Praise for Chris Bateman

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    "the most thoughtful respondent in games, barring none"
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My economy studies made an important difference between the fixed cost of manufacturing something and the per unit cost. Even if the latter is (almost) zero, the first must be compensated by the sales, and since the number of units that will be sold is never infinite, this will determine the absolute minimum of reasonable pricing.
Also, in my marketing classes, we made an important difference between common goods (cheap shoes) and luxury goods, where the latter is priced "unreasonably", but still being sold based on something else than the rationality of the buyer.

Altogether, my point is that the shoe allegory is pretty bad for explaining why F2P can be the only viable payment option. I think the F2P phenomenon is more related to the field of psychology than the field of economics. Predictably Irrational from Dan Ariely describes a lot of different experiments which - in my opinion - has a lot in common with F2P.

LateTide:
Thanks for this comment! I actually intended to write explicitly about how the cost of development needs to be recouped and that the free-to-play model thrives on low development cost, but in the end I just covered this by pointing out that the content of the AAAs would be impossible under free-to-play (the same point you make here regarding the fixed cost of manufacture, just expressed differently).

Nicholas' piece was a firestarter - he's aiming to drive a lively discussion - so it doubtless pushes further than in needs to in order to make its points. But I do believe that free-to-play economics are going to take over the lower market (indeed, they already have!) and perhaps the mid-market too. The exception - as noted at the end here - are the indie devs who aren't in it for the money but can still end up making money.

I also wonder whether games-as-products might make a comeback as free-to-play aesthetics of play distort games... gamer hobbyists in particular are choosy enough that they might be able to maintain their own niche markets. Indeed, they already do! :)

All the best,

Chris.

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