Wednesday, January 5, 2011

App Pricing

Adamant Entertainment recently made a bold announcement. They're changing their PDF pricing model so that every single product is now $1. No typo. Everything for a buck. Referred to as "App Pricing," it's a nod to the market success of inexpensive applications that are purchased in great numbers for platforms like the iPhone or Android. It's an interesting decision, and possibly a risky one, but I suspect it may ultimately prove to be a smart one.

We'll know more in a year or so, but in the absence of real data (inasmuch as a single publisher's success or failure will qualify as data) there's a lot to look at here. Some of it points to why this is a good idea, some points to the dangers, and most importantly, a lot of it informs upon the more important question: whether or not this is a good idea for you.

Speaking entirely hypothetically, the math behind such a price change is pretty transparent - the proposition is that the lower the cost, the more of a widget you will sell. If you could sell 100 at $3 apiece, but 500 at $1, the advantage is clear. What's not clear, of course, is where the sweet spot lies. Reducing price will almost certainly increase sales, but it's reasonable to wonder whether the increase in sales offsets the loss in per-unit pricing. No one can really know for sure, but it's only by taking risks like this that you find out.

That said, Adamant is not jumping blindly into this - part of the motivation for this has been noted on Gareth's blog. On each occasion he's sold his products at a drastic discount (roughly comparable to app pricing) he's profited greatly by it. Switching that over to a standard model has a certain amount of logic.

This seems like such a good match is that Adamant has a pretty deep catalog, over 200 items. That puts them in a position to benefit vertically (if a single title becomes a runaway hit) or horizontally (from small purchases inspiring other small purchases, so someone who wouldn't buy a $5 item might by 5 $1 items) and to generally have more product to draw in eyeballs. A smaller publisher with less of a critical mass it going to have a harder time - they might get lucky with a big hit, but they're less likely to pick up ambient sales.

One interesting choice is to go with flat pricing, rather than a mixed bag (where 'premium' product might go for two, three or even five dollars). The reasoning is straightforward enough - removing price confusion and comparison removes some of the friction to buy - but I'm not entirely sold on the idea. I hope it does well by Adamant, but were I in that position, I'd be more likely to use a mixed model.

It's easy to look at the immediate situation surrounding this decision, it's also important to take the long view. The electronic product market is trending upwards, for good (more sales! Yay!) or ill (more competition and noise! Boo!) but a pricing scheme like this is a bet not the market continuing to improve, not only in terms of popularity, but also in terms of ease of use. The barriers to purchasing and using PDFs are much less than they used to be, but they're still non-trivial. As they lower, the rising tide lifts all boats.

I actually think that's a good bet. Optimistic, sure, but it's the bet I'd make. But there's another factor, on that might be a much deeper problem.

When you make a purchase with a credit card or with a service like paypal, the merchant is charged some money. If this was just a percentage of the cost, it would be no problem - it could simply scale with the cost. Unfortunately, part of the cost is also a flat fee, and that's a real problem for low cost goods. It is entirely possible that the flat rate and the fees means the merchant will actually lose money on the purchase.

This is not a new problem. If you've ever heard the term "micropayments", this is what has really kept it from ever becoming much more than a buzzword. There are ways around it - apple tries to bundle your purchases together when you buy apps, but just sucks the cost when it can't - but they're not solutions that work very well on the scale of the RPG industry. One common solution is the minimum purchase (you've probably seen this at small shops). I believe rpgnow used to have such a policy (to keep themselves from losing money) but I don't know if it's still in place or not. Whatever the state of it, if it's not worth a merchant's while to sell things for a buck, sooner or later he will stop. Is this unsurmountable? Probably not, but it's an unpleasant reality to be wrestled with.

Bottom line, I would be hesitant to propose that anyone with a smaller catalog take a similar plunge, but all the same I would suggest people keep an eye on this. If successful, this is not only going to suggest a path, it's also going to exert some pressure to bring pdf prices down. This latter point is maybe dangerous - there's a danger of a race to the bottom that is mostly held in check solely by the payment issues - but it may also just be a herald of change.

