Will portals begin to compete on price?

[Mike Boeh]

I have noticed a few things lately. It could just be coincidence, but it seems like portals may start to try to compete with each other on the price of games. I am pretty sure this would be a bad thing for developers.

1. http://www.deprice.com/games.htm is taking a chunk out of their own affiliate commission to discount games, several from authors here.

2. http://www.gamefiesta.com (http://www.gamefiesta.com/sale-games.html) is discounting a ton of games :(

3. Real Arcade has just announced 50% off of Rebound Lost worlds and is promoting the sale heavily.

Do you think this will continue?

[James C. Smith]

In the case of the Real networks selling Rebound Lost Words this is a temporary promotion and is nothing new. Real has been doing this type of thing for many years with different games. They usually only do this with one game at a time. It is usually a game that was once a hit but has now fallen off the top 10 list for some time. In this case I don’t see it as them undercutting the competition as much as just running a sale.

The other cases you mention do seem more like the beginning of a price war. GameFiesta seems to have half their catalog on sale.

[svero]

I have to say Im not terribly encouraged by what gamefiesta is doing. Those are heavy discounts. At what point does it stop? With download titles what's to stop someone from discounting even further? At least in retail there's a certain minimum price boundary. I'm not sure what to think of it.

[Bmc]

I can't really see every portal jumping on the bandwagon and slashing prices across the board anytime soon. I think what Real is doing with Rebound (they also did it with Zuma and some others) is the same thing PS2 would do with a megahit. Basically cut the price and try to squeeze more sales out of a product that has already sold so well that it has become more difficult to find customers. So time to attract those who may have passed on it the first time by making it more affordable.

I used to work for the people who run gamefiesta.com. I'm sure the reason they are lowering prices is to try and gain a competive advantage over places like Real and Big Fish. Basically a gimmick, like BF's game a day.

I never heard of deprice so I have no idea about them.

[Jack Norton]

The deprice.com case was discussed before, it's regnow affiliates who cut the price from their percentage. That's what happens if you use regnow :D
You might think "who cares, I get my normal percentage".

WRONG! you get your same percentage but rest assured that if a user see your game there for 16$ and not 19$, before buying another game from you he will check first deprice.com and see if can save money - so you actually lose a customer+the money of a full sale made from your site without affiliation.

[ggambett]

I'm not happy with GameFiesta either. We all have the option of not submitting our new games to them.

I certainly don't want to see the portals competing on price. The royalty rates are already low, it would be the end if we start getting a low percentage of a low number instead of the usual $20...

[Jack Norton]

I used to work for the people who run gamefiesta.com. I'm sure the reason they are lowering prices is to try and gain a competive advantage over places like Real and Big Fish. Basically a gimmick, like BF's game a day.
Well what they're trying to do is quite clear :) but it hurts developers!
I saw Betty for sale for 12.99$! Gabriel post here regularly, maybe he'll be able to tell us if his royalty per sale is the same or not (if is 30% of 12.99$ = 4$ I would be really disappointed in his place!!).

<edit> he read my mind with telephaty and answered my question before I finished the post :)

[Bmc]

I don't agree with the idea of lowering prices across the board.

But then it's not really that different if a Real gamepass member would buy a game. They get it at a discounted price I believe. Something like 6-7$? Then again they need to pay a suscription fee to get that discount.

[Sirrus]

Well it is unfortunate for developers, its not a lost cause...

If you are affiliating with a discounter, simply take them off your affiliate list.

The big issue will be if major portals do this frequently - but as James said with his case, its temporary.

I find the subscription based plans such as those from Real, etc. to be a bigger issue. You have never see any revenue from subscriptions, which offer permenant discounts, so you are getting even a smaller cut infinitly.

[cliffski]

I hate the way portals discount the games. I used to think real would be a big earner, but with the gamepass and their discounting the amount the developer actually ends up with is trivial. And they can also kill your direct sales by undercutting you.
Its important to be very clear before signing what the policy is regarding discounting and subscription sales royalties.

[FlySim]

When signing up with a portal, is there a standard agreement about minimum price or royality? Or is that something you have to negotiate?

[GameStudioD]

Do you really think with all these portal sites popping up that shareware games will stay at 19.99? More portals means more competition between them. The main things a portal can compete on is selection and price. Even the biggest portals cannot get exclusivity to the top shareware games. Is Reflexives next game going to be Real only? Big Fish only? I am afraid not, this would not be very lucrative for the developer. Since a portal cannot get exclusive rights to the best games, they can only compete on price. We will see the price of shareware fall. I think the price point will fall to 14.99 or 9.99.

To see an example of this, go to your local retailer. A game is $40 - $50 when it comes out. After a few months, it drops to $30. Within a year, the game is sub $20.

[simonh]

I'm seeing signs that the average price is already dropping to $14.95. Miniclip sell all their games for $14.95. Hamsterball is $14.95.

I'm comfortable with a $14.95 price point, but any lower than that and I really cannot see it doing anyone any good. Profit margins will be reduced to nearly nothing, and you will have to rely on selling x thousand units just to earn a crust.

I would just say show to Games Fiesta that you will not settle for such aggressive price cutting (to the detriment of everyone), by refusing to deal with them in future.

[Jack Norton]

I would just say show to Games Fiesta that you will not settle for such aggressive price cutting (to the detriment of everyone), by refusing to deal with them in future.
I got contacted by them but refused because there was no price clause. They aren't the only one though that don't have one. Always look for that!
I think that every developer here when signing any contract with a portal, need to write down clearly that the price of the game can't be lower than XX.XX $.
Then let the portals do the war spending their money with ads and not cutting our percentage!! :cool:

<sound of a crowd cheering>

[patrox]

They're not really cutting down your percentage, they just give you 30% of a smaller piece.

It's only the beginning of the action, with more and more "portals" renting games ( i've seen several at 9$ a month for unlimited games ... ).
I also notived that some of "smaller portals" are distributing games from other portals so i suppose that you get a cascading effect... ( 30%*30% = 9% ).


pat.

[Anthony Flack]

I also notived that some of "smaller portals" are distributing games from other portals so i suppose that you get a cascading effect... ( 30%*30% = 9% ).


Eek, you'd want to be upfront about any deals of this nature as well! Sounds like a recipe for disaster, unless the first distributer is getting you deals with certain big guys that you would otherwise not be able to deal with (as I understand is sometimes the case).

