tags, in what was sure to be a vicious counterpoint to her argument.  But how was I going to do it?  Defend my position? In the face of such stark sales data?

The answer is: I won’t.

I changed my mind.  Last night was a wake-up call.  I now believe that unless you’re making 3D CraftMiner, your game needs to be 80 MSP.  This article has taken its final form: part pricing study, part confession.

Soulcaster set the 8-bit tone that would ultimately lead to Escape Goat, the #2 game on my list.

THE PRICING STUDY

Let’s start by going back to DLC Quest for a moment.  The numbers for this game hit me like a ton of bricks.  Since it came out literally within hours of Escape Goat, I get to hear about it frequently–we get mentioned in the same sentence on blogs and podcasts, forever destined to do battle in the various “pick of the month” features.  We even shared a page in Famitsu 360.

Essentially, both our games were well received by critics, and experienced the same landscape on the marketplace.  Well it’s been a little over a month since launch—let’s look at the numbers.

Escape Goat – 560 sales, net $2.10 each: $1,176 gross profit

DLC Quest – 15,000 sales, net $0.70 each: $10,500 gross profit

Maybe DLC Quest just has broader appeal.  I could buy, say, double or triple the audience, sure.  But no, we’re looking at a 1,000% difference in revenue.  To account for that, you have to look at the one major difference between the titles: the price.

The Confession

I was wrong to set the price at 240 MSP for all my games.  At the time, I had good reasons for doing so, but they were simply hypotheses that have been disproven.

Now, I could just leave it at that, but you guys were promised a heated argument.  Plus, conflict drives traffic.  To that end, I’m opening up a debate between my current, enlightened self, and the Ian Stocker of one week ago.  (We can call him “Dark Ian.”)  His arguments appear in italics, followed by my responses (as modern, enlightened Ian).  Note from Kairi: picture enlightened Ian wearing a lounge jacket and smoking a pipe for added effect.

Let’s begin with the question I’ve been asked many times before:

“So your games are 240 MSP. Are you insane?”

I don’t want to be part of the race to the bottom. If they offered 10 cent games, do I need to offer that?  I’d rather not compete on price.  Besides, $3 is nothing! It’s a latte, a Big Mac, 1/20th of Skyrim.  There has to still be a market for $3 games on the console!

The market exists, but sadly, that market is not XBLIG.  I’ll explain why in a minute.

But…I don’t make “99 cent” games.  I make niche games, targeted to a specific audience who is willing to pay more.  Also, doesn’t the high price tag denote quality to separate me from lower-priced games?  Consumers associate high price with high quality.  I have data to prove it!

Your beloved niche audience won’t get a chance to try your game, because they won’t download the demo.  Simply by being on XBLIG, you are associated with other $1 games, like it or not.

But look at the Soulcaster series.  25% demo-to-purchase conversion on them!  If I went to $1, I would need a 75% conversion to make the same amount!

You’re getting a fraction of the downloads of the 80 MSP games, because people look at the price tag and move to the next one.  Customer gut responses? “How arrogant.” “Nothing is worth 240 MSP!”  You wouldn’t need 75% conversion if you were getting 5x as many downloads.

If you were to look at interviews or tweets from me as recently as a week ago, you’ll find me parroting some of these things.  Well, not anymore.

Low sales or not, Ian should be proud of Escape Goat, one of my favorite games, XBLIG or otherwise, this year.

The Hypothesis

I love studying pricing psychology.  I even considered myself fairly well-educated on the topic when I set my prices–see my well-reasoned (now debunked) arguments above.  This makes this confession and change of heart even more humiliating, but don’t worry, I’m still egotistical enough to write an article containing a debate with myself.

So what was I missing?

The fundamental problem is that I was looking at pricing tactics that work when the price is in US Dollars (or whatever native currency).  And Xbox Live does not deal in that.  They use Microsoft Points.  To explain the subtle effect on the consumer mind, I’ll draw an analogy.

Let’s turn back the clock to 1989, a time when you had to leave the house to play the best games, and some of you were still in diapers. Kairi’s note: I was born in 1989.  Depending on the time of the year I was either in diapers or in a placenta spa.

I’m 10 years old and I show up at the arcade with a $10 bill.  When I look at this $10 bill, I think of the lawns mowed and weeks of savings.  But it’s all worth it, because LOOK AT THE GAMES.  So I go to the change machine and cash it in for quarters.  Now I have a massive handful of small metal disks.  This is no longer “money.”  These are individual tokens, each one granting me entry into one of the magical worlds available here.  (Some arcades give you tokens instead of quarters, but the same psychology applies: once they’re converted to quarters, it’s no longer about price. It’s about number of plays.)

