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Priced to Die

January 20, 2012 /

“Why We Should Fear Ourselves More Than Pirates”

So now that I’m seeing reports of SOPA and PIPA having been defeated by overwhelming negative opinion many are breathing sighs of relief. And others are cursing violently (but generally silently).

Among game developers and writers, my two primary areas of interaction, opinions are mixed.

Many are worried about piracy eating into their revenues. For freelance writers and indie game developers it does not take a lot of piracy to put a stranglehold on their revenue stream.

Still I think there’s a larger concern than pirates for content creators.

Why We Should Fear The $0.99 App and Novel

One interesting thing I’ve noticed since promoting my writing on various forums is the almost insatiable demand for novels that readers seem to have. While at first this is incredibly encouraging I quickly realized that for many this demand was paired with the reader’s demanding incredibly low prices, or even free work.

I’m not talking about people who think eBooks should be cheaper than print books. I’m in that camp. The prices on some titles are ridiculous. I’m talking about what appears to be a large number of vocal consumers who will not spend more than $0.99 for a novel or game.

Indie writers and developers have been praising the App store or Kindle self publishing because these tools have given them more exposure than they could have gotten a few years ago. This is a good thing in my opinion.

What’s not good is that to get consumer attention there seems to be a mad rush to have low prices and often free content. In the short term this seems to benefit authors, game developers, readers and game players.

But it will not last.

Why Not?

I am asked occasionally why I do not start up my own indie game development firm. I have over ten years of experience on AAA titles as well as experience on smaller projects. I have art, design, sound and programming contacts.

But it is incredibly unlikely that I would ever start an indie firm up because I doubt, unless we lucked out and created a blockbuster, that it would ever be profitable. And that’s gambling; I don’t gamble.

For every major and moderate success with the Apple’s App store I suspect there are thousand of complete failures. And not all of these failures are crap titles, they are high quality goods that are not being noticed and cannot be noticed unless priced too low to be profitable.

To be blunt I doubt I would be able to pay my employees the money they would deserve.

Likewise I’m skeptical how many self publishing successes we are going to see in the realm of self publishing.

What’s Gonna Happen?

App developers and those self publishing for low prices are creating an expectation in the consumer that these prices reflect the effort put into creating the content. As the years pass this expectation will become even more pronounced.

For both books and games I suspect we will start seeing more copying and less originality. Both authors and game developers, in an attempt to be profitable at such low price points, will try to minimize risk. To do this they will copy tried and trued gameplay and narrative and flavor it just enough that it is not a blatant rip off.

If I were creating a title entirely on my own and with no expectation of making money I might risk being original. If I had a team depending on success to feed their families I’d copy an existing design and try to improve on it.

Of course nobody knows what will really happen but I think content creators of the future are going to have to find other ways to subsidize their product. This might mean advertising or blogging revenue or something more creative.

I’m considering carving my next novel in the walls of a cave and charging people admission to come and read it.

Former lead designer at BioWare (Dragon Age: Origins, Neverwinter Nights). Creator of Raiders of the Serpent Sea.

57 Comments

  • MySmartPuppy

    January 20, 2012 at 4:01 pm

    “I’m considering carving my next novel in the walls of a cave and charging people admission to come and read it.” – Love that (and not a bad idea…)

  • Emmanuel Gonot

    January 20, 2012 at 4:13 pm

    I agree with this but short of Amazon or Apple setting a minimum fair price for these products, content providers will just need to be creative in getting their product front and center to make a profit.

  • Dana J Lange

    January 20, 2012 at 4:14 pm

    I think you are correct as there has been pricing pressure for many years with content including news and music.  Now the pressure is coming over to e-books and apps.  People will still pay a premium for some of these things, but only a few items will get that type of attention.   The model will need to change for profitability.  I’m not sure what that looks like at this point in time.

  • Eleisia Whitney

    January 20, 2012 at 4:18 pm

    Give me your best for little or nothing appears to be the current mentality. People are looking for low cost and free products in all businesses, not just ebooks and games. I understand why a writer or creater would be hesitant about spending money to develop a quality product. It is a gamble but so are most creative ventures.

  • Candace Mountain

    January 20, 2012 at 4:21 pm

    The trend towards giving away free ebooks or charging 99 cents is saturating the market with a lot of poorly written books with plots that may have been stolen from the back of cereal boxes.  Eventually, I believe, the reader will demand better and the poorly written trash will stop selling and talented authors will once again get paid.

  • Brent Knowles

    January 20, 2012 at 4:32 pm

    Oh definitely. I just think long term both creators and consumers are going to be disappointed with what they get. People will stop creating content if they can’t make money from it.

  • Nick

    January 20, 2012 at 4:53 pm

    0.99c should always be a strategy. However, you should choose a different strategy after you build your reputation and follower community. It may include offer a bundled product.

  • Brilliance On Demand

    January 20, 2012 at 4:59 pm

    I hope it’s all right if I interject another possible viewpoint here.  I know nothing about the game industry or the app industry, so this is solely from a writer’s and reader’s perspective.