But even then I would hope the royalty rate would be managed differently. 70% is pretty steep for an agent's fee.

[Raptisoft]

Hamsterball is $14.95 because of lack of content-- at least on my site. If it had double the races, it would be $19.99

[Robert Cummings]

The solution is simple from my point of view.

You need a contract which guarantees you a fixed result. For example, you always get $8 per copy sold, no matter what the price is they which to price it as.

So if they sell it as low as $10, it's their decision to earn $2.

-Rob

[ManuelFLara]

Hamsterball is $14.95 because of lack of content-- at least on my site. If it had double the races, it would be $19.99
IMO Hamsterball deserves to be priced at $19.95 at LEAST. It's very fun and polished, I was shocked when I first saw it! Also these few levels can be replayed many times (to improve your scores or just for fun) before getting bored.

[James C. Smith]

The solution is simple from my point of view.

You need a contract which guarantees you a fixed result. For example, you always get $8 per copy sold, no matter what the price is they which to price it as.

So if they sell it as low as $10, it's their decision to earn $2.

-Rob
I the past this has usually been the approach we take when we let other distributors sell our game. We set a minimum amount that we must be paid no matter what they sell the game for.

[James C. Smith]

I also notived that some of "smaller portals" are distributing games from other portals so i suppose that you get a cascading effect... ( 30%*30% = 9% ).
The fact the a “small portal” sources a game from a distribution network does not mean that the developer is getting a percent of a percent.

This kind of thing can happen when you use a publisher. Someone like Pop Cap or Garage Games or Play First may give you x% of what they get but then they sell your game on Shackwave, Real, AOL, Yahoo, and MSN. So the publisher gives the developer a percent of the money the publisher received which is a percent of the money the portal charged the end user.

I would be very surprised if this was happening on the “smaller portals” you mentioned. Many smaller portals are just affiliates of a bigger distribution network. But this doesn’t affect the money paid to the developer. For example, if a developer puts their game in a system that allows affiliates, such as Reg Now, or Reflexive Arcade, the developer will always get the same percent of the purchase price no mater who sells the game. In the case of Reflexive Arcade the developer controls the purchase price and the developer always gets 40% whether the game sells on Reflexive.com or SmallTimeGamesWebsite.com.

[tentons]

If it's true that the "standard" price is going down, then hopefully portals can make up for it on volume. That still doesn't help developers selling from their own websites much, though.

[patrox]

I would be very surprised if this was happening on the “smaller portals” you mentioned. Many smaller portals are just affiliates of a bigger distribution network. But this doesn’t affect the money paid to the developer. For example, if a developer puts their game in a system that allows affiliates, such as Reg Now, or Reflexive Arcade, the developer will always get the same percent of the purchase price no mater who sells the game. In the case of Reflexive Arcade the developer controls the purchase price and the developer always gets 40% whether the game sells on Reflexive.com or SmallTimeGamesWebsite.com.

In this case, they rent access to 60 games for 10 euros a month , so i'm not sure how the split works for developpers.

pat.

[Fost]

But then it's not really that different if a Real gamepass member would buy a game. They get it at a discounted price I believe. Something like 6-7$? Then again they need to pay a suscription fee to get that discount.

Not quite, they pay $7.99 for a gamepass, and then they get one game a month free. If that's your game, you get a percentage of $7.99 minus RA's costs (which will eat into $7.99 faster than they will eat into $19.95).

Portals to my mind are running an online version of the old publisher bundling scam (publisher bundles 10 games on a cd - they get the same cut, each developer gets a cut/10).

Does anyone know exactly what cut a developer gets from RA for a game sold via gamepass - after costs?

[Bmc]

anyone who knows that is probably bound by a NDA. I'm sure it varies per company anyways.

[Anthony Flack]

I guess that's why we've never heard an answer to that one. But I'm curious too. Gamepass is a promotion that benefits only Realarcade, so I would hope that the developer gets paid what they would normally get paid.

[dburger]

We get our normal royalty rate on gamepass purchases, but none of the monthly subscriptions they collect.

[Dan Prigg]

I would hate to see prices drop. I think 20 dollars is the right price now. Its more to do with the psychology of the buyer. 30 is too much and 10 makes its feel cheap.

[Anthony Flack]

We get our normal royalty rate on gamepass purchases, but none of the monthly subscriptions they collect.

Perfect. That's just how it should be then. Nice to know.

[Fost]

We get our normal royalty rate on gamepass purchases, but none of the monthly subscriptions they collect.

Ok, so (please correct me if I'm wrong!) - games bought with a gamepass have a discount, and so you get less because RAs costs eat into the smaller purchase price, and then you get your normal percentage of the profit (which is smaller because of the discount).

BUT

With the free game anyone gets with a gamepass gets every month - you get nothing.

????

Last time I looked at the RA forums, all people were doing was waiting to get their next free game each month. Although that could just be forum users, who are often a breed apart. Have the forums been closed? or moved into the RA browser? They don't seem to have a link on their pages anymore, otherwise I'd have shown you some example threads.

[svero]

If your game is chosen by a real gamepass subscriber as their monthly game you get your royalty for that game. So say your royalty rate is 25%.. you would get 25% of the *gamepass fee* for that month. Whereas, if a user bought your game not using gamepass you'd get 25% of the full price of your game instead. If I have it wrong someone please correct me.

That might seem like you're losing money, but I think the general idea here is that people will buy more games if they have gamepass than they would otherwise. So say gamepass is 10$ a month and 100 people buy the game at 25% you make 100x10x.25 = 250$. Hypothetically, lets say only 20 people buy at full price. Then you'd make 20x20x.25= 100$ -- so it is at least possible to make more through gamepass at the lower percentage.

I see it as different than the gamefiesta discounts which don't reward extra purchases except in terms of the game costing less. Gamepass really promotes the idea of getting 1 game a month. The only place where we get kind of left out is when a user declines to use their monthly credit. Real just pockets that money and none of it is seen by the developer. I'm not sure how common that is or what amount of gamepass it adds up to. Might not be really significant.

[Fost]

Ok, it's good to clarify thay you actually get some money from a gamepass (that would have been a real (no pun!) surprise!)

The other thing I'd like to know, is what RA list as their costs - I doubt anyone knows this other than RA though. Reason being, the royalty is a percentage, but the costs are a fixed fee - so they will eat into the potential profit far harder if a game is sole via gamepass for $7.99.

