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Businesses The Almighty Buck Games

Pay What You Want — a Sustainable Business Model? 133

Posted by Soulskill
from the blasphemy-and-heresy-and-ooo-cheap-shinies dept.
revealingheart writes "As 2010 comes to a close, it could be remembered as the year pay-what-you-want pricing reached the mainstream. Along with the two Humble Indie Bundles, YAWMA offer a game and music bundle, and Rock, Paper and Shotgun reports on the curiously named Bundle of Wrong, made to help fund a developer who contracted pneumonia. More examples include when Reddit briefly let their users donate an amount of their choosing for upgraded accounts when they were having financial difficulties; the Indie Music Cancer Drive launched Songs for the Cure for cancer research; and Mavaru launched an online store where users can buy albums for any amount. Can pay-what-you-want become a sustainable mainstream business model? Or is it destined to be a continued experiment for smaller groups?"
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Pay What You Want — a Sustainable Business Model?

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  • by devxo (1963088) on Friday December 24, 2010 @04:39PM (#34662130)
    Humble Bundle is a success because of the publicity it gets. It gives them lots of sales, but the same model doesn't work without the publicity and if there would not be nothing special about it, well they would get all the reporting from gaming websites and sites like slashdot. Remember that if user pays $5, it's less than $1 per game. The normal prices were at least $20.
    • by Peeteriz (821290)

      On the other hand, for virtual goods with near-zero marginal cost, if some user pays $5 for the bundle then it often is $5 more profit than with the normal prices.

      • by Anonymous Coward

        Exactly. Once your product is complete the costs are almost nil.

        Most game development costs quoted these days are hollywood accounting, marketing and a pissing contest.

        A million people paying $1 each beats 200,000 paying $5 because of the increased exposure you'd get.

        • by jthill (303417)

          At least several indie games are under continuous development. AI War and M&B Warband are two of my favorites anyway, and they're almost continuously upgraded. The (huge community of) modders on Warband actually complain about the pace. Diffidently. Fully aware of how good they have it. But they do at times, because it's hard to keep up. AI War changes even more dramatically -- since it's 2D sprite art they can move quicker on the game itself. And move quicker they do, there are huge additions

          • by h00manist (800926)

            So, no, don't take it for granted that indie developers have moved on or are just raking in the dough. The good ones got that way because their developers loved them, and many still do. So go halfies on a nice meal for them, ok? They're busting their butts for you.

            I got the Humble Bundle 2 at the regular price they posted. I just want the funding concept to work out.

      • by Anonymous Coward on Friday December 24, 2010 @06:06PM (#34662520)

        Sorry but you "zero cost" people are talking utter bullshit. Support, patches, maintaining a community, marketing, hosting, payment processing, running a real-life bureaucratic nightmare (i.e. a business), all that annoying shit you need to actually survive while you make the next game and so on don't grow on trees for free. How about you publish a game and run a business yourself, then come back and tell us how everything is free and runs by itself?

        Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that. It's only really viable if you get a huge volume to compensate the massive decrease in per-sale profit. For one of those games it's likely around several dozens of bundle sales to compensate one full-price sale (low average price divided by 5 games, minus donations and fees is hardly anything). Without the publicity to back it up, it wouldn't work.

        • Re: (Score:3, Insightful)

          Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that.

          I know I'm probably falling for a troll here, but can you prove that those who paid less for a game through a pay-what-you-wish thing are guaranteed to have paid full price if the cheaper option wasn't available?

          If you can prove this, I recommend you apply for a job on the RIAA's legal team. From what I read here on /., they could probably really use proof of this idea.

          And just to disprove your statement with one (admittedly, anecdotal) counterexample already: I know I've come across games before on Steam

          • by tnk1 (899206) on Friday December 24, 2010 @09:39PM (#34663596)

            Actually his point is valid, it all depends on the numbers. If you have a game that 100 people would have bought for say 20 dollars then you have 2000 dollars in sales. However, if you assume that "pay what you want" customers will average only 5 dollars, then those 100 people who would have paid 20 dollars then will only pay 5. That cuts your "guaranteed" sales to 500 dollars. So now, the people who weren't going to spend the money at all at 20 dollars need to make up the 1500+ dollars. That is another 300+ buyers. (I use the + in this case to point out that there is no point in this pricing method if you are just going to make as much money as you would have with a regular pricing model.)

