The Game Price Conundrum

With the resurgence of A-level quality indie games, there is a lot of debate around their “Appropriate” price point. After being stuck in the AAA only market, players have come to expect a certain dollar per hour formula which doesn’t always carry over to the 3-4 hour experiences that new indie titles bring to the market today. Is it fair to expect that if a $59.99 game gives 100 hours of playtime that a 2-3 hour experience like The Gallery: Call of the Starseed should only cost you $1.99? Probably not.

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Indie games come in all shapes and sizes and definitely in all levels of quality. On one side of the spectrum, we get sprite shooters that look like Atari games, made by someone who is just experimenting and is trying to make a few dollars, while on the other hand, we are getting brand new VR experiences from trailblazing studios we haven’t even heard of yet. To get a better understanding of the game price challenge for this entire spectrum, I went to talk to three different game studios who were all in different stages of their product. I talked to Twin Otter Studios, who just launched their Kickstarter for their debut title “Arcadian Atlas”, I talked to Lantana Games, who launched their game Mondrian late last year and finally,  I talked to Cloudhead Games, who launched their first VR Experience “The Gallery: Call of the Starseed” this week.

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The Kickstarter: Arcadian Atlas.

Arcadian Atlas is the a tactical RPG, inspired by classics like Chrono Trigger, Tactics Ogre and Breath of fire being developed by Twin Otter Studios. The studio, which consists of siblings Taylor and Becca Bair is in the midst or their first Kickstarter, which started on April 5th.

Arcadian Atlas has been in development for roughly a year and a half at this stage, with the last 8 months seeing a significant hike in time spent on the project. In all, especially with the Kickstarter around the corner, Twin Otter Studios has spent around over 2,500 hours so far.

Future investment is a tougher number to gauge according to Taylor Bair.

TB:  “As independent developers are much like new business owners – we sink way more than 40 hours in a work week. I’d say a very rough estimate per person would be 50 hours a week if we were working full time on this. So multiply that out by about an additional 1 ½ years for the project (or more) and you’ve got about 3,900 hours per person for the remaining life of the game at least.”

However, the real tangible cost for an indie developer comes from contract work. Programmers, artists, musicians, and animators may needed to supplement a team of two developers

TB: “We will likely sink about $70,000 at least into contract work alone by the end of the project. When that’s for a business run by two people, that’s a serious chunk of change.”

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Taking a look at these numbers, it’s easy to do the rough math on the total cost of a game like Arcadian Atlas. Considering the average wage in the US is $50,756 ($24.40 p/h) we are quickly looking at $251,320 in salary that are currently being unpaid. It gets worse. When you take the average gamedev salary into account ($83,060 or $39.93 p/h) you are already $411,279 down in unpaid salary and that is before the estimate contracting budget of $70,000.

 

A trip to Kickstarter seems inevitable at this point, if only to cover the contracting costs.

For Arcadian Atlas, Twin Otter Studios set up their Kickstarter with a base funding goal of $90,000 for the minimum viable product, which is essentially the most basic version of the game with just the core storyline and few bells and whistles. This is roughly 30% of their total cost based on the average US salary or 20% based on the average gamedev salary.
Right now, a stretch goal of $180,000 would “allow” the studio to make the “dream version” of their game with expanded story quests, customization features, and even more skills and job classes. Ignoring the fact that this would most likely increase the estimated 7800 hours of work, they are still only covering half of what they have invested in missed hourly wages. They need to rely on sales to even reach a break-even point. Remember though, sales don’t start until every Kickstarter has received their copy first.

So, what would be a reasonable price point for a game that took at least $300,000 to make?

TB: “With indie games you price less based on the number of units you will sell and more on what an equivalent product would sell for. That’s because it’s too difficult to gauge how many units you may sell. We don’t have expensive marketing managers who can do surveys or analyze past data to say X number of people would buy this sort of game.”

Assuming Arcadian Atlas hits the initial $90,000 on Kickstarter, they need to make at least $231,320 in sales (or $391,279 as gamedevs) to hit their breakeven point and here’s the problem; they can’t do the math to set their unit price at this point yet.