It's interesting to know the facts of this - not a worry for me personally, because we don't use portals, I just find it interesting to see how a big portal operates.


Some facts on the following would be good:

If you assumed a 25% royalty on a normally $19.95 game.

How much does the developer get in actual $$ when:

*the game is sold for $19.95
*the game is sold via a gamepass discount
*the game is given free as a customers monthly free gamepass game.

Also -
How do these sales break down? What percentages are Full price/ Gamepass Discount/Gamepass free?

It's all very interesting, but I've never seen any actual facts on the matter (I assume because of NDAs) Would be nice if someone from RA could answer the above with some Real facts (pun intended ;) )

[Robert Cummings]

I second this. You would not be breaking the NDA if you disclose these simple facts.

-Rob

[svero]

Im not sure what the exact breakdown is. I think it would be better if someone from real was willing to explain roughly how it works. I don't want to get in any trouble with NDA etc.. I don't think I'd be breaking the spirit of the agreement by talking about it in general terms, but at least with someone from real we can be sure the answer is correct. I have had games on real but I forget the exact breakdowns.

[dburger]

Some facts on the following would be good:

If you assumed a 25% royalty on a normally $19.95 game.

How much does the developer get in actual $$ when:

*the game is sold for $19.95
*the game is sold via a gamepass discount
*the game is given free as a customers monthly free gamepass game.

I'm sorry, but I do feel disclosing this info would break the NDA. Suffice it to say that we make much less money per sale on a gamepass purchase. I discussed this issue with Real personnel many months ago and they were very pleasant and explained their logic. We agreed to disagree on this policy.

I feel that the membership programs are good for the portals, as they help build the customer base and provide a steady stream of income every month. Unfortunately, because they keep their customer list away from the developers, we don't see any significant benefit of their customer aquisition.

As was mentioned on these boards recently, it is important to consider aquiring a customer as equally or more valuable than making a single game sale. With a membership sale, the developer really doesn't get much of either.

[James Gwertzman]

The argument in favor of the subscription to the portal is very straightforward. Customers, on average, buy relatively few games a year. Real's subscription is sufficiently enticing that many customers choose to sign up, thus giving Real $96/year. The same customer would need to buy 5 games a year to equal the same revenue, which most don't, hence the subscription makes a lot of business sense.

To a developer who complains, Real would argue that most of the people buying your game using their Game Pass would not do so otherwise, and hence it represents incremental revenue and not lost revenue.

I think that is probably the case for most B or A- games. If you make a B+ or A- game, then you will probably end up making more money overall through GamePass then you would if it didn't exist. Customers will buy your game with their gamepass who might not otherwise buy it.

on the other hand, if you are the developer of a very strong AAA game, a game so compelling that everyone who plays it simply has to own it, a game with a very high conversion rate, then you are probably leaving some money on the table with GamePass since people are able to "buy" it for less than they might otherwise.

[dburger]

To a developer who complains, Real would argue that most of the people buying your game using their Game Pass would not do so otherwise, and hence it represents incremental revenue and not lost revenue.

This is nearly exactly what I was told by my friends at RN and I understand their position, but I don't agree that these customers would not otherwise buy the game. These are proven customers who are active consumers of games. RN is giving them a great membership deal to maintain their loyalty to RN. I would like to think that many of them would have converted to customers of my game at full price. But, I'll never know.

I do enjoy the chance to discuss this here in a civil way. I hope I'm not disclosing too much for the guys at RN. They do a good job.

[Fost]

The argument in favor of the subscription to the portal is very straightforward.
Just to clarify my own position - I'm not arguing for or against portals or anything, and I'm not complaining about RA's practices - like I say, my company doesn't use portals. I just find it odd that the above information is not publicly known. They sound like pretty straight forward questions, that you'd at least want to ask RA when sorting out any contract with them.

It's a shame nobody seems to be able to post the actual facts and how they would pertain to a hypothetical product, because I would be genuinely interested to hear people's opinions on those facts- they certainly seem relevant to the future of this industry, and might spark a debate that brings up some ideas for improving matters - for portals, developers or hopefully both.

[Robert Cummings]

My take on this is:

Portals need to agree on a fixed price point. The big portals need to agree not to go below a certain price. Now a lot of larger companies do this already to prevent price crash fiascos (such as the bread for 2p thing in the uk that happened).

This only hurts the portals -and- the developers so there needs to be a gentleman's agreement (more of a common sense one actually) not to lower the price below $19.99 except where on a promotional or temporary basis. The portals and key developers should meet up for a chat every couple of months on an IRC channel (as this is global, this is probably easiest) for an informal report.

By working together, we make best use of the target market. I see portals as part of my own company.

Portals are a division of my own company - the sales and marketing division. Therefore I need to invest in that part of my company.

I would personally be asking for a higher percentage than most due to the amount it cost to build this game. It's a simple financial matter of recouping those costs, nothing more. However I see the need to spend on my sales division too - you see?

Therefore I propose that portals change the way they work with EACH other. Competition between portals will hurt portals AND developers - not customers.

Customers will pay the cheapest they can find, and if there isn't a cheapest, they will not go away. So I invite portals to join me for a frank and compelling discussion about price limits and practises. Together we can make this vineyard something very special.

-Rob

[Vorax]

Robert, what you are describing is called "price fixing" and it's illegal (http://business-law.freeadvice.com/trade_regulation/price_fixing.htm).

I am all for keeping the prices at the standard $19.95, but it can't be done by portals and developers working together to "fix" a price for games.

Competition between portals will hurt portals AND developers - not customers

The laws are in place to protect customers from corporations doing exactly what you described because it does hurt them.

[Robert Cummings]

Ah. I didn't know it was illegal.

Well, I'm sure everyone's got the sense not go into a price war in the first place then. Same difference.

-Rob

[Fost]

Yes, rather than fixing the end user price, a better system (as seen with most retail products) is to agree a fixed price per copy between the developer and the portal. That way they can do whatever they want with the price - you still get the same amount whatever.

Still, a precedent has been set, so good luck getting any such deal from a portal.

[papillon]

While it may be illegal for you to tell the portal to sell the game at only X price, should you not be able to say that your CUT of their sale cannot be less than Y price?