            If you look at that, you are making a big presumption on just how many people out there would buy a game if it is simply cheaper, even if you might do so. In this case, 3/4 of your customers need to have been people who wouldn't have bought the game to begin with solely on the cost factor.

            That probably will work for some games, but honestly, given the fact that millions of people do shell out for expensive games, its more likely that your indie game didn't sell for other reasons such as: no publicity, significantly less polish, no franchise tie-ins, etc.

            Bear in mind that people, even hardcore gamers, have only a certain amount of time in a day to play your game. They will want to play the games that they have bought as much as possible to get their money's worth and if the game is really, really fun, they'll play it constantly because they like playing it. Eventually they will tire of your game and move to the next one, but if you consider that a 60 dollar game could net you hours and hours of play, as well as even some social advantages to playing a popular game, that 60 dollars is actually not that much of a price to pay for the amount of recreation provided.

            So yes, you may well be willing to buy a game if it is half price, but I think your experience is at best anecdotal, and at worst, you aren't considering the realities of your own spending and time availability accurately.

            Another issue with the model is where the expensive games come back to bite the indie games on the ass. Right now, many games out there which retail for 60 bucks, I could just pirate from the internet if I was too poor/cheap to pay for it. Now, while this actually *does not* cut into the sales of the big gaming companies, since the cheap gamer would have never shelled out the money to begin with, it *does* cut into the indie gaming developer's pockets. Why? Very simply because that gamer, who would usually be more likely to spend money on your less polished, but proportionately cheaper product, now gets high quality games for free. Its a lose-lose for indie game developers on that front. That means that there is a whole segment of the unpaying masses that have a limited amount of time and a ton of free, high quality content to fill it with. Is that segment small or large? Its hard to say, but it does need to be considered.

            In the end, I feel that the pay as you want model is very simply a gimmick to play to a certain segment of gamers. If a small number of companies tout their liberal pricing policies as evidence that they are "different" than everyone else, that's old school PR value, not a new and interesting way of doing business and that is not a put-down. Such a strategy can definitely work on that small scale. If the whole indie industry turns into that? Well, then it just it won't work. You will find that, as you might expect otherwise, the better indie games will win out, and that would have happened if the price was 20 dollars or 5 dollars.

            • by nabsltd (1313397)

              That probably will work for some games, but honestly, given the fact that millions of people do shell out for expensive games, its more likely that your indie game didn't sell for other reasons such as: no publicity, significantly less polish, no franchise tie-ins, etc.

              The key point you are missing is the "it's just $X" issue that causes $0.99 iPhone apps to sell millions of copies.

              Once the threshold is low enough, you get a vastly greater number of people willing to pay. Then, if your product is good, word of mouth will keep the sales up. If you have more than one good product, you might even start to get loyal customers who will buy simply because of your brand.

              Also, "pay what you want" allows people to treat the product as shareware...pay $5 for 5 games and then play

              • Hear hear. We're dealing with a new 'virtual distribution' market model here, but it seems that a) consumers are slow to adapt to it (namely in their 'value judgement' of the product they're buying) and b) it is facing a lot of opposition from the 'old market' heavyweights.

                It used to be that we were willing to shell out tons of $$$ for a product we thought was 'magic', but those years of ignorance are well behind us - no longer can we be duped by a multi-million dollar ad campaign; it's the product quality

                • Addendum: when it comes to 'fun' category, I could care less if an author/actor/musician becomes a billionaire because of his 'entertainment value' - all that matters is his/her worth to ~me~. Yet when you throw market-manipulating corporations into the question (film industry, publishing houses, RIAA), I begin to hesitate: do all those taking a share of my contribution ~deserve~ what they are getting?

                  • by Bigjeff5 (1143585)

                    Well, the musician will likely never become a billionaire thanks to people buying his CD, but the author and actor might.

                    Seriously, the music industry is fucked in the head, the vast majority of mainstream artists can't make a buck without touring 350 days a year.

                • by gr8dude (832945)

                  If you're on Windows, can you tell me if you'd buy this one? http://private-disk.net/ [private-disk.net]

                  Note: I'm one of the authors, if you could take some time to describe your thoughts about this, I'd be very grateful.

                  The reason I ask is because the "three step decision-making process" you describe does not seem to be universal. For example, I expect games to be fun, but I don't expect an IDE or a video player to be fun, I expect it to work. Can you elaborate on the fun part?

