When Your Pay What You Want Experiment Is Too Successful In Ways You Didn't Expect

from the challenges... dept

Wed, Oct 17th 2012 2:06pm — Mike Masnick

One of the interesting things to come out of the recent brainstorming session we had with artists and entrepreneurs had to do with the lack of really open discussions about experiments that fail. On the entrepreneur side, every so often you see someone write up a "post mortem" of a failed startup. But it's rare to see artists post a "what went wrong" discussion. This is completely understandable. Most people don't want to focus on what went wrong, and greatly prefer to focus on what went right. Admitting failure in any sense often has a stigma attached to it -- and while entrepreneurs can "walk away" from a failed startup, giving them some distance, for artists, a failed experiment in their artistic career (which is often "their life") isn't so easy to walk away from. And many of the artists in the discussion agreed that they could probably learn a lot from the failures of others, such as how to approach things differently and what not to do themselves. This is a topic I'm hoping to explore more in the future, as any reports of "what went wrong" really do seem worth looking into.

This one isn't completely a "what went wrong" story -- it's more of a "what went too right and we weren't prepared for it" story. The folks at Good Old Games, who we've written about a few times before, recently put up a pay what you want bundle for Larian Studios' Divinity anthology of games. The setup is very clearly influenced by Humble Bundle. You can pay what you want, and if you beat certain levels you can get more things. There's also a leaderboard, and hitting certain checkpoints opens up new content for everyone.

Sven Vincke, of Larian Studios, recently wrote a really interesting post about how the "pay what you want" results were quite different than they expected. Despite having the examples of Humble Bundle and others for what happens when you do this kind of thing, Vincke still expected that people would pay very little for the game -- but that they'd get wider distribution. And they planned accordingly -- with the various "unlockings" based on the number of supporters, rather than the amount raised. But things didn't work out that way.

When the PWYW was conceived, we thought that we’d have a lot of sales at the absolute minimum, which basically is 1 cent, and this assumption was actually never challenged. The idea of the PWYW campaign was to on the one hand celebrate 10 years of Divinity and offer Divinity virtually for free (1 cent really is low), thus increasing the installed base of Divinity fans, but on the other hand also to put the Developer’s Cut in the spotlight.

The Developer’s Cut (and Beyond Divinity) were made part of the campaign as a kind of bonus and to not completely ruin ourselves, we introduced the rule that to access the Developer’s Cut, you needed to be in the top 10% of customers. Whether or not that was a sound strategy is a different matter and open for debate, but that was the idea.

What happened however is that for some reason, people started looking at this like some sort of Kickstarter (this was the very first time something like this was done on GOG), and in the very first hours of the campaign, we saw the average pricing go to heights we never expected. Somebody even paid a 1000US$ for one of the games!!!

Yes, that seems like a reason to celebrate, but it also meant that the key plan -- to get the games more widely known and distributed -- wasn't working as intended, and the plan to unlock certain content at key supporter levels was looking unattainable. However, adjusting midstream might make people think that the whole thing was a flop -- when that wasn't the case at all. Clearly they were getting more support dollarwise than they expected, but the number of supporters was much lower. So they finally decided that the best way to handle this was just to be incredibly transparent about it, and explain why they were changing the levels to unlock stuff:

Because in reality, it is doing well – it’s just doing the opposite thing of what we expected. From a revenue point of view, we’re seeing the best results we’ve ever seen on GOG in such a short time span for our games. But that wasn’t the initial idea

So in the end we realized that there wasn’t a way of fixing this without admitting that we just predicted everything wrongly. And if we’d want to still offer those videos (and tech demo of LMK) as a reward for people keeping on participating in the PWYW campaign, then we’d have to lower the different tiers.

Which more or less is what we’re doing this evening. We’re going to lower the tiers to numbers that we think fit the current trend more or less, except for the last one, which we’re putting high on purpose. Well actually, I’m putting it high, because all the others in the team wanted to put it lower. But I decided to be stubborn

One of the things that I think is important to remember about all of these different business model experiments is that they are experiments. We still don't know what fully works, and lots of stuff goes wrong. Sometimes it's a complete failure, and sometimes (as in this case) it's just different than expected, so pieces of it don't work the way they planned. But, the main reason many of these programs work in any way is that there are fans who really like to support the content creator, and when the content creator opens up and explains the situation honestly, that only increases the loyalty and the connection. That's what likely happened here as well. While this one really is a success story, it's still great to see an examination of "what went wrong" in the midst of success -- and it would be awesome to see more of this kind of analysis.

