Publishers with DriveThruRPG got the following in their January email today. I thought it was interesting enough to warrant circulation, so I asked if it was okay to share, and it was. Here’s the bit on pricing from Steve Wieck. I’m going to boldface a few parts that struck me as particularly interesting; they weren’t boldfaced originally.
"In the era of 99 cent apps and songs, it is easy to envision a world where the price of digital content continues to fall. Some publishers have been experimenting with low price points and finding some success. I want to offer a few counterpoints to the low price approach.
First, consumers often base their purchasing not on absolute price but rather on price expectation. If you’re not familiar with the term “price anchoring”, I recommend you check out Mintlife’s article here. Consumers will respond to a $1 RPG sale because their price expectation for RPGs in anchored at $15-$50 for a core rulebook and $5-$25 for a supplement. When the price they pay is far outside of their expectation it ignites interest in grabbing the deal.
If all publishers trended prices down to $1 for an RPG, then customers will re-anchor their price expectations at that level and $1 RPGs would no longer ignite large sales volumes for any single publisher. Instead $15 RPGs will seem expensive, much like any app over $1.99 is “expensive”.
Second, low price points seem to be suboptimal for long term total revenue. Our data on sales rates of core rulebooks shows very little correlation between a rulebook’s PDF sales rate and the rulebook’s price. This suggests that selling really cheap PDFs of your core books won’t sell dramatically more copies, and will therefore get you less total revenue.
Third, lots of $1 sales transactions kill us in micro-transaction payment processing fees. When an exclusive publisher sells a title for $1, we pay .31 to Paypal (or nearly the same to credit card processors) and pay the publisher 70 cents. We’re already down a penny before we cover any other operating expense. Customer purchase frequency and habits are not the same for games and comics as for music, nor do we make profits selling hardware devices, so what works at i-Tunes/Apple won’t work for us. A race to the bottom in pricing would force us to make some type of change in royalty structure with publishers or fee structure with customers, neither of which we want to do - ever - unless forced upon us by too many sales where we take a loss on every sale.
For those reasons and others (like affording decent art), we encourage publishers not to see lower prices as a long term way to raise your total income.”