Anyway, I applaud this effort, and will be watching it curiously. And if you're also curious, you should definitely pick up a few games at this price. I'd definitely suggest Icons.

EDIT: I just checked RPGnow, and it looks like thing have bumped up to $1.99, so perhaps the micro payments issue has been addressed. To this I say, hooray!


  1. Yes, we bumped up to $1.99. OneBookShelf contacted us and presented their problem -- on certain transactions (single-product one-dollar purchases, using Paypal and some rewards-based and international credit cards), they were losing money.

    I'm not interested in screwing my vendor partner, so I bumped the price up to a level that still is low enough for my theory, yet covers their transaction expenses in all cases.

    Of course, I've had a few gamers email me with complaints about "bait and switch" and "100% price increases" -- so there ya go. :)

  2. I actually picked up a few things because of this little price change. They were items I had looked at grabbing before and did not do to price. It boils down to gambling for me. If i am buying a product from someone I know, I know how much it is worth to me. I am not likely to spend more than 5 dollars on a pdf for a product I am not sure of. For one thing, a pdf has less intrinsic value to me. A hard back, if I don't like it, I can resell it again. I can't do that with a pdf so if I down load it and I don't like it, then it is a complete loss to me.

    A couple of bucks though.....Well there we get into the territory of "why wouldn't you buy it?" I can't get a meal for 2 bucks. I can get some possible enjoyment out of minimal risk.

    Now the question I do have, is why is PDF the only digital format people produce product in. Why not in epub or kindle formats? With as many ereaders as are out there, and it seems to be growing, using a different format might actually drive sales.

  3. @Jeremiah, the "why not kindle/ePub" is usually "because the guy doing layout/book formatting gotta get paid, and doing a kindle or ePub version of a book is not a one-button click thing" -- the additional cashflow of kindle or whatever sales may simply not be large enough when we're talking about an RPG product to warrant the additional expense of paying someone to create the alternate format.

    @Gareth -- Yeah, those bait and switch complainers? Fuck 'em. If you've put a solid explanation out there for the public to read and they don't buy into the idea that hey, maybe causing a store they shop at to lose money on every sale is a bad thing, they are the problem.

  4. One thing I'll be interested to see is how the "sales" surge flattens out. After all, shouting "sale" attracts people to the products to pick up a bargain, so sales in that period will naturally be inflated. For instance, once I discovered Adamant's twice yearly sales, I postponed my purchases until that time (but when I did by stuff, I also bought lots of stuff I will never ever use).

    But without the sales there is no special emphasis to go looking at Adamant's products for what's new, nothing to really make me go look and scoop up a load of bargains.

    Of course, this suggests the possibility of a subscription model. Pay $X and get the next Y releases automatically. Minimise the need for the customer to think (this will probably work with Adamant because of the volume and quality and variety of work produced). And at the cost, if there is a dud product (useless to you) then I doubt people will complain. If nothing else, it is something to read (you never know where the next bad idea to inflict on your players will come from).

    As for people complaining about the cost, well, some people will want to charge you with the cost of the bullet they shot you with.

    I wish all the best for Mr Skarka's Glorious Experiment.

  5. Another pricing option, if the sales software is up to it, is for an initial price which crosses the necessary minimum threshold, and then additional items are at the lower cost.

    A precedent for this is ordering from suppliers which have a price break after a certain quantity (e.g. Lee Valley Tools). For quantities 1-9 the price is $4.99, and for orders of 10 or more the unit price is $4.50.

    Perhaps under the present circumstances the initial item is priced at $4.00 and subsequent items are priced at the $1.00 point.

    This would hit the window of attempting your $1 flat price scheme, yet also meet the minimum price requirement needs of the supplier. As a secondary point, it supports (encourages?) larger orders because the extra cost is spread across more items...

    Whatever happens, good luck on your experiment.


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