                  Point #3 is about making more profit, it is a re

            • by yariv (1107831)
              Even if the average price is 5 dollars, why would you assume this is the average price for those willing to buy for 20? I would guess their average would be significantly higher, in fact quite close to 20 dollars.
            • by Bigjeff5 (1143585) on Saturday December 25, 2010 @01:22PM (#34666240)

              You're failing basic supply and demand principles here.

              For computer games, supply is effectively infinite, so we can ignore that side of the equation, and we need only look at demand.

              The question is, is $20 the optimal price point?

              Taking your example, only 100 people will pay $20 for the game. At $30, say the number drops to 50. Sales just went from $2000 to $1500 by raising the price. However, if the $30 price point only has 10 fewer purchases, well now your sales went up to $2700. In this case, the $20 price point is clearly too low.

              On the other hand, if $20 is too high then things will go something like this: the price is dropped from $20 to $5, and 900 more people are willing to buy the game at the drastically reduced price. That's $5000 for selling 1000 copies at $5 vs $2000 for selling 100 copies. The $5 price point is the clear winner here. To continue, dropping the game to $1 may only increase sales by another 3000 copies, sounds like a lot, but that only gets you $4000 total - a loss from the $5 price point. On the other hand, dropping down to $1 may actually boost sales to 10,000 copies, a clear win.

              Each product has an ideal price point, where the demand for the unit and the price needed to match that demand produce the greatest possible profit.

              This is why stores have sales. Think for a moment about Black Friday - the most profitable shopping day of the year. It is called Black Friday because it is the day when most retail stores go from being "in the red" - i.e. no profit for the year - to being "in the black" - profitable. How can this be, when it is the day when retail items are at the lowest price they will be all year?

              The answer is demand. You will always increase demand for a product by reducing the price. For almost all products this also means an increase in profit. The question is not whether reducing the price will bring in more money, the question is at what point will reducing the price stop bringing in money. With retail sales there are hard limits - things cost a certain amount to make, so the price cannot be reduced below that and still make money (on that item - you can sell for a loss to boost sales of other items, for an overall profit gain - see Xbox 360 vs Wii for a good comparison of the two strategies). With digital sales the limit is simply a number that needs to be met (the cost to make the first copy), the hard limit (bandwidth & server costs) is so minimal as to be insignificant.

              This also illustrates the genius of retail sales. At retail, an item initially sells for its highest price. Once most of the people who are willing to pay the high price have purchased the item it goes on sale, bringing in a whole new set of customers who were not willing to buy at the higher price but are perfectly willing to buy at the new, lower price. Depending on the nature of the item, the new price could become the permanent price, or it could go back to the old price. Either way, once sales level off, there is another sale, and a whole new slew of customers come in to buy the product.

              This allows the retail stores to extract the full profit at each stage. For my example, it would combine the $30 profits, $20 profits, and $5 profits. You would end up with $1500 for the 50 who would buy at $30 or less, another $1000 for the remaining 50 who would buy at $20 or less ($2500 for the first 100 sales), and $4500 from the remaining 900 who would buy at $5 or less. Once the money train has dried up, you can then even drop to $1 to catch the remaining 3000 people, for another $3000. This brings the total profit to $10000, and eliminates the risk of dropping the price too low.

              As you can see, in my example the last two bumps were the most significant, but for other products that could easily happen at other price points. For example, a polarizing game with a core of fanatical fans but not many others who would be willing to purchase the game no matter the price. You might only get 100 people to buy,

              • Thank you for a comprehensive, readable explanation of the supply-and-demand model as it applies to digital (and other) sales. May this post be modded up to +5 Informative.

              • by johny42 (1087173)

                What makes you think the retail stores have any advantage over digital stores? Nothing stops game developers from following the same model -- as far as I'm concerned, developers of the Humble Bundle games did just that -- all of the games were sold for several months for their full prices before they went "on sale" in the Humble Bundle.

                The "pay as you want" could just be considered some kind of a "last tier" in the tiered system you described -- instead of selling products for some minimal price like $1, yo

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        • by hairyfeet (841228)

          I'm sorry but I think you're wrong, and here is why: We PC gamers enjoy one of the largest catalogs on the planet and thanks to Windows backwards compatibility I can play games from 20 years ago to games released yesterday. There is also a great wealth of places where one can get quality titles, even AAA titles, for quite cheap, such as the Good Old Games Xmas Sale [gog.com] where nearly 300 games are marked down, many half off. This not only makes for a truly staggering amount of choices, but it means that even guys

          • OT, but Speaking of GOG...