    When the eBook market exploded, self publishing became insanely easy. Too easy, in some people’s viewpoints. A lot of the ebooks out there are …  awful.

    Now, I don’t particularly like it when some authors won’t price their Kindle edition more than a dollar below hardcover – that is irritating – but even then I’ll pay the price for the convenience of digital format (and ok, sure, the instant gratification of “buy with one click” that means I don’t have to drive an hour to the nearest bookstore!). I really don’t think the latest Stephen King should be 99 cents, though!

    For the genre I like to read, however (horror/scifi/apocalyptic fic/very specific types of fantasy), I won’t pay much more then a buck or two if the author is brand new and there aren’t many reviews. A lot of the little indie authors have realized that, and will put out their first book at 99 cents, then bump the price on the rest of the series.

    I’ve found many good new authors this way and paid $9.99- $14.99 for subsequent books in their series, so maybe they only got a dollar out of me for their first, but I ended up spending $20-$60 or even more on them by the time they were done. As for the poorly written dreck – well, put out shoddy product, no-one’s going to buy it whether it’s 99 cents or $99.

    I guess what I’m trying to say is that the publishing industry will never be the same, but that’s not necessarily  a bad thing. Who knows how many great books have ended up in the slush pile? Indie authors have suddenly gotten access to a whole new way to get their product in front of a market – and it lives or dies on its own worth and the ability of the author to promote, taking some of the power out of the huge houses.

    Does that mean I, as an end user, have to be more discerning? Yep. but that’s not always a bad thing either, and I’ve read some truly awful and poorly edited material put out by those same huge houses. I don’t know if this translates as well to apps and gaming…

    Just a slightly different take.

  • Brent Knowles

    January 20, 2012 at 5:02 pm

    I guess I wonder how many would-be developers don’t bother to take that risk though. Do we have data on how many moderate successes (i.e., NOT Angry Birds) there? Are companies making money and paying reasonable wages?
    Or are they all just gambling that they will build a reputation and follower community?

  • Brent Knowles

    January 20, 2012 at 5:05 pm

    Thanks for the great reply. 

    For the record I’m not against indie publishing. I’m just concerned that too low of prices (on games or eBooks) will discourage quality content creators from even bothering writing a book or making a game.

    That said, if most readers out there are buy the way you do (using the low price as encouragement to try new writers) and then being willing to pay higher prices later, than I’m more excited than worried about the future of both industries.

    Thanks again.

  • johnrodr

    January 20, 2012 at 5:23 pm

    What can also happen is that, as demand increases for a particular brand, the price goes up. This brings in other dynamics such as promotion which will likely find new ways to get to likely users.

  • Anonymous

    January 20, 2012 at 5:50 pm

    I think it’s similar to the photography market… I can’t be afraid that Sears and Wal-Mart charge $9.99 for a portrait session with a boatload of products included while I am asking my clients for $200 for the session and a whole lot more for the products after that. I have a different target market and I build my brand around that market. 

    I fully believe that a writer can do the same… If you have a great product then you can build a strong brand, cultivate a great audience, and the sales will come.

  • Jason Flaugh

    January 20, 2012 at 5:53 pm

    Perceived value is interesting. For example, when I talk with people, I state my hourly rate and because it is higher than what they typically are used to, they assume my services are of higher quality. Perceived value is one of the reasons why you have speakers that are called thought leaders and pay ridiculous amounts of money, even though all they do is say the same old stuff.

  • Brent Knowles

    January 20, 2012 at 5:58 pm

    You are probably right about that; needing to identify your target market and going after them.
    Unless the way that the App store or Amazon displays work changes though so much of the exposure of a product is driven by its current sales/downloads which is often heavily influenced by its pricing.
    But I guess that’s where building the  audience outside of the core exposure system is essential… to build up enough traction that you eventually start moving up the sales charts.
    Thanks for the perspective!
    – Brent

  • Laurie Tom

    January 20, 2012 at 6:03 pm

    I think we’re already seeing the pressure to copy in the app market.  I’m not knee deep in it like some people, but I know games come out that are referred to as knock-offs of this or that and they all sell for 99 cents.  I’d hate to be in that business.

    For stories I’m hoping it creates a lot of slush and a sort of “you get what you pay for” mentality.  Unless it’s on sale, a good book should be worth something.

  • Anonymous

    January 20, 2012 at 8:33 pm

    I’ve read a few articles around the Internet about this same thing.  The gist is usually that most ebooks are sold at $27 because they won’t sell at $7 (or whatever the prices are).  People think that the cheaper price means lower quality.  “If people are not willing to pay more money for the ebook, the information must not be worth paying anything for.”

    The same for the $3,000 training courses and seminars.  You are getting the same information that you can find for free/ cheap if you are patient, but the person is perceived as an expert so they can command much, much higher prices.  And people are happy to pay it.

  • Ted Chen

    January 21, 2012 at 7:22 am

    Brent, I don’t think it’s going to kill innovation.  Much like all other industries, once it matures enough it splits into two markets, one is the eyeball (volume) and the other is the niche readership (sustainability). 