After all, if they were buying physical goods from you, they would have had to pay a fixed price for each item up front. They couldn't just decide that they wanted to sell their $10 shoes for $5 and expect the supplier to magically drop their prices to compensate. (Well, unless they're WalMart, but that's another story.)

It does not seem fair for an affiliate/portal to be able to decide to sell your game for a tiny price and give you the same cut of that tiny price. Whereas if you were originally supposed to get $12 of the $20 they were selling the game for, if they decide to drop the price to $15 and still give you $12 (taking the discount out of their cut) that's perfectly "fair". Don't I remember someone saying this is how the RegNow discount works?

[Robert Cummings]

Still, a precedent has been set, so good luck getting any such deal from a portal.

The we'll just have to do something about that. The quality of the product is high enough to warrant such a move. After all the competition will be getting the best deal otherwise...

-Rob

[cliffski]

I thought it was legal for you to set a minimum price for someone to resell 'your' product, just illegal for different sellers to agree a minimum price between them? Or is this not the case? I know that until a few years ago in the UK, the 'book agreement' meant that you would NEVER find a book on sale in the UK for below the cover price, regardless where you shopped. This fell apart a few years ago and now there is widespread discounting. The argument in defence of the agreement was that it defended the smaller retailer who couldn't afford to run big discount schemes. They worried that small bookshops would be put out of business and you would just get a limited range of books from big supermarkets.

[otaku]

It is neither illegal (in the US or the UK) to fix a price for your product that you will not sell below nor is it illegal to have a contract between you and a 3rd party that states that they may not sell your product below a certain price. Price fixing and the law surrounding it is very complex.

There are certain instances whereby a retailer is not obligated to honour a price commitment, hence the introduction of MRSP/MSRP but price fixing regarding retail law is entirely different to those regarding product manufacture & distribution. On-line portals and on-line distributors are not considered retailers and a contract between a developer and an affiliate or portal stating the minimum agreed price would be legal. A number of portals already have items in place in their contracts to state that a developer will not undercut when the portal handles their game.

[otaku]

cliffski: Books in the UK fell in to one of the exclusion categories. Certain food groups and clothing items are also in this category. I'm sure the EU laws are making many changes to the various categories of what is included and what isn't. As I said, complex. It would take several pages just to describe how each works and frankly if you are that interested I would recommend consulting an attorney/solicitor specialised in the subject.

Basically it boils down to, for your game, you can set whatever price you feel and distributors that you have direct contracts with agree to sell at or above a fixed level.

Should you, and a number all the other developers decide on and agree that all Match-3 games must sell for $99 then that would be a situation open to inspection. Though truthfully it is still doubtful it would be considered price fixing because the barrier to entry of creating match 3 games is so low that it is not unreasonable that other people could break the deadlock quite easily.

Let's say that there was some unique process that cost ten billion dollars that a developer required to create a match 3 game, and there were only a few dozen developers in the world that could afford this process and they all agreed to sell their match 3 games at not less than a certain price that was far above the cost of manufacture & development, then that could be considered price fixing.

Complex subject.

[Vorax]

For the record - What I specifically said was price fixing: If the portals and developers all work together to set fixed a price (Roberts post above).

If "the manufacturer" (you) wish to set a minimum amount that a "vendor" (the portal) may sell a specific product for, then that can be considered at cost for the vendor and is not illegal.

For example if you say I want a minimum of $8.00 per game sold, then that is not illegal. It means the Portal has to give you $8.00 for every copy they sell, and they can sell it at the same price or higher. If you have no such agreement with them, then they can sell it at any price they want as long as it is above sales costs.

Otaku:
On-line portals and on-line distributors are not considered retailers

Why would portals not be considered online retailers? I think if it went to court any argument that a portal is not a retailer would fall apart very fast. They are no different then Amazon.com (which also sells games), just more specialized.

Disclaimer to all: I am not a lawyer, just versed in business. If you have real concerns you should contact an one.

[GameBoy]

Unfortunately, it does seem inevitable that the portals will compete on price. They can afford to sell games at rock-bottom prices, because unlike us, they have very little invested in the games and few costs to recoup. Promoting our games by other means would cost them money. This does not.

There seems to be a blind belief amongst many authors that there is virtually no crossover between their customer base and the portals' customer base, and that they have everything to gain and nothing to lose by signing up with them. With portals like Big Fish offering 20% discounts on ALL games ALL of the time, though, our customers are going to learn very quickly that they can get our games cheaper elsewhere.

[BitBoy]

Price competition only works if customers "shop around" to find the best price for a certain game. Suppose that this is indeed the case (which is debatable). Wouldn't it be possible to sell your game at a lower price on your own website than what the portals are charging for it? Sure, you would have a smaller profit margin on your own sales, but potentially you could "steal" some of the portals' customers. And we all know that there are LOTS of them! You could possibly get a lot more sales, plus you "gain" the customers which is a good thing! This combined with a lowest-price-point-clause for your game on the portals could prove effective. Any thoughts?

[otaku]

Actually it is well established that many of the portals have a clause in their contract that states that you, as the developer, will not undercut them on price. There are also a few other choice clauses that frankly amaze me anybody ever signs with a portal, but those aren't the topic of discussion here.

[GameBoy]

Wouldn't it be possible to sell your game at a lower price on your own website than what the portals are charging for it?You can't compete with the portals on price for the same reason that Microsoft can't compete with the prices offered by pirates. Both you and Microsoft have very significant development costs to cover. The portals and the pirates do not.

[BitBoy]

@otaku:
I wasn't aware that the portals claim the right to control the price on the developer's site! :eek: Not much leverage left for the developer these days, humm. Thanks for sharing!

@GameBoy:
I agree that the developer has a lot more costs to recoup for a game. The thought was that by lowering your own price below the portals', you could steal some of the portals' customers, thus making 100% from the sale instead of 25% (or whatever the rate is). If you could attract enough customers this way you would in fact earn more money! However, judging from what otaku says, the portals seem to be one step ahead as usual.. :rolleyes:

[Dan MacDonald]

The point of having this casual games forum is to get away from the discussions of "Is using a portal a good business model". That topic is a great one for the indie business forum, but not for this forum. If you have a game that will sell well to casual gamers then you would be foolish to try and sell it exclusively on your own site. Even Steve P. admitted that Dweep was not a casual game, it was a hardcore logic gamers game. Part of why it was successful, it would not do with the real arcade audience but he managed to market heavily enough and build enough of a website presence and reach those customers who wanted logic games like dweep.