            Holy shit! I've never fired up Rise of the Triad on Christmas before.

            You've not truly enjoyed "God Rest Ye Merry Gentlemen" until you've done so in 16-bit pseudo-midi...

            • by hairyfeet (841228)

              Isn't GOG great? You can gift games to your friends, the prices are crazy cheap and even cheaper now that they are having their Xmas sale which IIRC lasts until the 27th, all the games work on BOTH x86 AND x64, and NO DRM AT ALL, no phoning home crap, no stupid ring 0 drivers that can break your OS, oh and for the Linux guys out there they even have a list of games that work on Linux [gog.com] so you can even give games to the FLOSSie in your life. You can redownload ANYTIME you wish, they have tons of extras like w

              • Speaking of Linux... If you buy the Humble Bundle, can you DL it for both Windows and Linux without buying too, or just one or the other?

                • by svzurich (524785)
                  Yes, you can. Humble Bundle includes all version of all the games listed, and many have soundtracks. You get the Mac, Linux, and Win versions of all the games without restrictions on downloading. Also they now give out keys to add your Bundles to Steam, Desura, and Onlive. It really is the sweetest deal. with GOG coming just behind them. For as little as a penny you can get a tremendous value of games for 3 different computers OSes and they go out of their way to make it convenient. Plus if you pay mo
        • by AusIV (950840)

          There is an important distinction between "cost", which you're talking about, and "marginal cost", which the GP is talking about. Marginal cost is the increased cost of producing one additional unit, and for digital goods marginal cost is very nearly zero. The only marginal costs you mention are support and payment processing, the rest are more or less fixed costs. The marginal costs for selling a digital good with minimal support are very, very low. Once the fixed costs are covered, selling an additional u

        • by Anonymous Coward

          Sorry but you "zero cost" people are talking utter bullshit. Support, patches, maintaining a community, marketing, hosting, payment processing, running a real-life bureaucratic nightmare (i.e. a business), all that annoying shit you need to actually survive while you make the next game and so on don't grow on trees for free. How about you publish a game and run a business yourself, then come back and tell us how everything is free and runs by itself?

          Also, the "better 5 than nothing" argument is heavily flawed. They definitely lost full-price sales to people who only paid a fraction of that. It's only really viable if you get a huge volume to compensate the massive decrease in per-sale profit. For one of those games it's likely around several dozens of bundle sales to compensate one full-price sale (low average price divided by 5 games, minus donations and fees is hardly anything). Without the publicity to back it up, it wouldn't work.

          Support and Patches?

          Don't release a buggy ass half finished product and those two considerations go away. If you mean content updates, we call those Expansions and pay more money for them, maybe you've heard of the latest one, Cataclysm?

          Maintaining a community can be as little as free. Warhammer had a completely fan maintained community until they got shutdown when the owners of the then neglected IP decided to try again. And even if it isn't, consider it an investment, mediocre games with good communities

        • by Ihmhi (1206036)

          Give a game away for free (or damn near), and charge for a service. See: EVE Online.

        • Nitpicking: he didn't say zero cost. He said "near zero marginal cost".
          Doesn't that mean the cost per additional sale is near zero
          Not denying the rest of your post

        • by Gabrosin (1688194)

          It's not that each copy has a near-zero cost, it's that producing each additional copy has a near-zero cost. All of the things you mentioned are important, but their costs don't scale significantly as more people acquire the game.

          I don't think "pay what you want", in most cases, will be sufficient to recoup the initial costs of a game's development. But I do believe that after a game has been out for several months, and initially excited buyers have already dropped their money on the game, moving to a pay

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        • I have a business, helped my wife open hers, and had others before. A business has a monthly ongoing cost, generally salaries and bills. A project has a one-time cost. A software project can be developed as a one-time project, then consume no more financing, just eventually some additional support. So eventually that becomes another project.

          The one-time cost for developing a small game project, say X dollars for developers for Y months, could find initial funding, which would be a calculated capital ri
    • by Monkeedude1212 (1560403) on Friday December 24, 2010 @04:46PM (#34662166) Journal

      I don't think it can function without the fixed price system working in sync.

      Sooner or later more people will get used to paying less than $60 for a game by using a digital download like the Humble Bundle and sales through Steam. I don't think I can ever justify paying even $40 for a game ever again, just in my experience. I've now come to think that full feature titles are only worth about $20 - and if they aren't on sale throughout the year, they will be eventually. When I can get any number of indie titles for 5 or under, that's even more reason.

