1) On a panel at the Casual Games Conference in July, you mentioned that iWin had done some price point testing. What were the top line findings from that testing?
Our belief is that the $19.95 price point as not been tested or challenge since the inception of the downloadable games business 4 years ago. Since then the content has improved drastically and iWin fundamentally believes that the consumer is willing to pay more for quality game content. IWin licensed the rights to Family Feud and this game was the perfect product to test the $20 price barrier b/c the game had a strong brand associated with it and we had the exclusive rights to the game. Our assumption prior to testing was that the $24.95 price would yield the highest revenue per completed download but the results were surprising. The $19.95 price converted at 1.3% generating $.26 per download, the $24.95 converted at 1.1% producing $.27 per download and the $29.95 convert at 1.1% yielding $.32 per download. Our conclusion was that if a person is willing to pay over $20 for a game then their price elasticity stretches to $29.95.
2) What was the methodology of the testing?
In addition to testing the price we also tested the free trial period. Our belief is that there is too much free content available in the marketplace b/t web and download games. There are sites that release a game a day, which translates into 30 hours of free game play a month, plus there is countless number of free web games available as well. The average casual game player spends about 15-20 hours a month playing games therefore they can fill their game time through free content. Casual games are very intuitive so a player doesn't need a free hour to demo a game before they make a purchase decision. Thus we tested a 30-min trial period at $19.95 and a 60 minute trial at $19.95 and the 30 min converted better, 1.3% versus .9%, respectively. Based on these results we then tested the three price points with the 30-minute trial. Much like the $20 price point, the 30 minute trial period has not been challenged since the inception of the downloadable business and iWin believes that 60 min trial is too generous.
3) How do you interpret those findings? Is there really such a direct correlation between price and the customer's perception of that product's value?
My interpretation of the findings is that if you have a unique game with high production value then people will pay more for a quality game experience. I don't necessarily think you have to have a branded game to garner the higher price point as others have released Mah Jong games at $29.99 and the game converted exceptionally well. The other advantage of the higher price point is that you get 2 marketing pushes from a distributor- once on initial launch and then when you reduce the price to $19.99.
I don't think there is a direct correlation b/t price and people's perception that the higher price game must be better. Majority of purchases are impulse buys so if the game is satisfying when the trial runs out they make a purchase decision based on the entertainment value and not on the perception that a game must be better b/c of the higher price. I believe the demo eliminates this perception due to the fact that an end user can actually test a game before making their purchasing decision.
4) How did this testing effect iWin's launch strategy for that title? Did you encounter any resistance from your distribution partners? Did the higher price work equally well across all channels?
We were encouraged by the fact that all of the distributors that don't sell a game through a subscription service were very willing to accept our testing data and release the game at the higher price point. Even at the higher price point the game set unit sales records at several sites. Conversely, sites that offer a discount to a subscriber or an "all you can eat" subscription service were not willing to exclude the game from their subscription service. Since the game has been so successful at $29.95 we have elected to release the game only to non-subscription services.
5) Do you think that price sensitivity changes if a title has a recognizable brand attached to it? If so, how?
See answer above. There is no doubt that a brand helps if the game is a good game but if the game play is weak no brand can salvage a poor game. A branded game will definitely drive more downloads and user awareness but since a player can demo the game they are going to make their decision based on the game value and not the brand. Whereas the opposite applies in the cell phone market b/c there is no trial period so everyone buys a game based on the brand. There is no doubt that the trial period keeps you honest.
6) What implications does all this have for the downloadable casual games market? Is the current pricing model too rigid? How can we allow for more pricing flexibility without opening the doors to a price war among the distributors?
Since all of the distributors have the same content as it relates to download games, it is my fear that they will try to distinguish themselves through pricing mechanisms thus triggering a price war. I believe we have proven that people are willing to pay more than $19.95 and that prices should be going north as the quality of the games improves and as brands are introduced into this market. This market is nascent and if people start applying pricing pressure before the market has had time to mature they will squash investment in this space, there will be less content developers, and less innovation as the margins will be diminished.
With that said, I believe the trial period and the price points are too rigid. A developer should be able to implement any trial period or no trial period that they deem necessary to protect their IP. I would even argue that the free web version of the downloadable game could be the "trial period" and the downloadable should not have a trial at all or maybe something short like 5 minutes.
Consumers do have different purchasing habits so we need to explore alternatives to the ownership model. I would like to see shorter trial periods and allow people more flexible payment terms such as renting a game for an additional 1 to 5 hours for $2.95 to 4.95 (the Blockbuster video model). Or a model that resembles the cell phone business like a subscription on a game by game basis- $4.95 for a 2 week subscription for an individual game rather than an all you can eat for $9.99 per month that gives you access to over 100 games.
7) Do you think that casual game purchasers are drawing comparisons to other types of products (such as the cost of a new DVD, or a trip to the movies) when deciding whether or not to buy at a particular price?
I wish our users did compare a casual game purchase to going to a movie b/c a movie cost $10 for a 2 hour experience ($5 per hour) whereas a good game can offer 30 hours of game play for $20 ($.67 per hour). Unfortunately for the casual online game market we initially gave away our content for free and tried to monetize on this activity through advertising and when that failed we turned to pay models but it has been a long, slow road of unraveling our initial teachings. I would equate the download offering to premium TV or to satellite radio. HBO provides quality, exclusive TV programming but only a fraction of the market pays for this service whereas majority of TV viewers still watch free TV. The same can be said for satellite radio that has a subscription basis of 2-3 million, which is a small population, compared to the hundreds of millions that listen to free radio. As long as the market continues to produce and promote free games then only a subset of the population will pay for premium gaming.
8) How did we end up at $19.95 in the first place?
That is the question everyone should be asking and challenging. I believe it is an arbitrary number that was established when Real starting wrapping the web versions of Collapse and Bejeweled and it has stuck. If you look at more sophisticated subscription or premium content services on the Internet, they have tested various price points over the years and have not made any assumptions. For example- Match.com was $19.95 per month and it is now $29.99. Turbine charges $12.95 per month for one game- Asheron's Call whereas our industry gives users access to hundreds of games for $9.95. It is a simple formula- build quality content and people will pay a premium. You don't have to discount or compete on price to attract buyers.
9) How do you think our understanding of pricing in the US translates to overseas markets?
Zylom, one of the leading developers and distributors in Europe, sells games at 24.95 Euro and they have a comparable conversion rate so yet again another example of the market willing to pay more than $20.
BIO: CJ Wolf
Mr. Wolf is a seasoned executive within the online game space dating back to 1998 when he founded GameVantage, a web development and marketing agency that focused on designing and promoting online gaming sites. In 1999, he created BigPrizes.com, an online game sweepstakes site that was sold to Vendare Media in 2001. In the summer of 2001, Mr. Wolf incepted Next Game, Inc. as a multi player skill based provider which evolved into iWin, Inc after the acquisition of iWin.com. iWin is currently 45 people focused on developing and publishing casual games for the mass market. Mr. Wolf is a CPA and holds a BS in Accounting from Georgetown University.
