Let’s talk about price.
No, let’s talk about price and perception. No, let’s talk about price and misperception. Let’s talk about price and arrogance. Let’s talk about the difference between cost and value. Let’s talk about it in real world terms.
I know a guy who has a business-oriented product, a training product. It sells for $4,500 per person. My acquaintance is convinced that this price is fair – cheap, even. Having seen the product, I actually agree.
The Price of Freedom
By Matthew Sakey
December 5, 2010
Originally published by the International Game Developers Association
But, he’s having difficulty selling it. And since he’s unable to sell it himself, he tries to get others to help him sell it. Of course, he doesn’t want to pay them anything… his product is worth $4,500 a person, but demanding that others advertise and sell for him is worth zero. Then, when these unwilling draftees, not getting paid, fail to throw the sum of their hearts, souls and resources into selling his product, he accuses them of lacking the integrity to give the sales their all. Or, rather, being unwilling to put their integrity on the line (for free) and sell his product (for $4,500 per person) in return for nothing. When they suggest that maybe he consider possibly paying people to sell his product, or even investing in a marketing budget, he gets offended and says the product sells itself, so selling it should essentially be a pro-bono endeavor.
His problem is that it’s very difficult to communicate the value of this product, and in the current economy, demanding not only $4,500 a head but that those heads, and the bodies to which they’re attached, spend a full week in the training, is really asking a lot. Especially when the best anyone’s come up with to advertise it is “you’ve really got to see it for yourself.”
Activision/Blizzard CEO Bobby Kotick famously said that if it were up to him, he’d raise game prices even higher. While it’s easy and fun to bash Kotick for this and other remarks, from a business perspective he’s on solid footing. Companies should charge what they can within the market’s ability to bear it.
Or should they? Call of Duty: Black Ops is a good, solid game that Treyarch has every right to be proud of. It’s nothing innovative, but it’s sturdy. And it’s part of a huge franchise. So if Kotick could have demanded $100 for Black Ops, shouldn’t he? Again, it depends on the market. But more importantly, with digital products, it depends on customers too.
Adobe, for example, has taken the “I’d raise prices higher” and run with it beyond all human comprehension. I, and the people I work with, use Adobe products heavily. And not just a few of them: to do our jobs most effectively, we each (six people) need the Adobe Creative Suite Master Collection ($2,600). To truly kick ass, we also need Adobe Director ($999), Adobe Captivate ($799), Adobe Authorware ($2,999), and Adobe ColdFusion ($7,499). I’ll let you add that up. Plus, Adobe’s gotten quite difficult with backwards compatibility… in that it’s pretty much nonexistent.
Quite simply, Adobe has priced itself into piracy. My company diligently licenses its products, and cost has kept us from CS4 and CS5 upgrades, despite the compatibility issues it has created. Other companies, not to mention individuals, are not so ethical. But Adobe is so blind, so stupid, so greedy, that some spreadsheet-pusher somewhere in the bowels of that company actually continues to jack prices release after release. Adobe products are among the most pirated software in the world, and you know what? The company has earned every single theft. Whatever line there is, across which the merchants become the thieves and the customers become the downtrodden, Adobe has crossed it.
I DO NOT advocate piracy. It is a crime. If you do it, not only do you suck, but you should be prosecuted. My point is not that you or anyone should pirate Adobe products, but that Adobe has created and is actively fueling its own piracy problem. I advocate throwing rocks and eggs at Adobe headquarters, but not stealing their software. Besides, I much prefer to see the company choke itself and die screaming, gorged into ruin on its own avarice. With the reasonably priced Vegas Video just as powerful as Premiere – and far easier to use – hopefully we’ll soon see the same with raster and vector art, e-Learning development apps, and so on.
Steam sales (God damn you Gabe Newell) have proven that low prices can draw stampedes of consumers. iTunes proved that consumers are happy to pay for, rather than steal, music, provided it’s realistically priced. So there’s Kotick wanting to raise prices higher and my acquaintance assuring me that $4,500 is appropriate for what he sells. Well, $4,500 may be a great price. And Kotick almost certainly could raise prices of certain franchises.
But what if Adobe announced that the next CS Master Collection was $500 for a full copy, $200 for an upgrade? And that the apps within it, bought individually, were a flat $50 each? From (usually) freebies like Bridge to monsters like After Effects, $50 each, no waiting. What do you think would happen? What if the next Call of Duty were $19.99? Would we see a drop in piracy?
Actually probably not. But there’s always been debate about whether pirates are potential customers at all. High prices encourage piracy from otherwise legitimate consumers; low prices probably won’t impact the ones who’d pirate anyway. But what we would see is a huge increase in sales. I’d bet that it’d be far more than enough to overcome the price delta. In fact I’ll bet it would be by far the highest-selling, highest-grossing Call of Duty ever. Steam sales strongly imply that would be the case, at least. A lot of people who wouldn’t otherwise bother to buy Call of Duty <Whatever> would probably grab it just because it’s cheap.
We’re in a weird place right now. The big publishers are doing okay, but the indies are stampeding buffalo of innovation, and they’re doing well on pay-what-you-want models. MMOs are increasingly switching to free to play while raking in huge profits. Given that licenses and the vagaries of data storage mean we don’t (or barely) own our software anyway, I suspect we’re headed for a revolution in the concept of what we pay to play.
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