      Eventually it'll reach a point where I think $20 is almost too much, and that $5 is average, and that a "Pay what you want - oh sweet, only $1" scheme might take over. Which won't be nearly as profitable.

      I need those higher up publishers ripping people off in order to keep my perception of a games worth in perspective.

      And then years down the road, pay what you want turns into basically freeware.

      • by hedwards (940851)
        Bad argument.

        That's just a variant of the slippery slope fallacy. At some point the price of a game will reach a point where it's considered to be a good deal. And that point is for most people way below $60. Sure if you're young or have few responsibilities paying that much and getting a really long game might be worthwhile, but for most people that's a lot of money to pay for a game that you're likely only going to play for at most a few dozen hours.

        Hollywood can sort of get away with that because i
      • by Kjella (173770)

        The business has plenty of this problem on its own, just recently there was a huge crash in the media over artists now selling their CDs direct to grocery stores for 99 NOK (about $16.50 including 25% VAT) instead of the normal full price of 150-200 NOK ($25-$33). Angry Birds set a whole new standard for what a $1 game for an iPhone can and should do, suddenly games have to really justify costing $2-3 on the phone. Several people I've talked to have now made dollar games their price point, they generally do

      • by sg_oneill (159032)

        One of my favorite resturants is run by a Hindu group (No , not the Hari Krishnas) , and has a "Eat as much as you want, then pay what you think its worth".

        Its a great system , with people paying anywhere between $5 to $50 , usually depending on their wealth.

        According to the people at the resturant, it means the rich dudes sort of subsidize the poor customers who can't afford to pay high prices, and everyone gets on fine. The resturant itself actually makes enough that it can afford a premium river-side loc

    • by click2005 (921437) *

      Big game publisher manipulation has set a perceived normal prices of at least $20.

      FTFY

      I do agree with what you said though. I paid $25 for HIB2. I played Osmos but the rest are of no interest to me. I paid that much mostly because I applaud what they're doing but I doubt I'd do it as often especially if there were hundreds of these packs.

      I also think that if there were hundreds of these kinds of deals that people's perception of a 'normal price' would change. This is especially true for these games kinds

      • I do agree with what you said though. I paid $25 for HIB2. I played Osmos but the rest are of no interest to me.

        Woah, none of the other 10 games in the bundle (they added the first 6 if you paid more than the average)? World of Goo, Braid, Penumbra, Gish, Machinarium... practically every single game in both bundles is worth playing and completing. You need to at least play World of Goo; that's amazing.

        • That's what I don't get. Everyone said that World of Goo was the best game in the bundle. I tried it, really REALLY didn't like it, so never bothered with the first bundle, even during the PWYW event...

          • You need to like puzzle games (and cute things) to like it. It's not exactly action-packed (except in the later levels) but yeah, just a cutesy puzzle game.

      • I'm not a big gamer anymore, but Machinarium took me back to adventure game days! I played till the end. The quality of details is stunning, with attention to each character's actions, puzzles and the rich environments. The complete soundtrack is no exception!

    • by bobeau (579687)
      It was also a good idea for them to publish average prices. I bought the bundle after they put out a "raise our average" bonus deal. It also influenced me to pay a little more than I might have without that mild form of social pressure. As far as the argument that my paying less than "full price" means lost money for them, I can say with certainty that if not for PWYW, I wouldn't have considered buying any of the games at whatever the original prices were. As it is, I judged how much I'd actually play each
    • if it is good. it is so with any product/service. if its good, its special and it will sell.
    • by Dhalka226 (559740)

      And of course even with publicity, the more common the scheme becomes the less valuable it's going to be to any individual group.

      I can say I've bought a number of games on sale from Steam over the past month or so (and particularly the past few days). Two for $20, two for $10, two for $5. Three of those were games I knew nothing about; one was recommended by a friend, and the other two were me looking at the prices, looking at the game descriptions and screenshots and going "hell, that looks like it's w

    • by pinkushun (1467193) * on Saturday December 25, 2010 @01:58AM (#34664396) Journal

      Breaking it down even more, from www.humblebundle.com

      Average purchase: $7.77
      Average Windows: $6.64
      Average Mac: $9.06
      Average Linux: $13.78

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  • I tried... (Score:3, Interesting)

    by pspahn (1175617) on Friday December 24, 2010 @04:47PM (#34662174)
    I recently put a bunch of stuff that I don't want/need in the hallway with a sign asking for people to take what they want, but to leave any amount of cash under my door if they wanted to. One guy stopped by to give me $5 for my camping stove. No one else left anything. Oh well.
    • by Binestar (28861) on Friday December 24, 2010 @04:53PM (#34662204) Homepage
      this is like the guy who put a couch out near the road with a sign "Free" and it was there a week. Took the "Free" sign off and put a sign that said "$25" and it was stolen that night.
      • Re: (Score:2, Interesting)

        by Anonymous Coward

        You laugh, but this works. My parents have used it successfully to separately get rid of a refrigerator and a stove. The fridge had been sitting out for weeks, but it was picked up within hours of the $ sign going up.

