Founders/Cash Shop Economics

Wighty

With the recent announcement of Devilians founders packs and the apparent unrest about the prices of the packs all throughout various sites, forums etc. I can't help but ponder the subject of economics when it comes to these decisions.

I come from a 20+ year sales background and I know about pricing structure etc so it befuddles me when I see something so out of whack.

The typical run of founders packs in the last few years are some entry level $20-50 midrange at the $70ish mark then the top tier at $100+ which usually has some huge carrot attached to it in Devilians case it's alpha.

I would think from a sales perspective that sure you will sell a good lot of $150 packs and probably a good lot of the lower packs (the middle pack is probably the lowest sales and just there as a bridge to the top tier). Many people scoff at the price, you end up pissing a bunch of people off and shunning some of your loyal customer base.

If the packs were say $50 at the top tier or at least allow access at the mid tier (or all for that matter) and leave the top one for the fluff crap you would likely sell a tom more volume at a lower price which would (in my sales experience) end up with more overall dollar volume. I mean sure people will still complain about the price of admission but most of at least the loyal customers will be at ease and likely buy in.

This same mentality holds true for cash shops, or "Convenience Stores" It seems like the way these gaming economist operate is like a third world country You are either wealthy and spend money or you are flat broke and can't afford shit.

There is a reason why they call the 1%ers 1%ers, it's not the 80/20 rule where 20% of the people support 80% of your revenue (typical in most sales situations). In gaming is they reduced prices to a more reasonable say middle class level there will be (I hate to use this term) more or less income equality and players would more or less support the system and prosper.

The point is you can make more money with exponential volume at a lower cost vs. high prices that much less of the playerbase will be able (or willing) to spend.

/rant over

user547

That's not a rant, it's reasoned analysis.  Good question.  Like most of the business world these days, there is a lot of incompetence at work here.  There are a lot of people making decisions who really have no business wielding as much influence as they do.

Ezirens

its not really out of whack, they are doing the exact same thing they did when they released archeage. The prices and rewards are pretty much identical even down to the amount of cash shop money for each tier. People bought into the alpha heavily for AA because the Korean version was a good enough sandbox to be a really fun game and with the promises of trion to follow in rifts footsteps and have a fair cash shop model it seemed like a good thing.

Turns out, trion lied and lied horribly. It was a blatant cash grab, upon cash grab, gambling boxes, best in slot in cash shops etc... All the "no tricks, no trap" thing went out of the window as their eyes were too much $-$.

Now Devillian is AA round 2. Hopefully people don't have their rose tinted glasses on any longer.

FomaldehydeJim

Wighty said:

With the recent announcement of Devilians founders packs and the apparent unrest about the prices of the packs all throughout various sites, forums etc. I can't help but ponder the subject of economics when it comes to these decisions.

I come from a 20+ year sales background and I know about pricing structure etc so it befuddles me when I see something so out of whack.

The typical run of founders packs in the last few years are some entry level $20-50 midrange at the $70ish mark then the top tier at $100+ which usually has some huge carrot attached to it in Devilians case it's alpha.

I would think from a sales perspective that sure you will sell a good lot of $150 packs and probably a good lot of the lower packs (the middle pack is probably the lowest sales and just there as a bridge to the top tier). Many people scoff at the price, you end up pissing a bunch of people off and shunning some of your loyal customer base.

If the packs were say $50 at the top tier or at least allow access at the mid tier (or all for that matter) and leave the top one for the fluff crap you would likely sell a tom more volume at a lower price which would (in my sales experience) end up with more overall dollar volume. I mean sure people will still complain about the price of admission but most of at least the loyal customers will be at ease and likely buy in.

This same mentality holds true for cash shops, or "Convenience Stores" It seems like the way these gaming economist operate is like a third world country You are either wealthy and spend money or you are flat broke and can't afford shit.

There is a reason why they call the 1%ers 1%ers, it's not the 80/20 rule where 20% of the people support 80% of your revenue (typical in most sales situations). In gaming is they reduced prices to a more reasonable say middle class level there will be (I hate to use this term) more or less income equality and players would more or less support the system and prosper.

