Selling Add-Ons

Games, both single-player and multi-player, have recently been selling small Add-Ons much more often. The model is small, incremental payments -- like pinball or arcade games, really. Micro-payments were theorized to help the webcomics industry get started but that didn't happen. MMOs do periodic macro-payments. The costs of Add-Ons on both PC and console games is somewhere between these two, and I'd hazard that it's helped many otherwise marginal projects reap big rewards.

I remember one of the devs from Iron Realms talking about how a few (hundred?) of their big fans could spend a thousand bucks a year on their game, and those core players could pay a hefty percent of a project's development and maintenance cost. It's somewhat like the core fans that indie musicians, authors, and game developers look for: a few fans that are so dedicated, they not only spend much more than the average fan but they also help proselytize your products.

At the core of the idea is the notion of charging different amounts to different customers. At the other end of the spectrum from those core fans is the broke and or miserly fans that don't want to pay $15/mo. But they might pay $15/yr, especially if you can break it down into tiny payments that they can somehow squeeze out of whatever meager resources they have. Paying for some gold in Travian, for example, can be done with an SMS. If mommy is paying for your cell phone, you can just squeeze in one SMS a month and get your gaming fix. Save up a few bucks by stealing lunch money and maybe a friend will help get those dollars transferred to PayPal.

There's a bunch of great benefits to this approach. The guys that can afford to burn $50 a week on your game can do so -- you've got a business model that takes as much money from your rich customers as it can. Broke fans can build a community and a customer base, especially if the core game is free. Get them hooked, and then when they do come across some money they'll spend it on your game. In the middle are the players that are willing to spend $5 to $20 a month -- usually the majority of the audience for traditional business models. Except now you've given those guys an extra little incentive to spend even more. If they were happy spending $14/mo on WoW, they might have the resources to spend a lot more, and if you tell them they get 25% more production for just $1.20, they'll jump.

Small amounts of money are easy to spend. Gabe & Tycho mentioned this recently -- price something at a buck and it becomes much easier to try something.

The elephant in this room is, of course, iTunes. Consumers don't want to drop $15 on a dozen tracks, knowing they like one of them but hoping that the rest don't suck.

Or maybe it's just that the kids that used to scrimp and save to buy their media now, instead, just download it from some bit torrent. You can't convince a kid to mow a lawn to buy your CD if he is willing to click-click and download it for free. The only way to get him to spend money is to prevent him from getting it any other way.

This is probably the saving grace of games nowadays. PC games seem to be going downhill. Those that are still around are the few big, mainstream titles -- casual games like The Sims and games that require online play like WoW or Team Fortress 2. I remember players in the game rental market worrying about the state of the industry, and honestly I have no idea how they're doing now. I think the used games market has replaced it, but I guess I should just shut up about that and look for an educated opinion.

I haven't really mentioned console examples but that's not because I don't mean to include them here. I was just using PC examples. "DLC" for XBox 360 titles and (I guess) the other consoles is another strong market. $5 for a horse? No, but I'll pay $5 for an expansion pack, or $1 for some gamer tags.

I think selling Add-Ons like this is the way of the future. It's customization in a way-- instead of charging users $15 for a CD, you charge them $15 for a dozen tracks of their choice. Sophisticated consumers don't want you telling them how to have fun; they want options. Business realities mean the box itself is gonna cost $50, but the extras let you extend the game without having to sell that, too, in the initial box.