        In fact the guy started loading it on his truck, looked over and saw us, continued loading for a second, then thought twice and yelled over: "is it okay if I take this?" We yelled back "yeah."

        My theory is that the "free" sign tells people it's worthless junk, and they don't want to haul it home

    • Re:I tried... (Score:5, Interesting)

      by adonoman (624929) on Friday December 24, 2010 @04:57PM (#34662222)

      This model works much better when you're dealing with people face to face. Had you set up a table and asked people to pay what they wanted, you would have either gotten a lot more money, or no one would have grabbed anything. People are a lot more "honest" when someone's watching, even if they know that there won't be consequences of not being so. This is why busking works, but you'll have a hard time selling music on line in a pay-what-you-want model.

      • Re: (Score:2, Informative)

        by blahplusplus (757119)

        "This model works much better when you're dealing with people face to face."

        The truth is many games in the indie bundle are crap, thats why the bundle actually works. i.e. individually they are worth so little that most people would not regularly pay money for them.

        I participated in the last one and paid more then then my fair share and ended playing none of them due to not really being that interested.

      • by Bigjeff5 (1143585)

        ...but you'll have a hard time selling music on line in a pay-what-you-want model.

        Seemed to work very well for Nine Inch Nails and Radiohead, they each made several million on their experimental attempts online sales. NIN used a tiered model (starting at free), while Radiohead was pay-as-you-want, but the concept is the same and the results are undeniable.

        Musicians typically don't make much, if anything, on album sales. By cutting out the labels entirely both of these bands received 100% of the profit. Even if overall sales were a fraction of what the label could have done, the music

        • but you'll have a hard time selling music on line in a pay-what-you-want model.

          Seemed to work very well for Nine Inch Nails and Radiohead, they each made several million on their experimental attempts online sales.

          Of course, having a large existing fanbase helps. So does being among the first to make this experiment which garnered a number of people who likely never would have bought their music in the first place

          Musicians typically don't make much, if anything, on album sales. By cutting out the l

    • by sakdoctor (1087155) on Friday December 24, 2010 @05:00PM (#34662242) Homepage

      That's not how it's done these days.

      You could have removed some key parts of the stuff, and sold them as "unlockable content".
      Otherwise you could have done an advert supported model, with banner ads epoxied to everything.

    • by hedwards (940851)
      Buying politicians and suing people that don't buy your product seems to be a pretty sustainable model at this point.
  • In Vienna we have a pakistani Restaurant called the "Deewam", which is basically "eat as much as you want - pay as much as you want". Seems to work, it's well-frequented (mostly by students for obvious reasons) and it's been there for quite a few years. Maybe it's because you have to pay an actual person and look him/her in the eye. As most people don't want to look like assholes, they pay adequate prices.
    • by adonoman (624929)

      Unfortunately, thanks to the GIFT [penny-arcade.com], the drive to not look like an asshole doesn't apply online.

  • by lkcl (517947) <lkcl@lkcl.net> on Friday December 24, 2010 @05:03PM (#34662246) Homepage

    pledgemusic.com - this is an alternative business model. kickstarter.com - this is an alternative business starter model.

    however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing.

    so under these circumstances, "pay what you like" actually makes sense.

    and, remember also, you can always put advertising onto the "pay" page, which can, in certain circumstances, earn you more than you could for the data-based products being sold! there are plenty of sites which give you 10-step guides on how to do this... but as always, you always need to begin with that niche "good idea" in the first place...

    • by hedwards (940851)

      however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing.

      That's not true. Unless your second product is something that sells indefinitely and results in you no longer having to develop new versions, that money ends up going to developing future versions and new product lines.