The point is you can make more money with exponential volume at a lower cost vs. high prices that much less of the playerbase will be able (or willing) to spend.

/rant over

It works if you take the snob effect (Veblen goods) into account. I am not sure if it operates in this market, but it would provide an explanation. 

StoneRoses

This should not be at no surprise! This is nothing compared to Star Citizen.

GAME PACKAGES

---

 

Physical Packages

Package[1]	Ship	Original	Final[2]
Colonel	Hornet F7-C	$125	$140
Completionist[3]	All	$15000	$NA
Freelancer	Freelancer	$125	$140
Grand Admiral	Multiple	$2500	$2700
High Admiral	Multiple	$1100	$1150
Rear Admiral	Constellation Andromeda	$250	$275
Space Marshall[3]	Multiple	$5000	$5000
Vice Admiral	Constellation Andromeda	$500	$550
Wing Commander[3]	Multiple	$10000	$NA

1. Packages purchased by original and veteran backers before 26 Nov 2013 come with LTI
2. Packages purchased after 26 Nov 2012 may have different content
   
3. These packages still came with LTI after 26 Nov 2013

Loke666

DMKano said:

The reason for the high price is limited server capacity. 

Alpha server can only support a tiny fraction of the launch playerbase.
If the alpha pack was $50 then they'd be launching the game basically as they'd need the full server capacity in alpha.
This is why alpha packs are $150, because there's only a single alpha server.
It let's them gauge how much money they will need to spend on full launch infrastructure - also Alpha is critical to get the western playerbase feedback from hardcore  fans who will spend $150 to play.
This is why mmo games cost a ton for alpha packs - hardware alone costs millions of dollars and you don't want to buy more than you need.

Still, OP has a point. Charge too much and you will turn away many potential customers, a lot of us just see a huge price and assume they just want our money and want us to pay through the nose.

I think founders packs is a bit risky business there, I myself tend to avoid games that have them, I get a pay2win warning from them.

Funny enough don't I have any problem with B2P. for some reason if they charged $50 for the game and had a collectors edition for $150 with an artbook and sountrack besides the early access I have zero problems with it and I can't exactly say why this is fine....

Ezirens

DMKano said:

DMKano said:

The reason for the high price is limited server capacity. 

Alpha server can only support a tiny fraction of the launch playerbase.

If the alpha pack was $50 then they'd be launching the game basically as they'd need the full server capacity in alpha.

This is why alpha packs are $150, because there's only a single alpha server.

It let's them gauge how much money they will need to spend on full launch infrastructure - also Alpha is critical to get the western playerbase feedback from hardcore  fans who will spend $150 to play.

This is why mmo games cost a ton for alpha packs - hardware alone costs millions of dollars and you don't want to buy more than you need.

it has nothing to do with server capacity/or hardware costs. Those are cheap. Archeage alpha had somewhere close to 10k people playing alpha. Hell, it was popular enough they even had gold sellers spamming to buy gold in ALPHA. And whats worse, people were buying it and it only got worse.

A server cluster to support 10k ccu/concurrent users is between 20-40k. If you already have other tech and staff in place for other games, it gets easier. Aka, they had already setup for Rift.

so AA has 6 servers in US when it was alpha so 30,000 x 6 = 180,000 for hardware.
150 alpha pack x 10,000 users = 1.5million

and just so people know, they launch hardware and alpha hardware were the same hardware, they just whiped the data and changed some names.

I think they are doing just fine and it has nothing to do related to money issues.

Loktofeit

Wighty said:

There is a reason why they call the 1%ers 1%ers, it's not the 80/20 rule where 20% of the people support 80% of your revenue (typical in most sales situations). In gaming is they reduced prices to a more reasonable say middle class level there will be (I hate to use this term) more or less income equality and players would more or less support the system and prosper.

The point is you can make more money with exponential volume at a lower cost vs. high prices that much less of the playerbase will be able (or willing) to spend.

To address these two points:

The 1%ers aren't the people buying the $150 pack. They're the ones buying 2 or 3 of them. Sometimes 5-10.