The fact of the casual games business is this, if you have a casual game you put it out on distribution sites and that's how you make money. Is that the best way to sell every game? No. But that is how you sell casual games in todays market. So lets not turn this in to a "should I sell from my site or use the portals" talk. It tends to degrade rapidly to the strong opinions of a few people who have never before published or had any dealings with a "portal". Not a very productive discussion and one I would like to steer this thread away from.

If we want to speculate on the discounting of games at distribution sites and potential ways to avoid it happening to our games that's one thing, but degrading into a "damn the portals" thread is another.

[Fost]

If we want to speculate on the discounting of games at distribution sites and potential ways to avoid it happening to our games that's one thing, but degrading into a "damn the portals" thread is another.
I agree, there's little point in that - we have to work with what we are given or try to force change. I feel partly responsible however since I asked a list of questions above, the answers to which probably don't make the portals look particularly great.

I didn't however want to devolve into complaining about the situation - I'm genuinely interested in the answers to those questions, as I think they would be helpful in making predictions about the future of the big portals and how they will operate. Which I thought had a bearing on this thread. Perhaps the questions would be better moved into their own topic though - with the caveat that people only answer with fact and not opinion.

I find it purely interesting to see how portal business operates, however my experiences of dealing with them are limited, and they don't affect me directly, so perhaps I shouldn't comment too much in this section of indiegamer - sorry.

[James C. Smith]

If you assumed a 25% royalty on a normally $19.95 game.

How much does the developer get in actual $$ when:

*the game is sold for $19.95
*the game is sold via a gamepass discount
*the game is given free as a customers monthly free gamepass game.

Also - How do these sales break down? What percentages are Full price/ Gamepass Discount/Gamepass free?



It is very simple. The developer gets a percentage of how much the customer paid. There are no other costs involved in the developer's royalty calculation.

* regular sale = $19.95 X 25% = $4.99 paid to developer
* gamepass discount = ($19.95 - $5) X 25% = $3.74 paid to developer
* “free” gamepass game = $7.99 X 25% = $2.00 paid to developer

This is assuming the developer is getting a 25% royalty. I am not commenting on how likly a number that is. I am just explaining how that number would be used to calculate money paid to the developer.

I don’t think I am allowed to answer the last question about what percent of sales of each of the types mentioned above.

[Fost]

There are no other costs involved in the developer's royalty calculation.
Thanks for the info James!
That's surprising - but good news for people who want to publish through RA. I was under the impression they remove any costs first, and calculate the royalty on the net profit. This is of course how retail publishers work, and the definition of 'costs' can be a little vague in their favour. So it wouldn't have been out of the ordinary for RA to do the same.


I suppose the answer to this thread's question is that gamepass has been running a while, and must be succesful - try and buy a game from RA and you'll see what I mean - they go to great lengths to point out you could have that game now for $7.99, if you would just subscribe. I would guess the percentage of gamepass sales is now pretty high and rising.

So - portals aren't competing on price, they are just following suit and matching RA's system- it makes sense - If you were running a casual portal, would you not be implementing something like gamepass right now?

Long term, we may see public expected price for portal games to be $7.99 - if the portals actually do start to compete on price, it will probably be for the gamepass subscription price.

[Robert Cummings]

Which is clearly bad news for us.

-Rob

[Dan MacDonald]

Which is clearly bad news for us.

-Rob


Or them, it's a simple fact that if the developers aren't making money then neither will the distribution sites. Right now despite all the questions about the portal business model, there are developers who do very well and make a lot of money. As long as there is a way to be successful on the portals there will continue to be developers who exploit that method. Even if it's as simple as making really polished casual games. However when real's best developers are no longer making enough money to survive then real will change it's business practices or begin to shrivel up and die from lack of new content.

When the "supply" of good quality casual games goes down, the portals "demand" for said games will go up and they will improve the deal for developers. Right now the space is hot, and despite a lot of the talk on these forums there are a lot of developers trying to get a piece of the action. As long as these developers exist, nothing is going to change. Real is a public ally traded company who obligation is to make as much as possible for their shareholders just like any other company. It's not evil, it's just business and as long as there are developers making a ton of money going through real they will continue to be in business and making profit.

I feel I should also say, that I don't think for a second that making games for portals is the only way to be successful. If you don't like the deal the portals are offering, don't make a game that really requires portals to reach it's audience. Target a different audience and make a killing that way, it's still very possible to do this in today's climate.

Also I should note that one liners are generally frowned upon in these forums. Because of their length they are freequently subject to extreme generalizations and steriotypes. The responses to one-line posts are typically flames. Also as a general rule the world "clearly" is only used in rhetorical arguments and any conclusion that follows the use of the word "clearly" is not clear or obviously deduced from whatever proceeded the "clearly". If it was clear then it would need to be asserted now woudl it? :)

[svero]

Target a different audience and make a killing that way, it's still very possible to do this in today's climate.

Aside from card games or successes from a few years back can you give me an example of a recent title that has done this? Because I can't think of a single one.

- edited in - I concede there's a few examples of games that make "ok" sales without portals (say <100 sales a month or <1/10th the money to developer) and that there are a few examples of multiplayer rpg's etc.. that have taken off. But they're quite rare.

[Dan MacDonald]

"Listen, buddy, if I could tell you how it was possible in a minute, it wouldn't be worth the Nobel Prize"

:)

No seriously, I can think of a lot of examples but they are primairly multiplayer. Runescape is a good example, soldat is another, worms is another classic. What makes multiplayer games spread is the fact that they spread by word of mouth, if you make the barriers to entry very small then it's quite easy to grow a user base of people who sell your game to other people that they want to play with. Pocket Tanks from Blitwise has been very successful this way, and I'm convinced it's because you need to play the game in hot seat mode with another player. If everyone who trys your game has to grab someone else to play it with it's a very powerful distribution mechanism.

Shrapnel Games claims it can move "mid 5 figures" (~50,000) to it's niche strategy audience. Matrix games has been successful as well. Just throwing a cool single player game up on your website probably isn't going to give you the visibility your game needs to sell well, but I'm just waiting for someone to prove this wrong. The point is, there are other distribution and other marketing methods out there that can make you good money. For me I consider 100k a year to be a "killing" that may be smaller then a "killing" on the portals but it would be a comfortable living for me, especially if I was doing that games I wanted to do.

