Pricing Niche Strategy Games: Matrix, Shrapnel and Paradox

For some time, I’ve kept my eye on a space-opera 4X game by the name of Distant Worlds, developed by Code Force and published by Matrix Games. This game (based on what I’ve read) could best be described as Master of Orion III done right. As is typical for the genre, Distant Worlds casts you as an aspiring galactic emperor, out to subjugate the galaxy through the efforts of your colonists, scientists, businesspeople, and when all else fails, your soldiers. Less typically, the game expects you to delegate much of your authority to a computer-controlled viceroy, which apparently allows it to aim for an especially epic scale. It apparently even does a good job with little touches such as minor species that can be swept up into the larger empires, and with establishing backstory through in-game events. But for all my interest, I’ve never bought Distant Worlds. Why? Because it usually goes for its full price of $40, on top of which there’s also a $20 expansion pack. And that money would buy me a whole lot of other games or books instead*.


Admittedly, Distant Worlds is a new game; it only came out in March 2010. What about older titles? Here, we can consider Dominions 3, developed by Illwinter and published by Shrapnel Games, which sells for $55 despite being released back in 2006. Now, I love Dominions 3. It’s one of my all-time favourites, and well worth the money I paid for it. But $55 is still a fair bit of money, comparable to the price of a brand-new AAA game.


Whenever I see this topic come up, the standard response is that the Matrices and Shrapnels of this world charge the prices they do because their customers are a small, but price-insensitive, niche. In other words, if I am so hardcore a strategy player that I’ll buy Dominions 3 in the first place, then I’m so hardcore that I’ll pay $55 for it; on the other hand, if I wouldn’t play that kind of game at all, then no discount would help. And this is a reasonable point. While, say, Recettear managed to sell over 100,000 copies with the aid of heavy discounting, (A) Recettear is far more mainstream than Dominions 3, and (B) many of those cut-price sales brought in very little money. (If you’re interested in the maths behind price, units sold and revenue, I have a brief writeup in an appendix at the bottom of this post.)


But a third company, Paradox Interactive, would seem to disprove the “our game will only appeal to a few people, so we need to charge a premium price” approach. Paradox’s games are also very deep, very dense, and very niche, yet Paradox takes a very different approach to pricing and discounting. Paradox’s latest title, Victoria 2 (2010), also currently has an official price of $40 – but one site offers it (in download form) at a temporarily discounted price of $20, and another offers it (as a boxed copy) for a regular price of A$19.50. And Victoria 2 is by no means unique. I regularly see Paradox-published games (both internally and externally developed) go on sale with hefty discounts, often but not always to coincide with the launch of a new game. Paradox’s older games also have much lower base prices (Europa Universalis III Complete goes for $20, though it’s missing the latest two expansion packs.) So the Paradox brass certainly seems to believe that it makes more money this way.


Why might Paradox’s approach be so different from that of Matrix and Shrapnel? I can think of several explanations.


  • One, as I understand it, both Matrix and Shrapnel are primarily wargame publishers, but from what I can tell, wargames are generally also pretty expensive. (I’m not a wargamer, but this is based on my looking at the prices of wargames and hearing periodic complaints on the subject.) Perhaps Matrix and Shrapnel are accustomed to pricing for that market, and just apply the same principles to other strategy games? Perhaps their usual audience is accustomed to paying higher prices even for non-wargames? Perhaps it’s both?


  • Two is the nature of Paradox’s product offering compared to the other two. Shrapnel doesn’t publish that many games in the Dominions series (in addition to 3 itself, there’s just Dominions 2, which seems to be no longer available), and Distant Worlds is its developer’s only game. In contrast, Paradox has plenty of games in its historical series, which complement rather than replace each other, and it constantly releases new titles and expansion packs. So by discounting, say, the Renaissance/Age of Discovery/Enlightenment game Europa Universalis III, Paradox is building brand awareness for its medieval game, its Roman game, its Victorian-era game and its World War 2 game. To some extent, this is supported by my observation that games that Paradox publishes, but doesn’t develop, don’t seem to go on sale as often as Paradox’s own titles. Given that, say, there are only two titles in the externally developed Mount & Blade series (plus a third one in the works) and the first game was made obsolete by the second, and that there’s only one Sword of the Stars game (plus an upcoming sequel), there’s less need to promote these by discounting. (That said, their base prices are also cheap – Sword of the Stars Complete goes for just $20.)


  • The other remaining alternative, of course, is that one business or another is mistaken: either Paradox is leaving money on the table with its lower-priced back catalogue and frequent, large discounts, or Matrix and Shrapnel are losing business with their high prices and infrequent, small discounts.


I have my own suspicions as to the answer: I’ve bought a bunch of cheap or heavily discounted titles from Paradox that I would not have bought for full price, so Paradox has forgone little or no revenue from me. In contrast, as mentioned above, Distant Worlds’ price tag is what has kept me from buying it. And my instinct tells me that pricing games in the belief they’ll only appeal to a tiny niche may end up being a self-fulfilling prophecy. But I’m just one customer; I’m biased (cheap games benefit me!); and most importantly, I don’t have any hard data (for the Matrix/Shrapnel/Paradox end of the gaming spectrum) to verify my guess. So at this stage, I think, the jury is still out.


If anyone reading this is from one of the abovenamed publishers, or has experience with pricing niche video games, please leave a comment! I’d love to hear your thoughts.


* To be fair to Matrix, I just discovered that the game had gone on sale (down to $27) over Christmas 2010.


