Wednesday, October 20, 2010

Should Games Sell For Donations? Or, Is Setting a Fixed Price For Losers?

So here is a question for Indie developers. Suppose you didn't have to charge a fixed price for your game? Suppose instead you could just have it sell for a donation. Customers give any amount of money, and they get the game. Should you do it?

Of course, any credit card transaction involves a fixed fee, so we'd allow you to set a minimum price, say a dollar, so that you aren't losing money giving people your game. Some people will complain that it's not a donation if you set a minimum price. But only a true jerk would expect you to lose money for the privilege of bringing them entertainment, so these people can be safely ignored.

This question has been asked a lot since the success of the Humble Indie Bundle. I have been repeatedly asked what I thought of that, so that's a good place to start.

What Was the Humble Indie Bundle?

Basically, it was a bundle of five successful and high quality Indie games. They were not new, but they weren't so old either. They were sold for a donation. You could have all five, with DRM, for Windows, Mac, and Linux, for whatever you wanted to pay. And, even better, you could designate a percentage of your donation (from 0% to All) to go to charity!

It succeeded beyond all reasonable expectations. It got huge amounts of attention, everyone involved made buckets of money, and a lot of statements were made about what the Humble Indie Bundle meant for the future of games distribution. In particular, since they all made so much money just asking for donations, shouldn't every developer consider this?

It was a brilliant idea. It got several deserving developers a lot of money, it got deserving charities a lot of money, it got a lot of people some really good games, and it was just generally fantastic overall. If I was asked to include one of my games for a future Bundle, I would jump at the chance.

But Let's Not Overstate the Case

We should probably not leap to extreme conclusions too quickly. Because of the novelty and general virtue of the offer, it got a HUGE amount of publicity. And then it made a ton of money, which got more publicity, and they extended the sale, which got more publicity, and so on.

Look. If you gave me extensive free coverage on Slashdot, Kotaku, The Escapist, and every other online news outlet, I could make a fortune selling quarters for a dollar each. (Hey, it works in real life.) This is something people forget when they look at sales on, say, Steam making a lot of money and then say, "OK. All games should be cheap, always." Sales do so well because they get a ton of attention. If it becomes a regular, everyday thing, it won't get the attention. Will accepting donations generate acceptable income if many developers do it? I don't know, but it won't get the same glowing success it got when it was new.

But the fact remains. The Humble Indie Bundle was a brilliant idea that got a ton of well-earned success. They made a ton of money asking for donations for their games.

Should you?

When It Might Work

Not long ago, I wrote about how there is a spectrum in how games should be priced. On one end are the casual, disposable, impulse-buy games. These should be very cheap, painfully cheap. At the other end are are hardcore, involved, long playing-time, niche games for a small audience. These need to earn as much money from each member of their small player pools as possible to avoid developer bankruptcy. These games need to carefully choose an actual price that brings in adequate earnings.

So suppose you're writing a cheap, impulse buy, casual game and you had the chance to make it donation-ware. Should you? Quite probably! You need to charge a small amount anyway to work as an impulse buy. And, if you ask for donations, some people will give you more money. Maybe they love Indie developers, or they feel the higher price is fair, or they just hate having money. Either way, it's freely given, so grab it while you can!

I have several games that I bought on XBox Live Indie Games that I got for a dollar each. I like them a lot, and they made good money for their makers. But if instead of charging a fixed dollar they asked for a minimum dollar donation? I would bet just about anything these games would be making a LOT more money. I don't think Microsoft is going to add a Donate button to the Indie Games channel soon, but they should. It's a great option for developers, and it would make more money for Microsoft too.

When It Probably Won't Work

When you have a niche product with a small customer base.

The average donation for the Humble Indie Bundle was $9.18, and you got SIX games out of that. I am planning to charge my small but dedicated fanbase $25 for my next game. If my donation size was similar to what they got, to make the same amount of money, asking for donations would have to increase my sales by 250%. That is a LOT. To get that, I would have to get a huge amount of publicity and gather a lot of sales from people who would otherwise have pirated it. However, if this became a common business tactic, the publicity wouldn't be there, because donation-ware wouldn't be new and exciting anymore.

And if it didn't improve sales that much? At nine bucks per copy, I would be out of business inside of a year.

But I said earlier that I would jump at being in another Humble Bundle in a second. That is because the Bundle would get that sort of publicity. There's strength in numbers. But a lone small developer? It's a dangerous, dangerous tactic.

Who knows? It might work. Part of me would love to try it. However, Spiderweb Software is how I make my living and buy food for my kids. Someone will experiment more with this in the future, but it can't be me. The personal consequences of failure are too big. So feel free to pillory me in the comments for how much I suck and am a coward, but I'm sure some of you will understand.