    Shops took this route a long time ago with small family owned shops being supplanted by the mega department store.  Supply chain pricing forced many manufacturers to choose whether they wanted to optimize for large volumes, or to pass and concentrate on premium fine crafted products.  Innovation in the former moved towards process optimizations, while the later group innovated in product.  Following the demise of the small generalist shops, niche shops finally sprung up to sell the more expensive products.  They’re generally vertically owned by the producers or in partership with other producers.

    I think you’re right in that for the eyeball market, it’s going to devolve into more copying and other ‘innovations’ in low-cost content generation.  Large blog sites for instance have backend systems to scan and surface news content automatically to reblog news ever faster and cheaper.

    On the other end, I’ve already started to see some publishers pull back and into their own walled gardens away from retailers like Amazon.  Subscription prices there have edged back up towards the same profit margin needed to continue operations.  Growth is more muted there, since there’s only ever a finite number of people willing to pay for timely content before it gets copied and commoditized.  Product and brand innovation is needed to keep people from migrating to a competitors’ garden or more importantly from migrating back to the eyeball market.

    The trick is to make your product in such a way that it is impossible to make without the high-cost overhead that the other producers in the volume segment don’t have access to.  

    How does one do that for stories? 

  • Brent Knowles

    January 21, 2012 at 7:43 am

    Very interesting Ted. As long as there are multiple marketplaces for consumers to choose from you are correct in that long-term things will balance out. For gaming, with several different marketplaces already in existence, there is greater possibility of profit over time. So, probably not as gloom-and-doom as I hinted at in my blog.

    For stories there are fewer distribution outlets. With book store closures and downsizing at major publishers, Amazon is gobbling up market share. They recently released a program (Kindle Select) which further encourages authors to publish only through them. Which has the potential to kill some of the other distributors (due to a lack of authors). There are a few online competitors but none has an audience close to the size of Amazon (I sell about 10x more on Amazon than all other distribution channels combined).

    The solution probably is for the writer to become promoters as well, at least to the point where they build an audience of a particular size, after which one hopes the quality of their writing would encourage that audience to become promoter-evangelists for the author.

    Thanks again for the interesting comment!

    – Brent

  • Laura Sykes

    January 21, 2012 at 10:43 am

    At 99c a game or a novel, in the long run people are not going to be able to live on the proceeds. If it was a true economic problem, the law of supply and demand would bring the price back up and the creatives would return. But humans are more complicated that economic law would have you believe. I don’t know what the long term result is going to be but, like you, I fear that it will not be good.

  • Ted Chen

    January 21, 2012 at 12:50 pm

    Your post prompted me to see what literature there was regarding distortions to the traditional supply-demand curve.  It seems that what we’re seeing more or less is still something already documented. 

    In the case of 99c games or novels, you could draw the analogy to persistent international dumping practices.  Whether the actual author is in another country is actually irrelevant here; what is important is that they operate with severely different cost structures than the norm.  Sometimes they might even be your neighbors, subsidized by no-penalty government funding loans.  Taking what Brent suggested further, let’s call them the Nation of Gamblers ;)

    If this analogy holds true, the future looks bleak.  On the whole, the supply-demand curve still holds.  Prices remain depressed as long as the Nation of Gamblers continues to have a low cost of production.  It doesn’t help that they are a perpetually starving nation with a high mortality rate, but high birth rate to compensate.  To protect the Republic of Non-Gamblers, there are only two options.

    a) Enact regulation that increases the cost to consumer for the goods from the NoG.  In our scenario, author guilds are probably the closest form of this.

    b) Nationalize the demand.  This comes in the form of Buy America laws and other promotions to entice the consumer to emphasize with the producer’s plight.

    Naturally, the NoG will experience a cost of living increase as money flows in.  However, unlike the physical world, the NoGs that strike it rich emigrate to Switzerland and take the money with them, leaving the rest of the NoG in their continued decrepit state.  Oh wait, they do that in real life too.

  • Ted Chen

    January 21, 2012 at 12:57 pm

    I’m curious, is there anything similar to ShowMeTheGames in the stories arena?  Almost like an author-to-author seal of approval – with enticement to buy directly from the producer at a reasonable cost.

  • Brent Knowles

    January 21, 2012 at 1:16 pm

    Wow, interesting Ted. I think you are completely right here. And Nation of Gamblers has a nice ring and is probably a fitting label. I’m going to go off and do some thinking on this and maybe a bit of research. Has certainly sparked some discussion!
    Thanks,
     Brent

  • Brent Knowles

    January 21, 2012 at 1:18 pm

    Not that I’m aware of though I’ll do some digging.
    I think that the closest we might have is Smashwords, which while still a distributor (not author-to-author) is a bit more open (no DRM, almost all file formats, et cetera) and has some potential. But they are really tiny compared to Amazon.
    *Maybe* a site like Goodreads, which is author-to-author and author-to-reader, might be comparable too though I find it hard to navigate.

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