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Filed Under: case studies, expectations, experiments, pay what you want
Companies: good old games, larian studios

34 Comments

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Anonymous Coward, 17 Oct 2012 @ 2:21pm

They advertised it as PWYW for the 'Divinity Anthology'.

In reality it was only PWYW for the 1st, beat certain levels for more. False advertising at its best.

The first game alone hardly qualifies as THE ANTHOLOGY.

They are a bunch of dirty liars, nothing more.
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monkyyy, 17 Oct 2012 @ 2:22pm

good for nothing pirates look how much money they waste on indie games that could be going towards call of dooty, and football game 2013 early spring edition
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gorehound (profile), 17 Oct 2012 @ 2:27pm

Being Nice can bring you Money
If you work hard to reach out to your fans and you offer them a way to pay what they want to for Content you will do good.There is no need for DRM, Copyright BS, and Overpricing.
Get the word out about your product.Put up a good website and even a blog/facebook/ETC.Have some folks there to make posts and answer fans.Give them a chance to pay what they can or want to.
Treat your Clients like Human Beings and reach out to them.
Good Service and Good Prices and Good Practice means I will want to see more of what you have to offer.So when you come out with your next LP or Film I would probably be there for you like your 1ST.
To bad MAFIAA as this is not you.Best thing for your Industry is for you to finally suffer the Extinction you deserve.You will never be like what I wrote of but a Local and/or Indie Art will be and that is the Future we should all want to see.
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Lord Binky, 17 Oct 2012 @ 2:45pm

Everyone realizes this makes business guys shit their pants when you start experimenting like this right? I think I read that in a text book somewhere.
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E. Zachary Knight (profile), 17 Oct 2012 @ 2:54pm

Re:
Yeah, I would say that the advertisements they sent out were a tad bit on the deceptive side. I went there under the impression that it was pay whatever I wanted for all three games.

When I got there, I learned that it was pay what I wanted for the first game and then I would get the rest if I met certain minimum prices paid.

It wasn't worth it for a few days until the minimum price for all three games was below what I was willing to pay day one. However, by that time, I lost any desire to buy it.
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out_of_the_blue, 17 Oct 2012 @ 3:02pm

Only counter needed is to quote the source:
"we thought that we�d have a lot of sales at the absolute minimum, which basically is 1 cent, and this assumption was actually never challenged."

"to not completely ruin ourselves..."

[Every time you use "brainstorming" I giggle. After these many years, you're still stuck on "Step 2". -- Like passing gas and mistaking it for a hurricane.]
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Jeremy, 17 Oct 2012 @ 3:07pm

Please use hyphens...
"when your pay-what-you-want experiment..."

You almost gave me an exploded brain.
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Anonymous Coward, 17 Oct 2012 @ 3:11pm

This idea Mike Masnick promotes about building rapport with a fan base as a kind of major replacement for classic access control is really starting to grow on me. It is a radical new vision. People already make money and/or get a lot of attention on the net in all kind of new ways - I'm speaking of ad-funded blogs and websites, as well as viral phenomena that can later be monetized, and even such oddities as selling each pixel of a 1000x1000 grid. Often it is simply strength of personality, charm and extraversion (in the case of 1-person projects) and the sheer energy to be "on" all the time that does it. The person has his blog and is asked to speak lots of places, or something, and he's set. Why shouldn't the classic creative, but copiable products like music, fiction, visual art, software, and so forth also essentially fall under this same money strategy?

Since the old kind of exclusivity is almost impossible. If it streams, you can build software to capture it, and to prevent that, you virtually need spies in every home (or every computer).

Will the time come when general-purpose computers will be considered too dangerous for ordinary people to use (could be used for lawbreaking) much like prescription drugs, cigarettes, cryptography, concealed weapons, face covering and so forth?
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Anonymous Coward, 17 Oct 2012 @ 3:14pm

Re: Only counter needed is to quote the source:
Only counter needed is to quote the entire sentences.
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John Fenderson (profile), 17 Oct 2012 @ 3:23pm

Not understanding human beings
Vincke said "When the PWYW was conceived, we thought that we�d have a lot of sales at the absolute minimum, which basically is 1 cent, and this assumption was actually never challenged."

This expectation is one I often see from our trollbase, too: that all anybody really wants is free stuff. It amazes me that people can hold onto this belief so tightly in the face the evidence counter to it that is literally all around them all the time.

This is a basic lack of understanding of how human beings work. Sure, people want free stuff. But they also want a lot of other things and very, very often, those two wants come into conflict. "Free stuff" doesn't always win.