... This is starting to feel like a tangent from the purpose of the origional thread...

[svero]

Well.. I assumed we're comparing to top portal titles.. But if shrapnel says they can move 50k units that's quite a few games indeed. Still I'm quite skeptical in general of the ability to make some random single player title using standard buy online and make a "killing" relative to the portals on your own. I just don't see how you can reach a decent sized audience. We all know by now that submitting to download.com and the 250 or so other smaller sites will lead to very limited exposure. Not enough to make the kind of sales you would on realarcade. Search engines and paid search engine ads are also quite limited in their ability to bring in a well targeted audience for something like a general shooter game. So where are all these customers coming from if you're not paying for ads? and assuming you dont already have some big audience to pitch to from your past games etc..

Card games is the only example I can think of that can survive as a niche from search engines etc... and im not even sure that's true since most of the top card games have been around for years and years. Its hard to say. I assume there will always be a pretty big audience looking for various classic card titles. Its easy to imagine someone searching for freecell but not so much for "strategy game" and getting exactly what they wanted.

[Fost]

I'm not sure if it is necessarily all doom and gloom - it seems likely several portals will merge or be bought out in the coming years. That should make their customer base grow even larger. So it should be possible to make money chasing the portal's business even if every game is sold via gamepass. I suspect right now (but if you are dealing with them you will know this for yourself) that the majority of sales are via gamepass already - so if that model is already making developers money, then you should have nothing to fear. In fact, things should even get better as the portals expand their business and customer bases by merging - as even though you'll be making a much smaller cut, the volume should be sustainable.

The only thing I am thinking may be worse - is the window of opportunity to make money off a game (on a portal) will shrink. As sites merge, it means more and more games will be competing for the front page, and the rotation may be much faster.

Right now, I know for a fact that major portals are crying out for well built portal friendly games - some even maintain lists of games they would like to be made.

[svero]

There seems to be this idea here on the forums that if anybody ever says anything about the way things actually are they must be negative or gloomy. It's not gloomy or negative to say that the download sites no longer provide enough traffic to make a good living. That's just a fact. There may be exceptions, but by and large it's true. It would be like starbucks adding decaf to their menue because peopel dont want caffiene. Is it gloomy to say people want another kind of drink or is it just an assessment of the market and a business decision to do what's needed to stay profitable. The fact of the matter is that the market for online games has changed in the last few years. Those companies that changed with it are doing well and those people still grasping at what use to be a good way to market online are for the most part failing. To get back to the original point.. if the prices fall to a point where we cant make enough to survive then the answer is simple. Don't make portal games anymore. Try something else. Adapt or lose.

[James Gwertzman]

A lot of the discussion on this thread so far seems to be speculation by folks who don't actually have direct experience dealing with or contracts in place with the major portals.

The portals are not stupid. They want to maximize the money they make too, and they have no interest in lowering their average price point to $8, especially not for first-run AAA casual titles.

I can tell you that right now we see an average of $14/unit retail for our games sold thorugh RealNetworks, which is on par with what we see from the other major portals. Some have a higher average, some lower. Where it is lower than $19.99 there are a variety of reasons - in some cases it is costs being passed through, but generally these are very small and not a significant factor. Another factor are sales in different currencies, where different markets support different price points.

A few notes I've been wanting to make regarding some earlier quotes in this thread:

re: competing with the portals using your own website.

This is a classic issue of channel conflict, and is by no means unique to this space. The rise of the Internet has forced nearly ever manufacturer in nearly every market to ask themselves whether they want to sell themselves directly to their consumers, bypassing their distribution network, at the risk of pissing off their channel. Why doesn't Random House books sell their own books on their website direct to consumers at a cheaper price than they are available through Barnes & Noble? Why doesn't Microsoft sell their own software on their own website at a price less than you can buy it for at CompUSA? In both cases the manufacturers would be making more profit since they wouldn't have to pay the channel.

The answer is easy - the highest profits & margins are generally to be had making high quality merchandise. The actual selling & distribution is a messy, competitive, commodity business, and manufacturers have no interest in pissing off their distribution partners just to make a few extra bucks per item in the short-term.

Historically distribution has been a messy, low-margin business that is not especially interesting. It is changing a little bit in the bricks & morter space thanks to massive retailers like Walmart and Barnes & Noble which have enough leverage to start dictating terms back to manufacturers - who have to respond since being frozen out of those channels is suicide - but ultimately the best way to defend against a Walmart is to have a high quality brand that consumers actively want and that Walmart has to have. "outsourcing" distribution has historically been a smart move.

It is no different in the casual game space. Portals have leverage to the extent to which they can deliver up customers & sales. Real and Yahoo have more leverage than Reflexive because they are bigger and can offer more customers, which is one reason why their terms are not as generous. On the other hand, they do depend on having high quality games to offer, and so just like in the retail space, the best way to defend against them is to focus your energies on making high quality games and slowly building your brand.

Sprout Games has been very lucky so far - everyone one of our titles has landed in the top 10 charts for at least a few weeks, and that gives us leverage when we negotiate our deals. Who has the most leverage in this space? the company with the highest reputation for quality and the strongest brand, PopCap.

We are happy to sell via our own site, but we will never do so at the expense of our distribution partners because we consider them a very valuable and important part of our business. And as long as we continue making high quality games that consumers want, we have nothing to fear from them.

[Robert Cummings]

I don't understand the competing thing.

If you're not allowed to sell less than what the portal sells for, how come a competing portal such as big fish is allowed to do so?

Bearing in mind that you're not selling it exclusively? It makes absolutely no sense to me.

-Rob

[Anthony Flack]

Because the two portals are directly competing with each other, so they can do what they like. But you and the portal are not. You have a partnership of sorts. What's good for the portal is also good for you. If you piss off your business partner you may find they become your ex-business partner.

[svero]

The portals are not stupid. They want to maximize the money they make too, and they have no interest in lowering their average price point to $8, especially not for first-run AAA casual titles.


Except that seems to be exactly what gamefiesta is doing in the hopes they'll attract customers away from the current more established sites. And given that that is the case, if customers do start to move away from real and others are they not forced to some extent to enter a price war?