    • by Kjella (173770)

      however for software, the model is radically different. once you're into "self-funding", the next version, once completed, is almost pure profit thanks to the internet. there's no "physical goods" to produce. if it's data, it can be hosted, and it can be distributed for virtually nothing. so under these circumstances, "pay what you like" actually makes sense.

      Sure, but what's the incentive for people to pay if they know you're going to make it anyway? Say you wrote the first Harry Potter book, and it's a smashing success. What's the incentive for people to pay you for books 2-7? They know that even if you make $0.01/book on the next one, you're still going to make a lot more money than quitting and taking a normal job. "Pay what you like" only has an incentive to pay if at any time you have a credible threat to quit, which means you have pretty much all the down

      • by Trinn (523103)

        The incentive is simple.

        If you have enough to give, and you appreciate what I do, there's a chance you'll give. If you don't have enough or don't appreciate it, you weren't going to give anyway.

        If you do something for other people that they appreciate, and they see a way to help you, they'll likely do so, especially at low cost to them.

  • I Do This (Score:3, Interesting)

    by chromatic (9471) on Friday December 24, 2010 @05:08PM (#34662284) Homepage

    I've just done this with the book Modern Perl [onyxneon.com]. Rather than punishing paying customers with DRM or trying to track down and stop copyright infringement, my publisher gives away electronic versions for free and asks readers to spread them to other people, to write reviews, and to consider donating a reasonable value for the information.

    So far I've earned more money more quickly than I would have with the traditional publishing model.

    • by twisteddk (201366)

      I've just done this with the book Modern Perl [onyxneon.com]. Rather than punishing paying customers with DRM or trying to track down and stop copyright infringement, my publisher gives away electronic versions for free and asks readers to spread them to other people, to write reviews, and to consider donating a reasonable value for the information.

      So far I've earned more money more quickly than I would have with the traditional publishing model.

      And this works fine for selfpublishing or if you're hugely famous. But theres an entire lobby of MPAA, RIAA and various book publishers who want s a piece of the cake, and if theres' only one slice available, then how can they afford to pay the author ? I totally agree that pretty much any business model is better than having a publicist steal majority of your income and running around suing Your fans over licensing fees and piracy. But that's the current business model. It will hopefully evolve soon. Unlim

      • by chromatic (9471)

        But theres an entire lobby of MPAA, RIAA and various book publishers who want s a piece of the cake, and if theres' only one slice available, then how can they afford to pay the author ?

        In my case, I choose not to work with selfish publishers.

        If I'm going to do much of the editing of the book and if I have to do most of the marketing for the book, then why would I work with a publisher who'll give me only 5% of the revenue?

        • by twisteddk (201366)

          I totally agree. Your work, your money.
          But it's the age of greed, and a lot of people get suckered in by the big names, or their lack of marketing skills. But unfortunately it's usually the larger, more established publishers and companies that seem to be overly greedy and trying to protect a failing business model.

          I have a friend who's a musician, and he has tried self publishing, with a pay what you think it's worth model for his music. It doesn't keep food on the table for him, even though he is pretty d

  • If you can provide customers with a service they actually want and benefit from, and which is of a reasonable level of quality, a subscription model is a lot more sustainable. I would like to see some free software multiplayer games in which the business model is based on subscriptions; not wrenching fees out of people the way a lot of MMOs do right now, but providing a multiplay server that is so good (in terms of policies, uptime, etc.) that people will pay to use it. Gamers would still be free to play
    • by Kjella (173770)

      If you're paying for a server you're only likely to get a server, not development. If people can play it for free without the subscription or use alternate servers, the incentive to develop is really low. You can funnel lots of your profit into development only to have the business being taken over by someone providing cheaper hosting. Unless you start with exclusive content, in which care you're quickly back where it's only one server/network worth playing on.

  • 'Can pay-what-you-want become a sustainable mainstream business model?'

    Like, e.g., most churches and Greenpeace?

    • by thegarbz (1787294)
      Churches and Greenpeace can essentially be looked at as not for profit organisations providing a social service on behalf of the people and for the people. They also depend heavily on corporate donations and government tax breaks. The church didn't build up it's wealth from passing the hat around.

      This won't cut it for a game studio where production costs are into the 10s of millions and the underlying drive for the business is to make a profit. If people started paying $5-15 for all their games, and ther
    • by davev2.0 (1873518)
      Um, no. For most of history, churches have required a portion of a worshiper's income, known as a tithe. For most christian denomination, this is 10%. And, when the Church needed money to build all those cathedrals in Europe and the tithe was not enough, it sold indulgences, the right to sin.