** If the data’s available, there are plenty more examples of niche games I’d like to hear about. How has, say, Arcen Games done with its frequent sales on AI War?



Appendix: Product pricing, sales revenue, and profit

How much should we charge to maximise profit? (This isn’t the same as maximising revenue, as we’ll see.)


At the revenue line, revenue = price * number of units sold. So I should be indifferent between selling 5 items for $20 each or 2 items for $50 each, a ratio of 2.5:1.


At the profit line, it becomes a little trickier because now I have to deduct the incremental cost of selling each additional unit***: Profit = (Price – Variable Cost) * number of units sold. If each item I sell costs me an incremental $10, now I have to sell 8 copies for $20 each (making a $10 profit on each) to make the same profit as I would from two $50 sales (which would give me a $40 profit on each, for $80 total), a far less favourable ratio of 4:1.


However, when it comes to games distributed in download form, I think it’s reasonable to assume that, other than the retailers’ (Steam, Impulse, etc) fee, there is a minimal cost to sell additional units. (And in any case, my understanding is the retailers’ fee is typically a variable amount – say, 40% of the item’s price – rather than a fixed sum.) So for present purposes, we can probably treat revenue maximisation as the sensible policy to pursue.


*** Strictly speaking, when I talk about “profit” in this section, I’m referring to “contribution margin” – that is, revenue minus variable cost.


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Victoria 2: Now THAT’s detail

Victoria 2, Paradox’s historical simulation of the nineteenth-century world, is a game to which I have to take off my hat. Now, I have not played the full game — just the first game in the series and the demo of Vicky 2. I didn’t even have that much fun with the demo! But even from the demo, its ambition and detail were amazing to behold. The game models pension costs, migration driven by employment opportunities, the whole spectrum of political and religious beliefs across an entire nation, the gradual process by which government can subsidise, educate, and nurture a workforce. Raising an army is not done overnight, but requires that you spend months or years encouraging your young men to join the army through better military funding. Most strikingly, this is a game which actually tracks the flow of money through the world economy, starting from the moment gold is dug out of the ground and proceeding via the profits earned by the mine-owners and the wages paid to the miners.

Does this actually make for a good game? I don’t know, and neither do the critics. But it was enough to sorely tempt me when I saw the game being offered for 30% off at Impulse.

The other Paradox game I’m looking forward to: Crusader Kings 2

The other Paradox Interactive game I’m looking forward to (once it’s had a good dose of patches and maybe an expansion pack) is Crusader Kings 2.

Now, there’s precious little detail about this one; a quick search turned up nothing more than a few tidbits on Rock, Paper, Shotgun. But I’m looking forward to a continuation of the first Crusader Kings’ unique take on grand strategy: where most strategy games cast you as this kind of amorphous, immortal, omnipresent guiding force behind a company / country / faction, Crusader Kings cast you as a medieval European dynast. So you would follow the lives of your courtiers over time (see this review for an example); dole out offices at court to keep the barons happy; search for brides who would get you into the line of succession for choice territories (I seem to remember there was also an element of heredity in your heir’s stats, which prompted quips about Kwisatz Haderach breeding programs); etc. The expansion pack, which I never played, apparently went even further in facilitating awesome Cersei Lannister-like hijinks.

This is probably as close as we’ll get to a Westeros political simulator – yes, I am aware of the actual forthcoming Westeros adaptation (A Game of Thrones: Genesis), but judging from the press release on the official website, it sounds as though they’re aiming for something more like Total War. And for that reason, I look forward to seeing what Paradox will do for Crusader Kings 2.

Another game I’m looking forward to: Europa Universalis 3: Divine Wind

Yesterday, I forgot to mention another game I’m looking forward to: Divine Wind, the forthcoming expansion pack for Paradox Interactive’s historical grand-strategy game, Europa Universalis III.

The EU games model world history between, roughly, 1400 until 1800; the key word here is “model”. Other games place you in charge of an entire nation in a historical timeframe, such as the Total War and Civilization series, but they tend to use history as a veneer for conquer-the-world / build-a-utopia / etc fantasies. EU, in contrast, actually attempts to simulate  real life: the turmoil of the Protestant Reformation; the resistance of society to governments’ attempts to impose change from the top down (as described in this article by Rob Zacny at Gamasutra); the possibility for empires to overstretch themselves and fall apart, as happened to a monster Ming China in one of my games (at its peak, it spanned the world from Manchuria to Sumatra… then China proper fell into civil war between competing dynasties, and the subjugated nations broke free).

However, as its name implies, the series is also rather Western-centric. This is where the Asian-centric Divine Wind comes in, with features (per the press release) including:

  • Play as one of four major daimyo’s in Japan vying for influence over the Emperor and control over the Shogunate
  • Enhanced diplomacy with more options for alliances and peace negotiations
  • Dozens of new culture-specific building types allowing greater control over the development of provinces
  • More realistic development of trade
  • Manage the internal factions within China to keep the Mandate of Heaven

The first two designer diaries don’t contain much information, but I am interested in hearing more about trade, in particular. While I know little about Asian history, what I have read indicates that you can’t do justice to European/Asian interaction in this period without an in-depth examination of trade. I look forward to hearing more about this expansion pack.

(By the way, if EU3 interests you and you’d like to learn more, there is a demo available for the previous expansion pack, and this Greg Costikyan piece offers a more detailed writeup of the game’s mechanics.)