It's An Exciting Time

The last few years have made all developers rethink everything they know about development, distribution, and pricing. It's an amazing world, full of exciting new options. Why just considering whether I should ask for donations instead of charge a fixed price totally blows my mind.

And, finally, one more thought about PC/Mac development. Since it is so easy to pirate games on personal computers, people will only buy your game in they are virtuous and don't hate you. Since you are only actually selling products to Good People anyway, going to them with open hands and saying, "Pay me what this is worth to you." might eventually be the only business tactic that makes sense.


  1. I paid more than average for the Humble bundle. I bought them because I wanted more than half of the games in the bundle, but wasn't willing to pay full price for them. (I had played demos and enjoyed them.)

    If there was a bundle full of games I hadn't heard of I would be far less likely to buy them, or to pay very much. So, I would agree that it was a very special case.

  2. This comment has been removed by a blog administrator.

  3. May you live in interesting times, indeed. I'm not a developer, but I have worked in the IT field. I find these posts fascinating. I think that I might find them fascinating even if I were just a Spiderweb fan or gamer in general. Jeff, please keep musing on this topic.

    Apple just announced the app store will be coming early next year for Macs. This will essentially be an "iPad layer" within the OS. I can see some benefit to this concept. It simplifies installation, launching, updating and perhaps more. I do NOT think that the Mac version will have the same downward pressure on prices that the iDevice version does. Fears of closing the sandbox completely are a concern. What are your thoughts on this development?

    1. We spent a thousand of bugs as miscellaneous expenses daily. But when it comes to comes to donation, we just move our head to the opposite direction and think of what else can we do with the money that we are being asked to donate. This is a wrong perception. Just try it once, the feeling it gives, will carry you on the top of the world. So just ignore the ignorance and Donate Money at ccopac to get homes for the homeless.

  4. I think you are 100% correct - P.W.Y.C. donationware only works for a very high-visibility, mass-market product and a huge amount of buzz behind it. Due to the success of the indie bundle, copycat schemes are going to dilute the buzz until nobody cares: like a "sale" that never ends. The rest of us indie game developers will most likely be better served by selling premium content at premium prices. Certainly worth an experiment, but be sure to make it a very limited time only. Perhaps you could celebrate a milestone with a one-week-long pay what you want event to attract some new fans. I would love to hear how it goes as I too have been toying with the idea of letting users pay whatever they feel the game is worth.

  5. @Anthony: I seriously doubt they will close anything off completely, not as long as they ever want Word or Photoshop on the Mac. I think it's a great opportunity, and I plan to have games both for sale normally AND over their service.

    - Jeff Vogel

  6. I may be the only person in the world in favor of in-game advertising. There should be a lot more of it. The catch is, it should be for the game itself.

    Can't wait for the first time a game I downloaded for free asks me, when I go to quit, "I notice you played me for several hours. Did you have fun? If so, consider clicking here to donate for further development?" Why should I pay what I want for an unknown quantity? How can I pay what I think it's worth without knowing what I think it's worth?

    Minecraft could be making time and a half if the people who play it a huge amount occasionally remembered "Oh yeah, I paid just 10 euros for this."

  7. I agree that this is a fascinating topic. I personally tend to default to $20 for a donation, and would likely maintain that for PWYC games, possibly going higher if I had enjoyed previous games by the developer or something.

    Unfortunately, I am a rare case both in that I have money to do that with and that good games are worth a lot to me, they become more than "just games".

    Love your musings as always!

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  8. I think if any Steam type business plan would work for you it would be the type that some companies like Lucasarts seem to do. Take a bunch of games that have been out for a long time and are either out of print or hardly take anything in, package them up, and maybe throw in a more recent game that is underperforming, then give them a big discount off of their retail prices as a bundle. Then discount that bundle further as a short term promotion. Basically, a way of getting people who didn't get some of the games the first time around to consider buying many older games at the price of 1 or 2 new ones.

    Why it might work? You have many older games that most of your regular buyers own already, but also a lot of people who played the demos but never bought the game, you might convert some of them to paying customers. You might get others to buy as a chance to get games from a highly respected indie developer on the cheap. Plus some will be intrigued by your latest stuff and might pay full price for them.

    Why it might not work? Well, you don't have the easy advertising outlet that Steam does, so you might spend more getting enough publicity out there to make these potential customers even aware of this great bargain, then you'd make on sales of your niche product.

    Of course, there is also the sales model of making blog posts on controversial subjects in order to get them linked on Slashdot, and having some of them check out your actual games. ;->

  9. This comment has been removed by the author.

  10. How do you feel Minecraft fits into this theory?

  11. This comment has been removed by a blog administrator.

  12. You're blog is thought-provoking as always. I personally fear self-starting making my own games like I fear skydiving. I'm curious on your thoughts on the kickstart strategy.

