Questions, thoughts on business models

[karlh]

I was at a GameStop recently with my son. I don't go there often. That was perhaps my second or third time there. Certainly the first where I had time to wander around. Now this is the place where 90% of revenue from gaming comes from. Not the retail outlet, but the genre. XBox's, Playstations. The developers commonly make a lot of money from products that sell for $60 a unit. Usage of pirated versions are a fraction of legitimate versions. Compare that to any PC product than can easily be distibuted online, certainly FS products. I imagine 8 of out every 10 hours flown in a PMDG aircraft is flown by a pirated copy.

Not news to anyone I'm sure. Who else out there has the similar distribution models that don't encounter this degree of lost revenue? Smart phone apps, that's who. I know pirated copies of every app exists out there. But I don't see anyone using them. I recall being dumbfounded last year at the money spent on CandyCrush by educated, busy adults. What does the smart phone app industry know that we don't?

I think it's supply and demand. I don't have access to any market stats, but if a PMDG product was available for $10 instead of $70, wouldn't sales increase by more than 7 fold? I've always wondered about the pricing structure of PC apps. I dismissed my thoughts years ago because I thought the core customers were businesses. That certainly not the case in our medium.

So tell me, am I out in left field here or in there some logic in my thoughts?

Thanks,
Karl

 

[hairyspin]

This has been discussed many times before and I think you're well out in left field. The sim market is not big enough for the price reduction to generate the increase in sales to compensate. Also, if PMDG products were 70 cents I'd still probably not buy any: systems-heavy airliners are not my interest.

Actually, modern airliners are not my interest at all...

 

[karlh]

Thanks hairyspin. I wasn't able to find any threads. If you could suggest some links or search phrases I'll look again. For the record I used PMDG as a proverbial widget. Airliners aren't my cup of tea either.

 

[737freak]

I think we need a unified & modern market place, similar to Steam, Origin, iTunes, Google Play, Spotify.
Sure, we have a more 'diehard group' within the community which follows every little development or new project, but the majority doesn't do this. Therefore, the potential market is a lot bigger...but individual developers (even with the help of shops) are unable to reach these groups.

People love to pay for convenience, hence the success of the mentioned examples...

 

[Heretic]

I think it's supply and demand. I don't have access to any market stats, but if a PMDG product was available for $10 instead of $70, wouldn't sales increase by more than 7 fold?

By that logic, downloads of freeware stuff would each be infinite and we would be better known than...whoever is the most well known person in any cultural circle on this planet.
Red carpets, free food and accomodation, you know the drill...true internet superhero stuff.

 

[hairyspin]

Thanks hairyspin. I wasn't able to find any threads. If you could suggest some links or search phrases I'll look again. For the record I used PMDG as a proverbial widget. Airliners aren't my cup of tea either.

Okay, here's a recent example:-

http://www.sim-outhouse.com/sohforums/showthread.php?89260-I-wonder-if

 

[lionheart]

I thought this also. Planes sell in great numbers on 'sales', like a 50% off sale especially. I thought, I'll make a plane and sell it for $12.00, which is half of $25.00, so that should be the proper, magical price that will work.

I created a nice plane, (I felt it was really nice) and launched it at $12.00 and you know, no one would touch it, lol. Weirdest thing. Finally after several months on the market with super low sales, I raised the price up quite a bit. My summary on this is that your 'value' you place on a product line is the price. If you put a very low price on it, its value is very low. A plane that sells for $50 or $75.00 will be highly valued, (like a Ferrari or BMW 7 series or Tesla with full options).

It was kind of sad to find all this out, but you live and learn.

Its amazing how the phone 'app' business has taken off. For only $1 to $3.00 you can get a great program and they can actually make a million on a single app if it goes viral, world wide sales from one single outlet store. Amazing what is possible today.

I have also considered selling 'themes' of aircraft for a low price, little addon things. Carenado did this with one of their planes, adding a float plane variant to it, for a small fee. Buy the regular one and get the addon pack for the float version.


Bill

 

[mgh]

i think it's supply and demand. I don't have access to any market stats, but if a PMDG product was available for $10 instead of $70, wouldn't sales increase by more than 7 fold?

They could just as easily increase by less than 7 fold which would reduce the developer's earnings. I think that experienced and successful developers know their markets and price accordingly.

 

[n4gix]

Marketing 101: "It is far easier to reduce the sales price than it is to raise it."

 

[vololiberista]

I thought this also. Planes sell in great numbers on 'sales', like a 50% off sale especially. I thought, I'll make a plane and sell it for $12.00, which is half of $25.00, so that should be the proper, magical price that will work.

I created a nice plane, (I felt it was really nice) and launched it at $12.00 and you know, no one would touch it, lol. Weirdest thing. Finally after several months on the market with super low sales, I raised the price up quite a bit. My summary on this is that your 'value' you place on a product line is the price. If you put a very low price on it, its value is very low. A plane that sells for $50 or $75.00 will be highly valued, (like a Ferrari or BMW 7 series or Tesla with full options).

It was kind of sad to find all this out, but you live and learn.

Its amazing how the phone 'app' business has taken off. For only $1 to $3.00 you can get a great program and they can actually make a million on a single app if it goes viral, world wide sales from one single outlet store. Amazing what is possible today.

I have also considered selling 'themes' of aircraft for a low price, little addon things. Carenado did this with one of their planes, adding a float plane variant to it, for a small fee. Buy the regular one and get the addon pack for the float version.