People pay for things they can get for free all the time -- because paying for them gives them some other benefit than just the stuff. Those other benefits are very often much more compelling.
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Marcel de Jong (profile), 17 Oct 2012 @ 3:27pm

Re:
Do you WANT a nanny state?

btw, the idea of Connecting with fans, that Mike has been promoting is neither new nor a major replacement. It's just another way of selling your wares. And he has said that it wasn't new since the very beginning, and it has proved its worth many times over in the past god knows how many years.
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That One Guy (profile), 17 Oct 2012 @ 4:37pm

Re: Only counter needed is to quote the source:
Nice quote cherry picking, though you seem to have forgotten a somewhat relevant, related part of the original article. Here it is, just in case you missed it.

'What happened however is that for some reason, people started looking at this like some sort of Kickstarter (this was the very first time something like this was done on GOG), and in the very first hours of the campaign, we saw the average pricing go to heights we never expected. Somebody even paid a 1000US$ for one of the games!!!
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That Anonymous Coward (profile), 17 Oct 2012 @ 5:25pm

Re: Not understanding human beings
Yeah like that Ross Pruden guy, he expected people would give like a dime for stuff that was going to be public domain. And then the nerve of some asshole to show up and pledge $500 I mean what is this world coming to?!
How can we continue to keep thinking everyone else is a cheap evil bastard when these assholes prove them wrong time and time again?

...removes tongue from cheek... you would have noticed if not for the mask.
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G Thompson (profile), 17 Oct 2012 @ 6:59pm

Re: Only counter needed is to quote the source:
Like passing gas and mistaking it for a hurricane

Uhuh... I was going to just write that you make no freaken sense whatsoever then I thought nah.. let a quote say EXACTLY what myself and everyone else think about you and your weirdness

His head, like a smokejack, the funnel unswept, and the ideas whirling round and round about in it, all obfuscated and darkened over with fuliginous matter. - Sterne.
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Anonymous Coward, 17 Oct 2012 @ 7:13pm

Re: Re: Not understanding human beings
Some people will show up and spend $500 or $1000. They are the idiots, who's sense of scale and worth is completely out of kilter. They are the sort of people that Mike's business model of choice relies on to make work.

It's also misleading to a point when it comes to results. If you sell 10 units, 9 at 1 cent and 1 at $1000, it's easy to say "we made over $100 per sale". But statistically, you know that these outlier data points shouldn't be considered. The reality is that you sold the game for 1 cent average, and you have one odd sale for $1000. Basic stats tell you that the single big sale is exceptional and unlikely to repeat, so you really are selling for a penny.

"This expectation is one I often see from our trollbase, too: that all anybody really wants is free stuff. It amazes me that people can hold onto this belief so tightly in the face the evidence counter to it that is literally all around them all the time."

To me, whatever happens today (at the advent of this sort of business model) is the best results you will ever get. As more and more people come to understand that it really means "pay what you want" as opposed to "pay what is expected", they will shift to lower and lower price points, and perhaps just not bother to pay at all.

When you business model is predicated on a few people overpaying to support everyone else's free content desires, you are doomed to failure in the long run. It might work now, but it only takes 1 or 2 people to wake up and stop paying to pretty much kill the system.

Would it not be better to get $1 from each user instead of $100 from one, and nothing from the rest? The guy who paid $100 is going to feel like a right idiot when he realizes he was the only one that paid. Next time, he doesn't pay either, and you are left with little.

It's only a matter of time, it's human nature.
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Anonymous Coward, 17 Oct 2012 @ 7:45pm

Re: Re: Re: Not understanding human beings
That's a lot of made up numbers and baseless conjecture.

Meanwhile, the Humble Indie Bundle seems to be doing just fine 6 times in a row.
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Anonymous Coward, 17 Oct 2012 @ 8:33pm

Re: Re: Re: Re: Not understanding human beings
I honestly don't think the humble bundles are a good way for creators to make a liveable salary though, since most people would be more inclined to give more of the profits to the charities. Do you REALLY think the humble bundles would do as well if none of it went to charity?
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Anonymous Coward, 17 Oct 2012 @ 9:24pm

Re: Re: Re: Re: Not understanding human beings
Actually, the Humble Bundle has pluses and minuses to it as well.

The current one has reportedly turned $500,000 gross. But spread over each of the works evenly, that is only $50,000. Then there is the question of how much of those sales go to charity, and of course, how much the charitable angle plays into people's decision to pay.