Every game is one quarter.  The ancient Pac-Man machine, the brand new Street Fighter II machine… all one quarter as the entry fee.  But wait, what’s this game asking for two quarters?  I don’t care what it is, they’re asking me to GIVE UP ONE OF MY TOKENS extra!  Nothing is worth that.  I don’t care what the game is.  Moving on!

You see where I’m going with this.  In the world of XBLIG, the consumer thinks in terms of tokens, each one being 80 MSP, which grant access to one of the games.  Except, what’s this?  Here’s a game asking for THREE TOKENS!?  Screw them!  Not even downloading the demo for that!  Who do they think they are, that they are worth three other games?  And look at how pimp this 80 MSP game is.  I just can’t justify three tokens for one game… that’s just… wrong.

(If you’re part of the generation who started visiting arcades in the mid 90’s, after everything was converted into exercise machines, you might be thinking: “But everything costs four quarters.”  Well, don’t throw a wrench in my analogy, it’s all about price expectations.  Plus,  Street Fighter II didn’t come out until 1991.  I was making sure you were paying attention.)

Next, let me respond to something Kairi wrote, to ratchet up the conflict level a bit.  Kairi writes:

My point was WHY is a $3 game acceptable on Steam and not on XBLIG? It’s because a Steam game goes through wringers that games on XBLIG don’t. People feel confident with a Steam purchase. They don’t with an XBLIG, and that’s totally justified.

I agree, quality control is more reassuring on Steam.  But I would take it a step further.  Back in the realm of native currency, with flexible pricing, the customer thinks of the price in a totally different way.  $2.99 actually does compare itself nicely to a latte.  And with games priced flexibly at a broad range, there’s no precedent, like there is with XBLIG: “One game costs 80 Magic Seal Pelts, and thus ever has it been.”

XBLIG is its own world.  It has its own set of rules for pricing psychology.  For example, conventional advertisements in the real world do little to spur sales.  Ask anyone who’s had their game featured on the dashboard.  Downloads go up anywhere from 200% to 500%.  Soulcaster was mentioned twice in the Penny Arcade news section–a rare gift more valuable than many forms of advertising.  Change in downloads after that?  Not noticeable.  Its own world.

Following Ian's epiphany, both Soulcaster and Soulcaster II (pictured) are now only 80 Microsoft Points each.

I spent the last 18 months blind to this.  I dismissed the low sales as turmoil within the marketplace (which, don’t get me wrong, there is plenty of).  I had just written off making money on XBLIG, turning my attention to PC ports: PC, that promised land where dollar bills fall from the sky.  In the meantime, through a combination of pride and negligence, I missed out on plenty of potential revenue.  I was the three-quarter arcade machine in a room full of one-quarter machines.

I’ll close with a quote from Joel Spolsky’s article, quoted within Kairi’s post:

The truth is, the only way to determine how much someone will pay for something is to put it up for sale, and see how many people actually buy it.

As an entrepeneur-programmer-nerd, I listen when Joel speaks.  And as usual, Joel is right.  So today, I’m lowering the price of Soulcaster I & II to 80 MSP.  (I would do the same for Escape Goat, but I have to wait 50 days to change the price on that.)  Let’s see how it goes.  It’s yet another hypothesis, and it would be extra humiliating for me to have to come back in a month to eat these words, but either way, I’ll report back.

I hope this has been amusing and enlightening, at least enough for Kairi to want to extend this guest-blogging offer to more developers.  If not? Well, I’ll be remembered as the guy who ruined it for everyone.

I dedicate this article to my fellow XBLIG devs, especially you guys on Twitter.  Keep it real.

Kairi’s Final Thoughts: Ian, you didn’t ruin it.  I think this editorial perfectly sets the tone for what I wanted from Tales from the Dev Side.  Any developer who has had a game reviewed at this site, whether it was a positive one or a negative one, has my open invitation to contribute a Tales from the Dev Side editorial.  If you want to contribute, e-mail me with a proposal for what you want to write.  Don’t write it and then send it, as I would like to touch base first and make sure it’s something that won’t be too redundant or inappropriate for this site.

I think Ian did a wonderful job here, and I look forward to seeing what other developers can contribute.  If this is the type of feature you want to see more of here, or not, sound off in the comments section.

As a special treat, IndieGamerChick.com is giving away TWO free copies of Ian’s game Escape Goat this Monday, December 19.  One copy will be given away to one lucky reader who retweets this review.  Another winner will be drawn at random from one of Ian’s Twitter followers.  The drawings will take place Monday at 5PM on the West Coast. Limit one retweet entry per a person per an account.

Check out Ian’s Games on the Marketplace.

Soulcaster, which is now 80 Magic Seal Pelts

Soulcaster II, also now only 80MSP (oh, Magic Seal Pelts, M-S-P, I get it now. Ha, funny.)

Escape Goat, the #2 game on the Indie Gamer Chick Xbox Live Indie Game All-Time Top 10.

You should also check out his blog.