Bill

The other side of the coin is though when like myself one takes on a project to make significant improvements to an existing model. If that model is freeware then no amount of work thereafter can be remunerated. The model in question was originally released with approximately 100 gauges/elements. Now there are close to one thousand plus full checklists that take 20-30 minutes to complete (in the case of pre-flight). Many hours spent on correcting sound issues etc etc. Even in its original state it was streets ahead of a payware equivalent so now how much is it worth? A good £50 minimum I would say. But because it started life as freeware it's a nice little earner not!

 

[Dutcheeseblend]

I created a nice plane, (I felt it was really nice) and launched it at $12.00 and you know, no one would touch it, lol. Weirdest thing. Finally after several months on the market with super low sales, I raised the price up quite a bit. My summary on this is that your 'value' you place on a product line is the price. If you put a very low price on it, its value is very low. A plane that sells for $50 or $75.00 will be highly valued, (like a Ferrari or BMW 7 series or Tesla with full options).

I guess the potential buyer will say: "Hmm, what's the cause that it's so cheap? It must be a cast-off, or an experiment." Value depends on price, indeed. One needs to be a developer, but a psychologist as well.

Its amazing how the phone 'app' business has taken off. For only $1 to $3.00 you can get a great program and they can actually make a million on a single app if it goes viral, world wide sales from one single outlet store. Amazing what is possible today.

Probably this is because people (especially the young) are not aware of these small amounts of money anymore. "$3.00 is only $3.00, right? Ah, I want that app for some hours of fun, so I'll buy it." But can anyone tell me what is 20 times a spend of $3.00? Right? That gives $60.00! The phone industry has some kind of power that it takes 'seriousness' (or say responsibility) out of life. Imagine, how people throw their VERY expensive smartphones around if they were pieces of paper. In my opinion, 'smartphones' are far too expensive toys. Another thing: money is more virtual nowadays, so you can't see the money disappearing in fact.

 

[mgh]

With respect, what you, I, or anyone else thinks individually is irrelevant. What matters is the market and that is what will determine the price paid.

 

[Heretic]

Okay, here's a recent example:-

http://www.sim-outhouse.com/sohforums/showthread.php?89260-I-wonder-if

Hah, I at first wanted to link to that one, too!

I have also considered selling 'themes' of aircraft for a low price, little addon things. Carenado did this with one of their planes, adding a float plane variant to it, for a small fee. Buy the regular one and get the addon pack for the float version.

You could try to offer "value" editions for a reduced price. Textures with half their original resolution, no custom sounds, no paintkit, only one or two repaints, only one model variation, no passenger models, etc... and of course a "deluxe" edition with additional model variations.

The other side of the coin is though when like myself one takes on a project to make significant improvements to an existing model. If that model is freeware then no amount of work thereafter can be remunerated. The model in question was originally released with approximately 100 gauges/elements. Now there are close to one thousand plus full checklists that take 20-30 minutes to complete (in the case of pre-flight). Many hours spent on correcting sound issues etc etc. Even in its original state it was streets ahead of a payware equivalent so now how much is it worth? A good £50 minimum I would say. But because it started life as freeware it's a nice little earner not!

I've spent a good hundred hours or more on improving a friggin' payware plane I've bought. Probably the dumbest thing one can do, considering that the model regularly costs 50€. :S

 

[lionheart]

That is another thing... Hours... Your time is valuable. You do not spend a year making a plane and go to sell it and not make any money on it. Another words, if you go into business to make money, like fixing AC units, and you make $5,000.00 USD in one year, you are so hurting.... You need to make $25K to 100K at least or your business model will not support you. When you go into a new business, you will lose money for a while till you begin to have contacts and business flow. Thats what its like with every business. When you have a fantastic, amazing, incredible product that the public LOVES, then you have a rare 'viral' success and you ride the wave and enjoy it. It rarely happens, sort of like the lottery. Lots of hard work and 'thinking' you are doing something really cool can sometimes be a total waste of time because you go to launch your 'amazing, fantastic, fail proof' plane only to have it be a total flop on the market and no one wants it. Happens often. The market is unknowing... (like the lottery).

 

[scruffyduck]

Well said Bill

 

[toprob]

I can relate to all that Bill says, especially the post above where he mentions the business model. There is so much more than you'd think when pricing a product, and so many mistakes you can make. I know, because I've made a lot of them...

I, too, have released a 'budget-priced' product to see if halving the price would work, but it really failed to sell at all until I put the price up to normal. People do value things a lot more if they pay a reasonable amount for them. The same goes for feedback -- I get a huge amount of positive, appreciative feedback for payware, and almost no feedback for freeware. I think that paying money for my scenery is thanks enough, so the feedback is a real unexpected bonus. But hardly anyone thanks me for giving them free stuff.

I don't believe at all that the 'value' of any flightsim product has a huge bearing on sales -- halving the price of a really popular product is not going to triple sales, it may not even double them, so you are losing money right there. In my experience it is more likely to increase early sales by 20-30%, but over its lifetime it won't make any real difference to the total quantity sold.

Web sales really rely on user feedback, so keeping a good reputation for support and quality is a lot more important that pricing. Sure, there are always going to be people who complain that things are too expensive, but I suspect that if you offered them something at a huge discount those people still won't buy anything.

Flightsim is a tiny little niche, not even a bump in the scheme of things, and some of us concentrate on a tiny little corner of this niche, in my case New Zealand scenery. I can't expect to make a fortune, but I do hope to be able to support myself into retirement some day...