It's not quite as straight forward as your one line dismissal would make it seem.
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SgtC, 17 Oct 2012 @ 9:31pm

Re: Re: Re: Not understanding human beings
You've implied that human nature is selfish without recognizing that cooperation can be a selfish action.

Human nature is exactly why a pay-what-you-want business model works. Altruism is part of human nature and this business model relies on reciprocal altruism.

Humans recognize when they are done a favor. Reciprocating a favor often leads the original party to reciprocate with an additional favor. When approached rationally, cooperation is the better long term investment for all parties.

In the case of pay-what-you-want, consumers recognize a company cannot provide additional products without financial reciprocation. If the consumer desires more products from the company, a reasonable payment will be reciprocated.
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Mike Masnick (profile), 17 Oct 2012 @ 10:59pm

Re: Re: Re: Re: Re: Not understanding human beings
The current one has reportedly turned $500,000 gross.

That was yesterday. Now it's up over $900k and there are still more than 5 days to go. It'll easily break a million and probably go noticeably beyond that.

You can say that's not a success, but you'd be laughed at.
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Anonymous Coward, 17 Oct 2012 @ 11:33pm

Re: Re: Re: Re: Re: Re: Not understanding human beings
"You can say that's not a success, but you'd be laughed at."

Are you so desperate to slam me that you ignore most of my post?

Let me refresh your apparently feeble memory: "the Humble Bundle has pluses and minuses to it as well".

The question about the charitable angle plays as well, wondering how people would feel if there wasn't the proverbial starving orphan at the end of their price selection?

Nobody is denying that the Humble Bundle people are selling well. The question remains bottom line results for each of the participants.

Now you can you please stop putting words in my mouth?
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PaulT (profile), 18 Oct 2012 @ 12:57am

Re: Re: Only counter needed is to quote the source:
You mean quote facts and reality rather than the fiction that supports their pre-assumed positions? How would they troll when they have to admit they're lying?
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PaulT (profile), 18 Oct 2012 @ 1:01am

Re: Re: Re: Re: Re: Not understanding human beings
Do you really think it would do as well for the developers if none did?
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PaulT (profile), 18 Oct 2012 @ 1:31am

Re: Re: Re: Re: Re: Re: Re: Not understanding human beings
"Are you so desperate to slam me that you ignore most of my post?"

Hmmm... that's your normal tactic, isn't it? If I have a penny for every time I've written 4 paragraphs only to have an out-of-context phrase attacked by an AC while he ignores everything else I said...

Anyway, your entire criticism was based on the assumption of a $500k gross for the current project. Not only is that so out of date as to be completely misleading, but the current bundle is eBooks, not games - making it a completely invalid comparison. Why not compare the videogame bundles that have already finished - and are typically more successful than this one (the last videogame bundle grossed just over $2 million).

If you'd look at previous bundles, you'd see stories from developers about how much BETTER they have done under the scheme than they were without it. Remember, the income here is not their only possible income stream and many appear here after their initial commercial run. These are often supplementary sales that they would not have made without the bundle (I can vouch that most of the games I've bought through the bundle I wouldn't have bought at full price individually, for example). Literally, this is bonus money they wouldn't have otherwise had for most developers here. But, that doesn't fit your narrative, of course.

"The question about the charitable angle plays as well, wondering how people would feel if there wasn't the proverbial starving orphan at the end of their price selection?"

I still can't understand why you think this matters. People are more willing to buy something if part of the proceeds go to charity? Why is this a bad thing? It's certainly part of the reason why indie developers have gotten more of my cash than Ubisoft did this year.

Please, if you have a breakdown of what each developer gets from the bundles and how that compares to what they were getting prior to the bundle's release I'm all ears. But, lay off the cherry picking and the blind assumptions, OK? Let's all have a real discussion for once.
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Andy, 18 Oct 2012 @ 2:34am

PWYW gone wrong
We experimented with Pay What You Want for both physical and digital versions of our album. On average, people paid more for the digital version than for CD and Vinyl!

We had to put a stop to it pretty quickly because a large majority of people were ordering the vinyl version for the 1 euro minimum and we were risking losing a lot of money. We won't be doing that one again!
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Niall (profile), 18 Oct 2012 @ 2:50am

Re: PWYW gone wrong
Obviously that becomes a question of pricing, including whether the physical and digital minimum prices are the same, and what they are. It might be possible to say that the minimum physical is, say, 5 euros, later dropping if enough physical/digital are bought to bring a run size drop in price. But you ought to be able to find a balance where the 'free-to-produce' digital pays for the cost of pressing the physical vinyl.
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Not an Electronic Rodent (profile), 18 Oct 2012 @ 3:20am

Re: PWYW gone wrong
On average, people paid more for the digital version than for CD and Vinyl!