    If you're unfamiliar, here's how it works. You throw up your idea: a video game, movie, book you'll write, public art, whatever. You throw a price-tag on it, a total donation goal. Along with that you post prizes for donation tiers. X gets you a game copy, 5 * X gets you a signed game...

    If the goal is met within time-line the money is transferred to your account (preunambly with overhead for transaction). If not, the money is refunded to prospective "donors".

    Your thoughts?

    For the record, I'm not really a fan of playing RPG's these days, but I enjoy your blog.

  13. Jeff,

    Does the math change for you if you were given a chance to make a much older game donationware?

    Say you had an opportunity to get in on a donationware bundle, but not The Bundle that got all the hype. But instead of wanting Avadon, they'd want, say, Avernum 2. You'd be in with five other indie games of equivalent age and stature, and you'd get a one-sixth share of the profits, subtracting web hosting fees, credit card fees, etc?

    The more I think about it, donationware is a lousy way to sell new games. But it might just be a great way to wring a few more bucks from old ones.

  14. These days budget gaming is easy. Also major titles end up on sale quickly. Just after reading this post, I picked Mass Effect 2 with just 9.95(€). In my case, it's hard for an indie developer to compete with a price and make a living.

    Thus, a promise to you Jeff. If I decide to buy one of your games (demo installed), it doesn't have to be ridiculously cheap. For me, your blog actually is the best kind of marketing.

  15. One of the hardest things to determine is what price you should charge without knowing what the demand curve looks like (e.g if I double my price what percentage of customers will I lose and will that be made up with the increased revenue per copy sold?). Donationware seems like one possible way to get that information and that could be used to inform setting future price points.

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  16. The math is a little off, you said $9.18 average for 6 games, but you didn't take that 6 games into consideration. So you would have needed to sell more like 250% X 6 = 1500% as many copies. People arent going to pay as much average for a single game.

  17. "You could have all five, with DRM, for Windows, Mac, and Linux, for whatever you wanted to pay."

    With DRM? I bought mine at least DRM-free. :)

  18. If you support Mac, it shouldn't be so hard to support Linux: there may not be a huge Linux market, but they make a lot of noise and, if asked to donate, tend to pay the most money. For the Humble indie bundle more money was made from Linux than from Mac, despite there being less people buying the game for Linux.

    It's interesting that you're able to feed a family with indie-games development. I'd assumed that one could just barely afford pizza every night, and had to get one's parents to bail one out. This is why I'm at university working on my plan B, not making indie games full time: if anyone's a coward it's me.

  19. " Since it is so easy to pirate games on personal computers, people will only buy your game in they are virtuous and don't hate you. Since you are only actually selling products to Good People anyway, going to them with open hands and saying, "Pay me what this is worth to you." might eventually be the only business tactic that makes sense. "

    To me this is key. I'm not about to pontificate my grand theory about what the answer to your question is, but I think this is important to think about. (Granted, I wouldn't call pirates "Bad People" - but I'm not also relying on selling games to put food on my table like you are...actually, maybe I would call them Bad People if they're pirating from indie developers...anyway...) But this is so important, this insight here. Don't really have any more thoughts now, but thanks for writing up this really interesting post.

  20. > "I may be the only person in the world in favor of in-game advertising. There should be a lot more of it. The catch is, it should be for the game itself."

    Seems like it would take a lot of advertising to make-up for a $10 or $50 sales-price of a game. I suppose you might get more players, though. Anyway, Microsoft is selling off their "Massive" division which specialized in in-game advertising. They discovered that in-game advertising wasn't nearly as profitable as they were hoping. Players tended to tune it out. According to news reports, Microsoft was trying to sell-off the division for around a million dollars. They bought it in 2006 for between $200 million and $400 million.

  21. > "Pay me what this is worth to you." might
    > eventually be the only business tactic that
    > makes sense.

    I agree. Well, almost. Actually, I'd like to pay for a game _after_ I played it (perhaps not finished 100%, but extensively) - that's what would make most sense to me.

    But how to do that in real life? Perhaps ask for the minimum payment (~1$) up front and for the donation later. Not sure if this would work, but if there is a time to try something like this, it's probably now.

  22. I would say honestly that the best place a game could be offered at a discount price would be on Steam. I don't think 'donationware' is a business model that is sustainable due to jerks out there.

    I for one spent 20 bucks on the game maker's webpage for a couple of the games that were included in the bundle. I had purchased two packs of games that included two games. One for myself and one for my sister. If it wasn't for a good advertisement article on a site I read daily I would never have bought it.

