Don’t Be a Cheapskate: 4 Reasons Pay-What-You-Like Backfires

Tue, Apr 24, 2012

Frisky Misc, Funding, Industry, iPhone, Mobile

Pay-What-You-Like.  You’ve sometimes seen it called Pay-What-You-Want.  You’ve seen it while leaving your local museum or hippy café as a big box that says “Donations.”  You’ve also seen it for Radiohead’s In Rainbows or with Humble Bundle, the collection of indie games offered for however much you’d like to pay for it.  Originally a big idea with a lot of promise, returns have been decelerating or even evaporating on the revenue model, leaving people like Joost van Dongen of Proun fame to say “I would not have done the Pay What You Want model and would have done a fixed price on Steam instead, I think I may have made 5 to 10 times as much money.”

So, what happened?  Well, just because a lot of people have heard of something doesn’t mean they’re buying it.  The four problems stopping the model from succeeding are:

1) Cheapos – The most obvious way a PWYL model can fail is that people don’t want to pay anything.   In November of 2007, an internet research company called ComScore estimated that 68% of people who downloaded In Rainbows did so without paying a cent.  Some products have countered this idea by offering a PWYL model, but with a minimum of anywhere between one penny to ten dollars, such as the soundtrack to indie game darling Fez (which I’ve been listening to nonstop since I bought it), which is offered at a seven dollar  minimum… or more if you like.  Indie game bundles have also used this method, such as Be Mine 2, which costs $4, with extras money going to charity.

2) Pride – A more surprising drawback can be social pressure.   Sometimes the model can backfire when people don’t buy the product at all for fear of looking cheap, according to a recent article by Science Magazine.  This is only exacerbated by the fact that the PWYL model is used most often in concordance with charities, like Humble Bundle joining up with Child’s Play or the Electronic Freedom Foundation.  The issue, of course, comes down to expectation of cost, which is why suggested donations are so important for this model, and leads to the third problem.

3) Confusion – At the bottom of it, most gamers really have no idea how much it costs to make an indie game, and budgets vary wildly from thousands to millions.  There is ambiguity there, and where there’s ambiguity, there’s hesitation, and where there’s hesitation, there’s lost sales.

4) Competition – Kickstarter, the crowd-sourcing donation-based website that funds everything from independent films to postcards, has started to become the go-to place to fund videogames, slowly replacing PWYL. After all, the Humble Bundle’s average price paid per bundle was the highest it ever was when it launched in 2010, at $9.18 per bundle, and it never got that high again.  In fact, the average price paid for bundle sunk as low as $4.09 five months ago.  Whereas gamers have spent almost $10,000,000 on Kickstarter as of April 19th, according to Rock, Paper, Shotgun.   It’s no surprise, then, that there is now an entirely gaming focused version of Kickstarter called Gambitious and a mobile-centric version called Appstori (a TriplePoint client).

In many ways, the two models reflect each other: game developers create a project and hope you’ll give them money in return for it.  But the difference between PWYL and crowd-sourced funding is 3-fold:

  • First, whether you get the money before you do the work or after (and whether you get the game now or sometime in the indefinite future).
  • Second, creating a definitive tiered system explaining what you get for how much money.
  • Third, giving nothing is not option with Kickstarter.

The biggest advantage PWYL models had was tons of free buzz, as seen with In Rainbows, where more people were talking about the models than the products themselves.  But the idea is no longer fresh, and it’s less interesting to newsmakers and consumers alike.  Crowdsourcing services like Kickstarter, Appstori and Gambitious have done a good job learning from the flaws inherent in the PWYL model, but if they’re going to succeed, they’ll need to get over the buzz alone and become self-sufficient.  So far, it’s a promising future.

 

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