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The 0.99 Problem

12-12-2009, 12:57 AM
#1
Joined: Sep 2009
Location: UK / Toronto
Posts: 602
The 0.99 Problem

Article about the benefits on pricing your game higher than 0.99 on the app store:

http://www.gamasutra.com/blogs/AdamS...99_Problem.php
12-12-2009, 01:09 AM
#2
Quote:
Originally Posted by EssentialParadox View Post
Article about the benefits on pricing your game higher than 0.99 on the app store:

http://www.gamasutra.com/blogs/AdamS...99_Problem.php
scary...

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Minecraft

12-12-2009, 10:22 AM
#3
Joined: Sep 2009
Location: Georgia
Posts: 314
Good article and it makes some solid sense. I've always maintained that pricing an App at $.99 means you must make the Top 10 in order to be successful financially.

The one fault I see in the article is their bottom three pricing tiers example:

Quote:
50,000 copies x $0.99 = $49,999 - 30% = $35,000

50,000 copies x $1.99 = $99,500 - 30% = $70,000

50,000 copies x $2.99 = $149,500 - 30% = $105,000
The problem is that if you can sell 50k copies at $.99, you won't sell that many at $1.99. If you're lucky you can sell half as many and make the same amount of money:

25,000 copies x $1.99 = $49,750 - 30% = $34,825.

They did mention something about sales scaling down as price scales up in the text, but failed to demonstrate it in the example. Perhaps the example was only intended to demonstrate the various amounts of profit based on a fixed number of sales at each pricing tier, however, that isn't the real world.

Quorlan
12-12-2009, 01:17 PM
#4
Joined: Sep 2009
Location: UK / Toronto
Posts: 602
Quote:
Originally Posted by Quorlan View Post
Good article and it makes some solid sense. I've always maintained that pricing an App at $.99 means you must make the Top 10 in order to be successful financially.

The one fault I see in the article is their bottom three pricing tiers example:



The problem is that if you can sell 50k copies at $.99, you won't sell that many at $1.99. If you're lucky you can sell half as many and make the same amount of money:

25,000 copies x $1.99 = $49,750 - 30% = $34,825.

They did mention something about sales scaling down as price scales up in the text, but failed to demonstrate it in the example. Perhaps the example was only intended to demonstrate the various amounts of profit based on a fixed number of sales at each pricing tier, however, that isn't the real world.
I think their point was probably to show the income difference when you're targeting a specific amount of sales with your marketing. I personally don't believe that pricing between $0.99 - $2.99 will make much difference to the customer if effective marketing has already brought them to the game and they're interested in it.

Do you really think the difference in price between $0.99 and $1.99 will translate into halving the sales, and further halving it at $2.99? I'd personally be surprised if that's true.

Last edited by EssentialParadox; 12-12-2009 at 01:19 PM.
12-12-2009, 04:08 PM
#5
Joined: Sep 2009
Location: Georgia
Posts: 314
I don't think it would actually cut the sales in half necessarily. I do think that the $.99 app has a disproportionately higher chance of winding up in the Top 10 charts than a $1.99 or $2.99 app. And that in turn will affect final sales numbers and profits.

Personally I believe apps should be priced higher or risk the continued pollution of the App store with garbage apps. Or the app store charts should be a function of volume of sales AND price, that way apps that are priced higher have a more level chance of showing up in the top charts.

I guess that's what the top grossing chart is for, but when presented as Top Charts - Paid Apps vs. Top Charts - Top Grossing, I think the general user base sees the first as "the best games" and the latter as "the most expensive games". I could be wrong and I certainly don't have scientifically gathered evidence to back it up, it's just a gut feeling based on my own observations of people in the App store.

Anyway, I think $.99 Apps are a problem that create a "race to the bottom" price war that leaves many developers in a position where they have to choose between depth and quality in the their games or profitability. In that scenario, depth and quality will almost always loose, after all, we all need to eat.

Quorlan
12-13-2009, 01:57 AM
#6
Joined: Sep 2009
Location: UK / Toronto
Posts: 602
I agree on the image the "Top Grossing" charts currently have. I don't think any of the charts are reliable for finding quality right now.

I am starting to believe that customers are starting to begin becoming more sophisticated about their app purchases. The last year the App store has been treated as an all you can eat buffet, tasting everything because it was so cheap. But I am getting the impression that app buyers are looking for more substantial games, and they're willing to pay extra for that. Looking forward, I don't believe $0.99 will be a viable business model for developers. This should hopefully translate to the app store leveling out with a more substantial lower-end price-point. We'll always have the occasional $0.99 impulse buys that shoot to the top of the charts, though…
12-13-2009, 06:50 AM
#7
Joined: Sep 2009
Location: Georgia
Posts: 314
Quote:
Originally Posted by EssentialParadox View Post
I am starting to believe that customers are starting to begin becoming more sophisticated about their app purchases. The last year the App store has been treated as an all you can eat buffet, tasting everything because it was so cheap. But I am getting the impression that app buyers are looking for more substantial games, and they're willing to pay extra for that. Looking forward, I don't believe $0.99 will be a viable business model for developers. This should hopefully translate to the app store leveling out with a more substantial lower-end price-point. We'll always have the occasional $0.99 impulse buys that shoot to the top of the charts, though…
I think you're right about that. I know that I've talked to quite a few App store customers who all, like me, feel that the $.99 problem is holding the platform back and who are all searching for the better apps that may cost more but promise more depth, more gameplay, higher quality graphics, sound and programming, etc. I'd love to see the App store grow up this coming year and become a better source of quality titles.

Q

Quorlan
12-13-2009, 06:57 AM
#8
Quote:
Originally Posted by EssentialParadox View Post
Do you really think the difference in price between $0.99 and $1.99 will translate into halving the sales, and further halving it at $2.99? I'd personally be surprised if that's true.
Yes, unfortunately we've seen a linear relationship between the number of sales vs. the pricing of the app in our past experiences.
12-13-2009, 07:34 AM
#9
Joined: Sep 2009
Posts: 610
Quote:
Originally Posted by Quorlan View Post
I think you're right about that. I know that I've talked to quite a few App store customers who all, like me, feel that the $.99 problem is holding the platform back and who are all searching for the better apps that may cost more but promise more depth, more gameplay, higher quality graphics, sound and programming, etc. I'd love to see the App store grow up this coming year and become a better source of quality titles.

Q
The only way this will happen is if developers make a stance together and refuse to set the 99c price. There's no way on earth a quality game can be made for that price. Sure maybe 1 developer out of 100,000 developers may get lucky with a quality game at 99c but the rest will go bankrupt.
12-13-2009, 08:09 AM
#10
Joined: Mar 2009
Location: Oslo, Norway
Posts: 731
Quote:
Originally Posted by TrueAxis View Post
The only way this will happen is if developers make a stance together and refuse to set the 99c price.
A practice that would be 100% illegal in a lot of countries…