[James Gwertzman]

Game Fiesta is not discounting their top games - if you click on Big Kahuna and click "Buy now" the price is still $19.99. They are offering some older "B" titles for sale, but that's the equivalent of the bargain bin at your local game store.

They do have a membership club, similar to Real's subscription service, but their price point is higher ($9.99) and like Real you only get one game a month.

Finally, I don't know where otaku got his information, but there is nothing in any of our contracts with portals about not undercutting them on price. Maybe others have such clauses, but I'd be surprised. Frankly I don't think they're needed. Undercutting your own distribution partner is just bad business, and any developer who makes a habit of it will probably find themselves having trouble securing distribution.

[BitBoy]

Finally, I don't know where otaku got his information, but there is nothing in any of our contracts with portals about not undercutting them on price. Maybe others have such clauses, but I'd be surprised. Frankly I don't think they're needed. Undercutting your own distribution partner is just bad business, and any developer who makes a habit of it will probably find themselves having trouble securing distribution.
Well, that doesn't really stop the portals from undercutting the prices on the developers' sites, right? How could they ever complain if you decide to undercut their prices without sounding like hypocrites?

I'm just nitpicking to defend my previous idea here, not trying to shoot down the portals.

[svero]

Game Fiesta is not discounting their top games - if you click on Big Kahuna and click "Buy now" the price is still $19.99. They are offering some older "B" titles for sale, but that's the equivalent of the bargain bin at your local game store.

Many of the games in the sale section are recent top 10 AAA casual titles. Platypus, Ancient tripeaks, Alpha Ball, and Puzzle Express to name a few. I suppose you could argue tha they've had their top 10 run already and now are b-listed, but just the same I'm sure many of these games are still really solid sellers from other sites and the developer's site. It doesn't seem all that bargain bin to me.

[Bmc]

Many of the games in the sale section are recent top 10 AAA casual titles. Platypus, Ancient tripeaks, Alpha Ball, and Puzzle Express to name a few. I suppose you could argue tha they've had their top 10 run already and now are b-listed, but just the same I'm sure many of these games are still really solid sellers from other sites and the developer's site. It doesn't seem all that bargain bin to me.


Some of those games you mentioned are over a year old. They also own Ancient Tripeaks so that one doesn't really count. I believe Puzzle Express may be the newest game out of that batch and it hasn't been on any top 10 list (that matters to me) for at least a few months, if not more.

[Dan MacDonald]

I'm inclined to agree with James, the whole game pass thing wouldn't still be in existence if they were making less money. In all actuality it likely extends the sales period for a title. Titles that have been out of the top 10 for a few months likely see a noteable bump in sales revenue when they are discounted and increase the total revenue generated by the title.

Why I think this tweaks some developers is it appears to crater any chances of the developer selling the game from their own site at a "reasonable" price. As I said before, however, if you have a AAA casual game there's only one practical place to sell it and that place is not your web site :)

This is the reality of the casual games business, you experience a lot of exposure very quickly and make a lot of sales in a relatively short amount of time, after a while the game falls into the catalog and generates a small trickle. If this business model bothers you then don't try to make a AAA casual game, it's really that simple.

[svero]

Ok well.. you guys are wrong on this b-list thing. The fact of the matter is that a good online game can sell well for several years. I know because some of my titles are 5 yrs old and still sell comperably to what they did in the first year. I know some of your business models prevent you from doing well with games after the first few months, but that's not true for all of us.

But lets take a concrete example. Look to buy the game, Platypus, which I have on good authority still sells very well at portals and from retro64.

Miniclip - $14.95
Bigfish - $19.95
Reflexive - $19.95
Realarcade - $19.95 (+coverage for 2004 action game of the year)

Gamefiesta - $12.99

That's price competition. Surely that's beyond debate?

[arcadetown]

I brought this up before and seemed nobody took it seriously. I see a discounting war brewing as it becomes more visible to consumers, and at this rate it's going to happen sooner rather than later. Surely this can't be good for anyone.

What can be done? Ask for minimum per unit royalties (note you can't legally ask for a fixed end consumer price). You can also exercise your right not to do business with low ballers. Also if enough vendors complained to regnow perhaps they'd reconsider enabling lowballers or give vendors an option to turn off if they choose.

Some say subscription services, multi-item purchase discounts, or other small discounts are similar. Trick is those are usually not advertised in front of consumers via google adword campaigns, typically smallish discounts, or require monthly commitments. How long till you think all portals will be forced to advertise "save 15%" slowly inching towards "50% off"?

[svero]

Well I think there's definitely some truth to the idea that deep discounts will hurt the portals as well. They cant sell the games for 5$ and sustain the same income, but they're free to discount more heavily because they're not paying for any physical goods. The problem is they could pick your game and deeply discount it as a loss leader, or if they have enough money just sell at heavily discounted rates to squeeze out the competion in the hopes that later they can bring the prices up once they've succeeded at securing the customer base. Thats the nature of a price war.

[svero]

For instance.. suppose sprout releases feeding frenzy 2 and its a big hit. What's to stop a portal from saying.. hey! everyone wants feeding frenzy 2 so lets just sell it at 2$ a unit and advertise that everywhere to grab all the customers. That would pull the rug out from under their release. We have no protection whatsoever against that in the standard contracts the portals use that I can see.

[Robert Cummings]

Thats never gonna happen.

Feeding Frenzy 2 will be top dollar for as long as possible.
What this does though is even more terrifying.


It is the arrival of the AAA indie. People like sprout and the zuma guys will get all the cash and smaller, less established indies will get a very small slice as the portals use their games to loss lead and rack up the bargains.

Therefore to compete the overall quality of games has to go up. Where does this leave the indie? Well it gives licenses and larger non-independant studios a more interesting deal... not so hot for us.

[Anthony Flack]

This is the reality of the casual games business, you experience a lot of exposure very quickly and make a lot of sales in a relatively short amount of time, after a while the game falls into the catalog and generates a small trickle.


Still, one of the nice things about doing the online thing is that you can maintain your back catalogue indefinitely. It's not so cool if your distribution partners blitzed your game for a few months, made a ton of money (for both of you), but then decided it was worthless, and proceeded to give it away to anyone who'd take it.

I don't think we really need bargain bins online, since we don't ever have to clear out old unsold stock. I think it makes sense to extend their lifespans as a portal hit with a limited run "on special", if that works out. But after that, it would be nice to allow them to keep their dignity in old age, until such time as the developer finally declares them free.