TB: “Kickstarter is great for gauging interest. If your project gets X number of backers, that’s a good indicator of the demand for this sort of game, but you have to price your game before a Kickstarter – so it’s a dangerous tightrope. You price as best you can on the experience you are delivering to the community, and you just pray the community thinks it’s worth that to them. If it isn’t, then your Kickstarter doesn’t fund”

Where AAA titles have the luxury of a set price point of $59.99, indie developers are often going into the business end of their operation blindly. Especially for first releases, there is currently little help or guidance to find the ideal price point. Players expect a certain amount of game time, but easily ignore the cost of development that needs to be recovered as well.

The best we can do is to estimate unit price on cost recovery, which in Arcadian Atlas’ case would look something like this:

Recovery $231,320 Recovery $391,279
Unit Price: $9.99 23,155 units to recovery 39,167 units to recovery
Unit Price: $19.99 11,571 units to recovery 19,573 units to recovery
Unit Price: $29.99 7,713 units to recovery 13,046 units to recovery

 

As a first time to market with a game this size, only time will tell how many units will make it into the hands of players. Considering the fair amount of units that are needed, a discount surge might be helpful if the price is initially set to high, but discounting your product too soon is not always healthy for the product either.

TB: “I don’t much believe in discounting a product, especially not until after you break even on it, as it devalues the thing you are creating and doesn’t create resources for the next project. Our time invested into a thing is of inherent worth, and I believe for video games to be viable passion projects while maintaining a level of integrity and quality we should charge what they are worth and give a product equal to that charge. That’s my philosophy at least.”

Estimating sales proves to be a difficult item when it comes to Indie Development. To get a better understanding of how price points influence sales, I approached Danny Silvers from Lantana Games to talk about his experiences with setting a price point, going to market and the effects of discount sales.

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Selling your game: Mondrian – Abstraction in Beauty

Lantana Games is an educational game developer in Boston, MA. As a studio, they work with schools and students, giving them the opportunity to get involved with games that are educational in the classroom and fun in the living room, while mentoring them in their own projects to jumpstart their careers in game development.

Their most recent title, Mondrian – Abstraction in Beauty, an art-history inspired block breaking game,  launched on September 21, 2015 after a development cycle of just over five months and has received two major patches since launch, adding functionality and playability to the game. The team behind the title consists of Danny Silvers on programming, Hannah Hoyt and Davidjohn Blodgett on music/sound, Becky Taylor on marketing, and Chenylle Mercado and Karen Layman on art. None of them receiving a salary during development. Mondrian is currently for sale on Steam for $7.

Danny Silvers:

We specifically kept development of Mondrian low-budget in order to expand our community. By this point I would say we have invested between 2000 and 3000 man-hours in developing and supporting Mondrian – Abstraction in Beauty.

On top of the software development and support side, we’ve also brought the game to several shows, including the MassDiGI Game Challenge, the upcoming Made in MA party prior to PAX East, and even got accepted into Indie Arcade: Coast to Coast last January, which included a roadtrip down to Washington D.C

While Lantana Games did not go into detail on their sales numbers, as of now they have made back 16 times their initial investment in sales. But keep in mind, with investment they are referring to the cost of sound banks, licensing and travel during their promotional phase. Once again, unpaid salary goes unnoticed which in this case could range from a minimum of $48,800 to a maximum of $118,170

Setting the ideal price point also seemed challenging for the team. Since their financial investments were relatively low, cost recovery didn’t seem out of reach but at the same time, failing it would mean it would be the last project they’d work on. Pricing it “just right” was essential.

DS: The goal for Mondrian’s initial price was to set it under $10, but not devalue it. We wanted a price that we felt users would find fair for the content they were getting: dynamically generated levels; the soundtrack, unlockable items; and accessible, customizable gameplay.  On top of that we also offered a Deluxe Edition at that magic $10 price point, which includes high-bitrate MP3’s of the soundtrack. To date, the regular edition has sold more than twice as well as the deluxe edition.

A game’s price can say a lot about what you’re getting. $5, $10, $60, each of these price points has a perceived meaning. Mondrian is a game with infinite replayability that we’re continuing to support six months after launch with new content. We felt that placing it between the $5 and $10 price points was absolutely fair for what was on offer, even though with the added content and features it’s getting to the point where it’s starting to feel like a $15-$20 game.