Founders packs target a specific subset of the game's audience. Most gamers would not even consider a founder's pack, let alone know they exist. This is targeting the early adopters, the more invested gamers that buy-in early, and the price-point of 50 has proven very successful, amazingly successful when we consider that it is often used for games that will be free at release. 


So, if this was release, then I'd say you're spot on. Release is targeting the broader audience where that lower price approach you are talking about works. As soon as they hit that tipping point where you see the shift from early adopters to the majority you'll see lower priced items or services show up, usually in the cash shop. 

JDis25

It's all about maximizing your $ per player. When you cap it at $15 a month, or a one time buy-in fee, it becomes difficult to sustain without huge amounts of players. Typically when games like AA, Devilian, BnS, Trove, Albion, are released; there is no IP to carry them, no huge advertising budget.  They aren't going to attract many players (and because of the age we live in) are not going to keep many players. So sub fees don't make sense for most games. Enter in the cash shop. The trick is doing it in a way where if you play free (or close to free, ie $15 a month) you have to play more and work harder, this way you make the game feel alive because you are online playing. If you don't have a lot of time, maybe you work or have kids, you can support the game and hopefully the in-game economy by spending money.

Remember we want games to survive and we want new IPs to come around but we are always so hesitant to spend any money. Subs might be feasible if people were willing to spend $25-30 a month. but let's face it that is a hard sell for any game to pull off for just the opportunity to log in and play.

danwest58

The current state of how companies are charging for their games will continue to push players away no doubt.  All my friends use to keep up a lot on new MMOs coming out.  Plus are upset at F2P MMOs cash shops which are terrible.  Now all of them are either doing 1 of 3 things.   

They Stop playing MMOs all together
Play a P2P MMO like FFXIV
Or play F2P MMOs and spend no money at all and when they hit a pay wall go to the next F2P MMO

While F2P can be viable the problem is pricing the cash shop, charging $150 for a game plus giving a large advantage to these people much like AA did, also buying for Alphas and the like.  In Truth many of these games are being designed as throw a ways and people will continue to fall for it.

Superman0X

Wighty said:

...
/rant over

This was a good post, and well thought out, but missing a key ingredient. The missing piece is price elasticity. Dropping the cost does not provide a matching increase in volume. In fact the opposite is usually true.... they can raise the price to an insane amount, and make more than they are now. The only reason is that the public outcry gets greater as well. The current price structure is actually very generous, and will provide the same amount of demand as would occur with everything doubled in price. 

Madimorga

With AA I think they were very clever with pricing. Not that I agree with it (I think early access has community damaging aspects) but clever as far as making loads of money upfront.

I will even go so far as to say a few got their money's worth before launch ever happened because some claim they got the most enjoyment out of the game during alpha. However,  the botched launch caused disappointment because the queues robbed many Founders of the real value of their purchases (first shot at valuable land). So regardless of how much fun many of those unlucky Founders had during alpha, I suspect many quit the game with a bad impression of the dev/publisher and regret rather than cherish the good memories of their alpha time.

I think XL/Trion were after the guild leaders and major guild players of cross gaming guilds with their pricing.  These are the people who take their gaming very seriously and spend a lot of money on it. This got them some valuable free marketing buzz as well as $150 a head.

It also gave those organized guilds with enough members who beat the queues a monopoly on resources. This is something the rest of us gamers hate to see happen, but big cross gaming guilds dearly love it.  All in all, Trion/XL was very clever with pricing. Sadly they were not clever with follow through, such as at least ensuring none of the land hoarders were hacking RMTers. 

This new offering of theirs I see ploughing nose first into the dirt. It sounds bland to begin with and it's not running anymore overseas if I remember reading that right.  Plus now Trion has been smeared with AA debacle, including the upcoming merge.  I think they're screwed and that they deserve to be.

Salvadorbard

I don't know the specifics here but in games like the Iron Realms MUDs the prices of their cash shop are astronomical purely because these types of games have years of player longevity (I've put 12000 hours into Avalon for instance) and in terms of sustainability, paying $100 for something that lasts forever devalues the product and of course given there is generally a finite number of people willing to pay for things, the lower price for a permanent item / power / whatever = quickly saturated economy.