      Greenpeace is not a business and to be a member of Greenpeace one must donate to the cause.
      • by hedwards (940851)

        Greenpeace is not a business and to be a member of Greenpeace one must donate to the cause.

        True, but you get to choose how much you donate and for practical purposes if you're not willing to put even a couple bucks in the hat, you're probably not interested in being a member in the first place.

  • Pay what you want is never a sustainable business model in a world where the customer is faceless. Once there's nothing preventing every customer from paying only $1 that's what they all will do. Currently the trends show otherwise because many people show their support or stick it to the man when paying. But long term there's nothing to motivate one person paying more than another.

    To really maximise profits you need to charge what each customer will bear individually. So if the $90 price tag suits some
    • by Anonymous Coward

      Pay what you want is never a sustainable business model in a world where the customer is faceless. Once there's nothing preventing every customer from paying only $1 that's what they all will do. Currently the trends show otherwise because many people show their support or stick it to the man when paying. But long term there's nothing to motivate one person paying more than another.

      Bullshit. You're projecting your own behaviour onto your limited view of the market & sciety. As pay-what-its-worth / pay-what-you-want increases in usage, consumers will come to terms with the fact that patronage is necessary if they liked what they've got, and more so if they want more of it from the maker. I suspect you lack the ability to see beyond supply & demand of industrial economic theory, but need to start integrating the notion of infinite supply due to the inconsequential cost of distri

  • See, the problem is that people, as a group, are assholes. Given the option of paying what they want, they will underpay or not pay at all, even if they can afford it.
  • Yawn. Call me back when McDonalds, Burger King or Wendy's lets you pay what you want for a hamburger. That would be mainstream.

  • genuinely i go with steam for my games these days. have you seen the killer deals they offer. far cheaper then buying the cd and less drm hassle these days. as for this homebrew pack they have proven one thing. there is a market for linux has a mainstream gaming platform. in both of these experiments linux users always payed the most money. well windows of course got the most buys of course. and mac is just sad like a 1$ avg.
    • by 0123456 (636235)

      That's a good point. If a game on Steam is $20 and I think it's worth $5, I don't pay $20 for it, I wait for a sale when it's $5. So if it was 'pay what you want' I'd pay $5 for it and they'd get my money straight away rather than having to wait for a sale.

  • reddit didn't say "pay what you want" for upgraded accounts. They said "hey, we really need some money", hinted that people might get something in return, and let them donate.

    What they got was upgraded accounts, for a duration based on how much they had donated, and trophies saying that they were "charter members".

    So there's a big difference there. For the Humble Indy Bundle, it's "pay what you want" and you get the same thing. For reddit, it was initially "pay what you want", with no indication as to what

  • Either pay-as-you-go will work as a sustainable business model and become the norm, or it won't. Debates among armchair economists won't affect the outcome. If IP stakeholders start attacking pay-as-you-go with PR campaigns, lawyers, and Congressional whores, then you'll know it's definitely working.

  • ...and only for older/"smaller" items. With anything done over digital distribution, if someone pays $0 then you are out only the cost of the bandwidth used to transfer the item in question. With older items, which have already been sold at a regular price (and hopefully recouped production costs), anything anyone pays is a bonus, because more likely than not those people would never have purchased that item. I know that I would never have purchased any of the games in HB2 myself, but when I'm able to na

    • by Bigjeff5 (1143585)

      ...and only for older/"smaller" items.

      Huh, so you're saying Radiohead's latest album wasn't a success in spite of the millions of dollars in profit? Profit which they would likely never have seen a dime of if it had been sold in the traditional manner, mind you (the music industry is nasty to artists - it's incredible).

      Obviously this isn't going to work for everything, but it works for a lot more than older or smaller items. In fact it works extremely well on popular items as well. In a brick and mortar store Radiohead's album would have so

  • distribution approaches zero. Other than that, you still have to cover the cost of goods sold and may never make a profit.

    • by Bigjeff5 (1143585)

      In other words, it's good for everything digital.

      Which is what the summary was talking about.

  • I suggest a radically enhanced variation, FairPay, oriented to ongoing relationships, especially suited to online sales – that is sustainable and could solve the current crisis for digital content pricing.

    FairPay combines Pay What You Want (PWYW) with consequences that make it fair to sellers by giving them a complementary level of control. It works where there is a subscription or other ongoing relationship of continuing sales, by tracking how fairly each individual buyer pays over a series of tr

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