While the pricepoint of $6.99 seems to be a sweet spot for a game like Mondrian, customers have come to expect bundles and flash sales for smaller titles as well. Mondrian being no exception, Lantana Games participated in several discount sales and bundles but did not see a significant uptick in revenue. However, the sales did amount to putting the game in as many hands as possible, helping expand the potential customer base for future products.

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DS: We can definitely feel the pressure from the fans and the media to keep our prices low. Putting 2000+ hours into developing a game, only to be told that $6.99 is too high an asking price, is not as rare as you’d think. As indies, our revenue is our investment, our players are our investors, and them spreading the word or leaving a positive review is our ROI. However, gamers are very quick to judge a game based on its price point, and that is very dangerous thinking. A game like “No Man’s Sky” could end up being the most brilliant, bug-free, beautiful game ever made, but it could also end up littered with negative reviews because gamers don’t want to pay $60 for an indie game. Thus sales of the game would fail to meet expectations, and indies would continue to feel like they’re being forced into charging less just because they’re indies. I think, as a community, we are too quick to judge a game based on its price or simply conditioned to wait for a flash sale shortly after launch. While I’m not encouraging anyone to be reckless with their wallet, if there’s a game you really want and you want to support that developer to the fullest extent possible, just buy the game.

When passions and vision are the currency of your studio, the risk of creating titles as those above is relatively low. If your Kickstarter fails, you make it up with unpaid development time and if your travel budget grows, you’ll have to wait longer to start turning profit.

Bigger studios however, don’t have this luxury. Once you start working with a payroll, the previous “unseen cost” becomes a hard number on the bottom line. When your Kickstarter funds become only 5% of your development cost, you’ll need outside investors to make it to launch.

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Luckily, there are countless models to look at and draw experience from. Investors knowledgeable of the games industry often have a good idea on what to expect. Unless you are a studio working exclusively in VR Entertainment.

Cloudhead Games is such a studio that is pioneering interactive VR experiences that the market has never seen before. How do they, without a single frame of reference find a both a marketable and profitable price for a unique product with a limited install base?

Not without a challenge.

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Creating a genre: Cloudhead Studios

Founded in 2013 and based on Vancouver Island (Canada) Cloudhead Games consists of a small but ambitious team that are already setting industry standards in the areas of VR locomotion, hand interaction, actor performance capture, and contributed to Oculus’ best practice guides. As a small studio, Cloudhead prides itself on pushing the boundaries in VR and carving out meaningful interactive narratives within this new and exciting medium.

If you haven’t heard from them yet, expect this to change soon as their first episode of The Gallery: Call of the Starseed officially launched on the HTC/Vive on April 5th 2016.

The Gallery channels inspiration from dark fantasy adventure films of the 1980s such as Goonies or Labyrinth, filled with environments and mechanics specifically crafted for virtual reality with full motion-control and room-scale. Players traverse richly detailed VR environments such as derelict beaches, abandoned sewers, quirky laboratories, in one of the first commercially announced, fantasy adventure VR game franchises.

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While the inception of the game started with three people in a garage in 2012, it quickly expanded to a team of 15 of VR enthusiasts/believers including AAA talent from Bioware, EA, Radical and Riot. Cloudhead currently consists of a producer, creative director, narrative designer, cinematic designer, game designer, 3 programmers, 1 animator, 1 3-D artist, audio lead, business developer, communications lead, general manager, and general accounting. In addition, several positions were contracted over the course of the production as well.

Although the project significantly grew in scope, back in 2012 Cloudhead was working off a concept fit for a Kickstarter. With already 4 months into preproduction, a Kickstarter seemed to be sufficient to get the job done. Up to then, all funding for the project came out of their own pockets and on good faith.

Good faith, according to the previously mentioned formula, was already worth between $46,848 and $76,655 at this point. The Kickstarter, with a goal of $65,000, was supposed to take care of the rest. But the project grew and grew.

With VR Hardware makers pushing dates and expanding capabilities every three months or so, It became painfully clear that in order to give players the best possible experience, they were going to have to find more money. After all, a bad video game is eventually just a bad video game, where a bad VR experience is actually a physically unpleasant nightmare and most likely the end of your game dev career.