You mean maybe a digital format is what people actually want and they're willing to pay more for it when they don't have to? Nah! That can't be right... they're all a bunch of freeloading pirates and should all be grateful to be allowed to pay whatever you thought it's worth for whatever format you thought was best.. surely?*
/sarcasm

* Disclaimer: this is not a pop at you Andy, just at the usual arguments that get trolled round here.
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Michael, 18 Oct 2012 @ 5:07am

Re: PWYW gone wrong
Making your minimum price cover your reproduction costs makes sense. You need to be charging more than 1 euro for the vinyl version.

If people do not want to pay a minimum that covers your reproduction costs, your product is not profitable and you need to re-think your product. In your case, selling it digital reduces your reproduction costs (to essentially zero) AND made it MORE valuable to your customers. A great business lesson learned for you and it only cost you a (hopefully small) run of CD and vinyl.

I hope you consider it a very successful experiment - because it told you a lot about your target audience and gave you a way to decrease cost and increase price. Now you need to make sure you maximize your customer base without incurring more expense than the additional profit (i.e. how big of a run of vinyl you can sell out while making a profit) and you will find yourself building a larger fan base while increasing profit.

Best of luck.
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Ninja (profile), 18 Oct 2012 @ 6:40am

Re: Re: Re: Re: Re: Not understanding human beings
Humble bundles are ONE of the ways.

And what if the charity component helped boost the sales? Problem?
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Ninja (profile), 18 Oct 2012 @ 7:07am

Re: Re: Re: Re: Re: Re: Re: Re: Not understanding human beings
But, but, they didn't make one gazillion dollars with the bundle so it's a failed business model! Can't you see this simple fact? And they had to *gasp* share with some filthy charity! That's not how truly evil and greedy human beings like our bosses do business!

/troll
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MahaliaShere (profile), 18 Oct 2012 @ 1:29pm

Re: Re: Re: Re: Re: Re: Re: Re: Re: Not understanding human beings
This, and the fact that people weren't forced to pay the exact same amount. These ACs and non-ACs seem to be very resentful of that.
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arahman81 (profile), 18 Oct 2012 @ 1:36pm

Re: Re: Re: Re: Re: Re: Not understanding human beings
Are you talking about the current eBook bundle? I don't really see it being as financially successful as the other ones, because, it's a ebook bundle. And you can't expect everyone that bought the game bundles to get the book bundle too. Actually, I would say that at $940k at the time of posting, it's already passed the "profitable" level.

...now that I see it, Xkcd Volume 0 is nice. But kinda failing to see the value in getting an electronic copy of an eBook. But then again, some of the strips are just too large for physical print books. And I don't know if it's the same for the book, but the title-texts have too small of a font in the demo.

(not saying I'm against for-sale copies of webcomics, just that physical prints hold much more value for them)
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That Anonymous Coward (profile), 18 Oct 2012 @ 7:50pm

Re: Re: Re: Not understanding human beings
Funny I didn't think I was an idiot when I put my money where my mouth was.

I get called a freetard pirate quite often by you and your gang of asshats, so how does that work in your I'm just a freetard thieving pirate model?
Oh right I just must be an idiot freetard.

No what we are seeing here is it is human nature to fear that people won't give you anything, because you expect them to be just like you... moneygrubbing asshats. The problem is you can't imagine even for a moment anyone has a life different than you. This makes you blind to the amazing changes happening in the world, because you can only frame them around your tiny exposure to reality.

Your the poster child for the ZOMG if we lower the price and give it to them when they want it then they will all steal it!!!! Ignoring the idea that the consumer, the person you want money from, should be respected if you want them to pay you. It is insulting to pretend that if they can buy it for 99 cents they will feel it is worth less.

Your fear of lower prices is just fear of a lower paycheck, ignoring economies of scale and actually making the content available when the people with money want it, rather than sticking to a chart from the dark ages that has been copied over and over by monks in the cloister because a xerox machine is evil and allows it to be copied easily and cheaply.

My sense of scale and worth is just fine thanks. I pledged $500 to Dimeword for many reasons... the best of which was to give myself the change to tell you to go fuck yourself. You assume you know all about me, and you've made it clear you understand nothing about me and how I view the world. I don't see if how you demand it see it, that makes you cranky and makes me smile.

I remain...
TAC
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hermes, 19 Nov 2012 @ 12:04am

Nice.
This is an interesting topic. Thanks for sharing.
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