Games * Design * Art * Culture

Friday, September 15, 2006

Games are Not Fruit (and Why Gametap is Evil)

Fruit goes bad. If you leave fruit on the shelf at the grocer's too long, eventually it turns brown and shrivels up, and you have to throw it away. So maybe as it starts to get ripe you cut the price--99 cents a pound instead of $2.99. It's got a "sell by" date.

The conventional game industry treats games like fruit. A typical game has an on-sale window of 2 weeks, and is going to sell 80% of its volume during that period anyway. So after a month, you discount it from $49.99 to $39.99. And another month later to $29.99. And by the end of the year, it's in the discount bin at $9.99.

The online retailers, by contrast, mostly have a single, fixed price for all titles: $19.99. And it never changes. That's what you pay at Yahoo! Games or RealArcade or Big Fish for everything. Reflexive is a little more flexible; some of their titles are $14.99. But that's it--and it's not dependent on age. Swarm is eight years old, and still retailing for $19.99. (And worth it, in my opinion.)

My belief is that's as it should be. The value of a game has--well, not nothing to to with its age, because, say, there's not a lot of point in buying a game that only runs under DOS today. And I'm not at all sure I'd want to buy the original Civ, at this point, either (though a great game it was); I'd want the most recent version. But in general, a game is a game, and it surely doesn't lose 80% of its value in the course of a year.

The disparity in how the conventional and online markets treat games came home to me as we were constructing the Manifesto site; Flatspace II retails for $24, while eXtinction sells for $10. Flatspace II is not overpriced, btw; it's a game I like a lot. Although if it were up to me instead of the developer, I'd price it at $20, since that's the standard price for downloadable games. And the two are certainly not directly comparable games; Flatspace is an Elite-style title, while eXtinction is a platform shooter. But eXtinction is certainly as good a game as many others available online for $20--and a priori, it's mysterious why it should be priced so low.

From my perspective, too, it's not good that it's priced so low, because I look at things very differently from a conventional publisher. A conventional publisher looks at a title like that and says, "It's old, if I can get even ten bucks for it, great."

I look at it and say, "It's a 50MB installer. If I have a conversion rate of 1%, I've got 5 gigs of data traffic, which costs me a buck, per sale. At ten bucks, that's a big chunk of my margin."

Flatspace II is a 10 meg installer. Guess which one I'd rather push?

Back last winter, when I first embarked on this venture, I went to Finland for what's likely to be the last time in a while. When I had still been at Nokia, I'd agreed to lecture at the University of Art and Design in Helsinki. While I was there, I met with Kai Backman, the creator of Short Hike, a space station simulator (and a 2004 IGF finalist--he's now decided to turn it into an open source project). He's been selling versions of Short Hike online for years, and told me that every month, he got sales off versions of the demo that were three or more years old.

The point is: The lifetime of a game online is vastly longer than the conventional market is used to, because the conventional market has been peculiarly warped by the dynamics of retail.

Why is eXtinction $10 and Flatspace II $24? Because eXtinction was published by Merscom, which is primarily a conventional retail publisher, dealing with us mainly in hope of finding some aftermarket for a title that they think is past its sell-by date. For them, $10 is gravy off something that's old, and not going to generate much, if any, revenue from here on in. Flatspace II is by Cornutopia, a classic indie developer used to an online environment. They know that games are not fruit. They see no reason to drop the price--because there is none, in their retail framework.

Now mind you, Merscom is probably selling boxes of eXtinction in stores somewhere (more probably the UK than the US--I don't think it ever got a US retail release, although I could be wrong). And they're probably selling them for six quid or something. And it would be absurd to charge more online for the game than the price for the game in a box. (This is all hypothetical, on my part--for all I know, we're the only source for the game remaining today.)

In general, I look at the prices set by our partners who are steeped in the conventional retail culture--Merscom and Strategy First, mainly (and I'm not criticizing them, I'm glad to have their product and support)--and say: I understand why you are pricing games this way.

But as you move to an online retail environment, you have to learn that the rules are different.

Games are not fruit; they do not spoil.

The conventional market pricing for games is absurd; $60 is too damn high. For anything. I do buy games at retail for $40 and up--but only when I am absotively posilutely convinced that I (or one of my kids) will adore it. Something by Sid Meier, or Paradox works for me; a high-profile Japanese RPG, or a Zelda title, and I know my daughters will eat it up. But at those prices, I take no chances.

$20. This is a good price. Twenty bucks I don't spend without thinking, but if I like something, it's not going to deter me either.

Ten bucks? In general, that is not good pricing. If someone wants a game, they will pay twenty. (And if they do not, they will pay nothing.) If you price it at ten, you are gambling that you will sell more than double the units you'll sell at twenty--but games are not fungible products. It's not like buying flour, where it's basically all the same, and you might as well go for the cheaper brand. These are not impulse sales. If it's worth ten bucks, it's worth twenty.

Now, there are exceptions. We're selling The Shivah for $5. It is very retro in graphical style--and Dave Gilbert was offering it as freeware up until recently. True, the version we offer, unlike the freeware one, has music and professional voice acting--but still, it was freeware, so there's a limit to how much you can charge. I understand why he went for five. I think that's too low, actually--but I wouldn't want to price it at twenty.

The point is this, though. As game sales move online, we have to stop thinking of games like fruit.

Games don't spoil.

====================

I was about to end the post here, but I think I won't. I'll go off on a diatribe. Milder than my usual sort, I hope. But not likely to make me any friends either. Doubtless I should learn to hold my tongue.