[Robert Cummings]

Agreed.

The strengths of selling online is that there should be no "sell by date". With retail, there is no choice as there is only so much room on the shelves.

Online, there is a similar situation with the portals, and that is, they only have so much room where they can make commercial success. Currently Portals usually do their top 10 by revenue.

As people buy the game less over time (they own it or have checked it out) then obviously it will drop.

However, on your own site, your products have an infinite shelf-life :) So long as you don't put the date on it ;)

[Savant]

For instance.. suppose sprout releases feeding frenzy 2 and its a big hit. What's to stop a portal from saying.. hey! everyone wants feeding frenzy 2 so lets just sell it at 2$ a unit and advertise that everywhere to grab all the customers. That would pull the rug out from under their release. We have no protection whatsoever against that in the standard contracts the portals use that I can see.
I think, to a degree, that would be self regulating. Indies would hear about that and not submit their games to that portal in the future. They would, in effect, be slitting their own throats as the AAA indie developers all started steering clear of them. It isn't like there's only one portal in town.

[svero]

Sure it was an extreme example, but I don't think it's entirely crazy. I've seen similar examples all over the place in other businesses where companies opening new stores gave away or deeply discounted popular items to grab customers. I expect that all the portals realize getting regular visitors and securing a customer far outweighs the benefit of a single sale from one particular hit game. It barely hurts them to consider discounting. Obviously it's correct to say there is some self regulation, but going back to the sales they're having now, anyone who buys platypus off of fiesta *instead* of buying it off of retro64 or one of the other portals will end up brining the profit from that game down. To simply dismiss it as a b-title and say it doesn't really matter is kind of a strange attitude to me. The game IS selling many many copies still and now the average price point has been reduced. The discounter takes a small hit, but they've reduced what they lose by dragging the developer along with the discount whether or not the developer agrees.

[Robert Cummings]

You have to ask yourself if the demographic of the portals are going to be the same kind that visit retro.

I don't think so, and hence it is a profit for Mike regardless.

[James C. Smith]

It’s true that that they are unlikely to visit Retro, but they may be likely to visit Big Fish or Real where mike could make even more money.

I also don’t buy the B list argument. Half the games on their site are “on sale”. I think they are going to get “self regulated” out of business by the developers.

[James Gwertzman]

For instance.. suppose sprout releases feeding frenzy 2 and its a big hit. What's to stop a portal from saying.. hey! everyone wants feeding frenzy 2 so lets just sell it at 2$ a unit and advertise that everywhere to grab all the customers. That would pull the rug out from under their release. We have no protection whatsoever against that in the standard contracts the portals use that I can see.

Two things: 1) we would terminate our contract with the portal and pull the games, and 2) we would tell the portal that in the future they wouldn't get the games until 3 months after everyone else got the game.

I'd like to hear from Retro64 why he hasn't pulled Platypus from GameFiesta. My guess is that the sales have already fallen off enough on the other major portals that he's happy to see the sales. I know that when the original Feeding Frenzy saw its sales starting to trail off we agreed to a 2 week 50% off sale on RealArcade.

I know because some of my titles are 5 yrs old and still sell comperably to what they did in the first year. I know some of your business models prevent you from doing well with games after the first few months, but that's not true for all of us.

It's all relative. Feeding Frenzy continues to sell well, we're just not selling hundreds of copies a day anymore. I agree that the great thing about the online space is the very long shelf life.

[Mike Boeh]

I don't know how it's selling on Game Fiesta, as I haven't received a report yet, and probably wouldn't be able to disclose it anyway :( But I am not too happy about them discounting it, and I have considered asking George to pull it. I suppose they have no obligation to pull it, but I am sure they would if I asked- George has been fine to deal with. But right now, Gamefiesta isn't big enough for most people to see it, and they aren't buying adwords promoting the discount. However, if I did see it start to show up in adwords, then I would definitely ask them to remove it from their "sale".

I pretty much agree with svero's take on it, which is why I haven't posted in this thread- but comparing Retro64 and Sprout is kind of like apples and oranges. Retro64 is a developer/publisher, while it appears Sprout is focussed strictly on development, letting third parties do the marketing. So it's just a different perspective.

I guess I am more disturbed that this will become a trend, with the larger portals getting in on the act too- and we'll receive a smaller piece of the pie.

[James C. Smith]

...
3. Real Arcade has just announced 50% off of Rebound Lost worlds and is promoting the sale heavily.

Do you think this will continue?

One of the 3 examples that started this discussion was Real Arcade discounting Ricochet Lost Words. As I pointed out before, Real has always run temporary sales like this to boost the sales of a proven hit that has recently been underperforming.

I though it would be interesting to fallow up with the results of this sale. The sale has ended and the game now coasts $20 again. But while it was discounted it generated enough sales to prop it back up to #5 is the weekly top 10 sellers list. Now it is getting extra promotional value out of being in the top 10 list and it is selling at full price! This is an example of a very effective sale and a very good reason that you should allow distributors some price flexibility. It is very different that the web site that has half their game permanently “on sale.”

[James C. Smith]

I'd like to hear from Retro64 why he hasn't pulled Platypus from GameFiesta.

I don’t know any details about this specific case, but usually these types of contracts have terms that allow the distributor to keep the game for some period of time. You usually can’t just make them pull it any time you feel like it. But you can ask them to pull it and they may decide to honor your request. And of course you could have the game pulled if they violate the term of the contract or the contract expires.

[Mike Boeh]

I just sent the disable notice to DePrice.com. If you type "retro64" in google, they have an adword that says "10% off all retro64 games"...

Nice

[Jack Norton]

Cool :mad:
Well since I use Plimus my affiliates can't play with prices, so I don't have to waste my time looking for them and sending disable notices... :cool:

[Mike Boeh]

Cool :mad:
Well since I use Plimus my affiliates can't play with prices, so I don't have to waste my time looking for them and sending disable notices... :cool:

Yes, all three of your plimus affiliates won't be able to play with prices.

(Yeah regnow affiliates are a drag, but there are too many of them to ignore.)

[Jack Norton]

Watch out for 100 refunded asian orders! :D

joking... just trolling ;)

[Mike Boeh]

Yup, myself and Jack Norton officially trolled, so I am going to lock it now :)