    Although I check steam daily or at least every weekend to find out if they are running a sale. Most times it isn't worth looking until a holiday but at those times you can buy a game for 'your price.' The heavy discounts for games on steam holidays is excellent and I wish every developer realized this.

    I can speak for my own habits. If a game is something I'm really excited about I will pre-order it. If I'm mediocre about it then I will read reviews about it after release and possibly follow it for a while before purchasing. Lastly I will skip a game and keep the thought in the back of my mind. Those are the games that I pickup on steam for minimal cost. Ask the developers if some profit is better than none and I'm sure you will have your answer. At least with steam they can control the variables somewhat.

  23. There's a similar problem over in the music industry, where the success of a couple of big name acts offering "pay what you want" deals has led a lot of people - usually self-justifying copyright infringers - to claim that is the 'right' way to distribute music, and that artists still make a living off it. But it only works for people at the extremes of the spectrum - those already popular enough to have enough people pay attention to the offer, and those who weren't going to earn more than a pittance through the traditional channels. The vast majority of artists - and indeed, game developers - will fall in the middle, where there is an audience for the product, many of whom will prefer to take it for free, and too few to create a viral effect and bring in masses of donations. You can end up losing more from letting your traditional customers pay less than you'll gain from getting a few new customers donating a few cents.

  24. If we build into our analysis the assumption that all customers are "good people" and will pay as much as the game is worth to them rather than as little as they can get away with, we can see by applying some basic principles of microeconomics that the donationware model becomes crushingly superior to the fixed price model.

    Anyone who would have paid the fixed price would have done so only because he felt the game was worth at least as much to him as the fixed price. Thus, under the donationware model, he will donate at least the fixed price and in some cases more. Any person who would have paid $25 for your game will, if he's a "good person," be willing to donate $25, and there are some people who would have paid $30, $35, or more who would have gotten away with paying $25 under the fixed price model but who under the donationware model will loosen their pursestrings.

    Furthermore, under the fixed price model, anyone who felt the game to be worth only $24 would not have bought it, and would thereby have been denied the pleasure of playing it while also denying the game creator $24 of revenue. Under the donationware model, the game creator captures revenue from all of the people who value the game less than the fixed price but more than zero. This is likely to be a substantial amount of revenue, and an amount that the game developer would otherwise have had no opportunity to garner.

    In essence, under the "good people" assumption, the donationware model in effect allows the game developer to practice perfect, comprehensive price discrimination across his entire demand schedule.

    Of course, the "good people" assumption is dubious, to say the least.

  25. You are absolutely right to carry on charging a reasonable price for your games. There's no way you can risk your families subsistence on donations for this kind of old school RPGs.

    But you know that. I just wanted to contradict your "pillory me in the comments for how much I suck and am a coward" and show that yes at least one person understands.

    I even bought Geneforge 3, but never finished it. Enjoyed my time with it though, even though it left me with no appetite for more Geneforge, and I am looking forward to seeing your next title.

  26. Donationware is one idea... another is this concept of "FairWare" envisioned by Hardcoded:

    Essentially, the software is "Free" as in it doesn't need a license, but ever time you launch it, a window pops up letting you know how many hors of development time remain unpaid. When you donate, you get a license that removes that removes that pop-up.

    Conceived as an alternative to Open-source, but laos viable as an alternative to Donationware - as you put it, developers need to make living, also.

  27. With games such as yours, I think in the long run, donations would be the better strategy.

    Your user base would expand, and it would highly increase the chance of future purchases with other games/bundles.

  28. I donated $80 for the bundle with 50% earmarked for the charities. I felt it was a great cause, a good way to show support for developers who produce games for Linux (my preferred operating system), a novel idea, and a way to try out a few titles I had heard about, but had not yet been sufficiently compelled to invest time & money into them.

    I had already purchased full-cost licenses for Lugaru & Aquaria previously, and knowing their quality and value did much to increase my perception of the other titles.

    One very interesting statistic was the average donation per platform. Windows was the lowest & Linux the highest. Frankly it doesn't surprise me at all because overpriced software (Windows, Office, Adobe products, etc.), a sheer abundance of big-title games, and the warez culture causes the Windows user-base to devalue software in general. I experienced this myself as a former Windows user and participant in the upgrade treadmill & warez scene until I grew tired of it all and switched completely to Linux.

    Any future Humble Bundle promotions are sure to receive my attention and participation.

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  32. I think someone has already mentioned it, but you wrote "with DRM" when it's actually WITHOUT DRM. Cheers!

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  35. Perhaps you could celebrate a milestone with a one-week-long pay what you want event to attract some new fans labatterie I would love to hear how it goes as I too have been toying with the idea of letting users pay whatever they feel the game is worth.

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