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Instead of throwing in the towel, now an all too common occurrence, Cloudhead Games dug in and boldly expanded their ambition. In the end, their Kickstarter funds only represented around 5% of their total budget, which is now tipping close to the $2,000,000 mark.

Cloudhead: We were constantly under the gun to innovate and find solutions to problems that didn’t exist before. In an industry that is known for “crunching” we were certainly no exception, 12-16 hour days were common over the 3 years, and if we weren’t working on the game we were on the road trying to convince the world that VR was a big deal and worth paying attention to.

So our scrappy little studio quickly became part game maker, part R&D house. Because prototype hardware was coming in rapid fire (we had internal relationships with both Valve & Oculus), the goalpost was constantly moving forward and we were building new systems to accommodate. That meant we were in cycle of invention and reinvention with each new iteration.

To keep costs controllable, people being brought on to the project were not offered industry rates, but a medial one with further compensation including company shares, bonuses and payback terms for full-scale once they reached parity. While the Kickstarter did exactly what it is designed to do, Kickstart an idea, other essential investments were needed to get them across the finish line. Besides family and friends, seed investors and industry investments from partners were added to the budget. Even Canadian research grants like IRAP (Industrial Research Assistance Program) and SRED (Scientific Research and Experimental Development Tax Incentive Program) were tapped into for certain aspects of the project.

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With their new budget and team, Cloudhead Games was able to fully realize their vision and are in the midst of their official launch. But investors are no charities, they will be looking for a return on that investment, leaving Cloudhead with their next challenge. Recovering their investment and turning a profit.

CH: Finding a pricing model that works has been difficult and given what we know, its a common problem facing early VR developers. The bottom line is that “year one” of VR’s rebirth is up against the wall in terms of available hardware. Our potential attach rates and reach are difficult to guess at with such a small starting market. So you’re constantly comparing those metrics against time spent on actually building the experience.

We had to invent our way out of some crazy problems that had no historical parallel. What is that worth to the player? I think initially pricing models in VR will probably reflect the investment, the novelty, the risk small studios took to make this stuff a reality. AAA studios have the luxury of sitting back, waiting for solutions to unfold. But none of that will matter if the user has a terrible experience. Ensuring that they don’t has been our priority, which is why this isn’t a “port to VR”, this is made from the ground up for the format.

The price set for the first episode of The Gallery landed on $29.99 ($38.99 CAD) while early backers who put in $25 are getting all four episodes for a fraction of the cost. With the experience being estimated between 2-3 hours for the first episode, the price might seem high when compared to a regular game with that kind of playtime, but at the same time, the comparison wouldn’t be fair. VR is unique in many aspects. Significant time and energy is poured into little details which were previously glossed over. Since the user is no longer constrained, they can scrutinize every detail. This kind of story telling has never been done before and comes at a price.

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CH: What we’re offering out of the gate though is something that no one else is doing, because the time, manpower, money investment is substantial. So from that lens it’s more about staying nimble with the competition and gauging discounts based on how the market evolves year one. We’re hoping that people who take the dive on $600-$800 hardware can afford some reasonably priced software that showcases their investment in the most powerful way.

 From small indie studios who drive their projects with passion instead of salaries to trailblazing VR studios with ever increasing budgets have one thing in common. Bills need to be paid and investors need to get their money back. Without the thousands of unpaid man hours, or the blind investment in new technology, the games we are playing today would simply not exist.

While respecting the spending power on the consumer side, without the risks taken and the sacrifices made by independent developers, the indie market as we know it would simply cease to exist and we’d once again be left with an exclusively AAA market, where sometimes instead of creativity, ROI is a hard requirement.

A $29.99 experience that blows your mind for four hours, could instead be on scale with seeing two amazing movies back to back.  At the same time, a smaller game with infinite replayability can easily be 10% the price of a AAA game, even though has less than 1% of the production value.

If you do not see the value of a title, that is fine too. It is your dollar and you can spend it however you want, but in order to sustain a healthy indie market, we need to stop comparing apples and oranges and take the games for what they are.

An investment in something that brings temporary joy.

 

How do you feel about game prices? Are you expecting a certain amount of bangs per hour for your buck or is the overall experience worth your money? Do you like to eat apples AND oranges? Let us know in the comments.

 

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