Let us consider GameTap. And similar ventures, like the reincarnation of Infinium.

For $9.95, GameTap offers you free, unlimited play, of its entire catalog of games.

This is a good deal, by the way. Go and sign up for it, while it lasts, if you have any interest in playing games more than a year or two old.

But. It is a VERY. BAD. MODEL.

If this model triumphs, we are ALL DOOMED.

Not just my venture; any hope of a creative and vital game industry in the years to come.

Here's why.

How do the publishers and developers of the games that GameTap offer make any money? Well, GameTap takes some portion of the subscription revenue they receive, and they apportion it to the providers of the games they offer on the basis of usage.

So if, say, you are a GameTap subscriber, and spend a dozen hours in a month playing Civ III or something, Firaxis gets some money from you, indirectly. A few cents, I imagine.

In other words, GameTap is a venture based on the premise that games are fruit. Publishers are willing to license older product to them, because they view that product as having no real value otherwise. They are licensing games that are past their sell-by date. Anything they can make past that date is gravy. A few cents is okay.

This is great for gamers--today. But not so great if this becomes the prevailing model.

For PC games in particular, I believe, ESD is the future. Gamestop says that 6% of their sales derive from PC games. Shelf space devoted to PC games is declining year by year. If PC games are to survive, they are going to have to move online.

Today, there are, in essence, two competing models for how they are going to do so. One is the application sale model, which we are of course pursuing--and so are the casual game portals, and so is Steam, and so is Direct2Drive, all with our different takes on what that means and how it should happen. And whichever one of us has the better idea doesn't really matter, from the perspective of the health of the PC game market; someone is going to build a viable path to market for PC games independent of brick-and-mortar retail, and developers are going to be able to make reasonable livings developing games for PCs, if any one of us (or some smarter competitor) makes it happen.

But if brick-and-mortar retail for PC games evaporates, as I think it will, and all PC game developers are left with is GameTap--then all you can make is pennies.

I don't actually think that will happen; I think GameTap is fundamentally screwed, because they are dependent on PC game publishers continuing to treat games like fruit--and the only reason to do so is if your primary channel is conventional retail.

But that's why I look at GameTap and think "bad idea." Not necessarily bad business idea--but a bad idea, if you're concerned about the health of developers, and the market as a whole.

Games do have value. And games are not fruit.

People should pay for games. Not outrageously, and yes, I think $60 is outrageous. But some reasonable sum. Like, say... Twenty bucks.

Ten dollars a month for everything?

Idunno. I don't see how you can make that work for developers. And if you can't make it work for developers, you don't have a sustainable value chain.

posted by Greg at 1:29 AM 21 comments

21 Comments:

you're mistaken about the gametap business model. some of the details are incorrect.

By Anonymous, at 11:29 AM

I think you have it backwards... I'm looking at GameTap and thinking of signing up, but I think this is the future -- and salvation -- of PC gaming. You state yourself that you're not willing to shell out $50 for a game when good games can be had for $20. But $20 games are not as heavily developed -- "polished" -- as $50 games. So $50 games are doomed -- except on a subscriber based service like Gametap, which could eventually release brand new games to its subscriber base, spreading the cost out on all who "give it a try".

By Anonymous, at 10:02 AM

Games aren't fruit, but software just doesn't last.
A game made for win95+dx5 might not work on your new pc with winXP.
No new games are made for older systems, so why would you buy a old console?
I don't like it, but what should we do about it...

By TeDaDeS, at 6:04 PM

This post has been removed by the author.

By 22samurai, at 12:31 AM

If people don't buy a $50 game at retail, waiting instead for it to drop in price, or they buy the game used either in the same store or online, then you've got the same conundrum online that you're talking about happening in retail: I'll buy a game for $6 at Half-Price Books that I would strongly debate buying at $10 and would probably refuse to buy outright if it were $20. With enough patience, most games can be had inexpensively. So why would I buy a game online for $20 when similar titles can be found in realspace for $6?

It's only fair or natural that prices should decrease over time; many 10-year-old games get released as open source (Descent 1 and 2, Abuse, Allegiance, Doom, Ur-Quan Masters, BattleCruiser 3000, etc, etc, etc). Games are not like fruit, but most of them are not like wine either - the majority of them fit within the intersecting matrix of cultural fads and zeitgeist, technology, and hardware. Only a few rise above their own "limitations" to become classics (Zork, Super Mario Bros. Warcraft, Diablo, etc).

Perhaps the real problem is that developers also consider thier games to be fruit, otherwise, they would make them more "future-proof" - with storylines that keep players coming back, advanced configuration options for advanced hardware, and continuous, years-long support through patches and updates. Then there are some companies who plan or force the obsolescence of their product (Neverwinter Nights, the Madden Series, etc). There are so many examples of "fruit" games that I find it hard to agree with your thesis.

Additionally, I enjoy having the physical medium of the games - I'm always guaranteed that my copy will work, and I don't have to pray that the DRM verification server is still up five years from now. The nature of the digital artifact is here-today-gone-next-week, so in a way, I have actually made a better investment on a CD-ROM that costs me $6 but lasts practically indefinitely with the proper care, versus a digital copy of a game that may or may not work or exist depending on whatever may happen tomorrow (server failure, hard drive failure, etc).

So, if we really want to see growth in the game industry, maybe we should be thinking in 'wine' or 'literary work' terms about games instead of 'fruit' or 'fast food' terms, along with giving consumers the chance to own an _actual_ artifact in addition to a digital download.

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