Guest Post: Cartel Market Pricing, by Jaspor

Guys, today we have a guest post from Jaspor, formerly of Darth Hater.  He does math way better than I could, so y’all should pay attention to his really in-depth analysis of the economics and pricing of the cartel market.

Since Star Wars: The Old Republic launched it’s Free To Play model back in November, the Cartel Market has been a popular subject not just within the SWTOR community, but across the entire MMO landscape. Inspired by the incredibly well done article about $80 jeans and how that approach relates to the Cartel Market, I thought I’d take a similar look to the pricing we’ve seen to this point, what’s wrong with it, how it can be fixed, and the chances we’ll see some changes.

The $80 Jeans… but made out of thin air

If you haven’t yet read Njessi’s piece on the $80 jeans, go read it now. I’ll wait. She makes several excellent points that I completely agree with.1  Taking the analogy a bit further only continues to demonstrate the mistake BioWare and EA are making by pricing these Cartel Market items too high. Material goods we buy in the real world – like jeans – are made out of, well, materials. Concrete tangible materials that cost money to buy or produce. Those jeans are made out of denim, thread, and even some metal for buttons and zippers. (And maybe even some sequins if you’re into that sort of thing.) Those materials cost a certain amount of money per pair of jeans. If the jean company were to sell those jeans below the cost of the raw materials to make them, they’d be losing money. Which would be bad. Of course, that’s not even including other factors that go into the cost of manufacturing the jeans, such as factory equipment, assembly line workers, warehouse storage, packaging, and shipment and delivery costs. Add all those things together and it’s not hard to calculate how much it truly costs for a company to make a pair of jeans. Therefore, there’s a very measurable price threshold that the jeans MUST be sold above in order to make a profit. Now, the final sales price of (and therefore the determination of how much profit can be made on) those jeans is up to the company selling them. And no doubt there are teams of people who consider any number of factors when determining the final price. But the bottom line is that they cannot go below a certain price because the raw materials and manufacturing expenses cost more than that.

Digital goods, such as those purchased on the Cartel Market, are different. They are not made up of raw materials. They’re made of bits. Bits don’t cost anybody anything, you just have to know how to manipulate them. They exist in cyberspace. There are no suppliers of materials. There is no limited inventory. There is no need for storage or shelf space. There is no packaging or delivery. The only cost associated with creating digital items is the time involved from the designers and developers.  Let’s not underestimate this though. Some of these items can take quite a bit of time to design and implement, especially when they are doing things that haven’t been done in the game before.  I’m sure a BioWare Project Manager has a spreadsheet somewhere that shows exactly how many hours were spent creating the Carbonite Chamber , Life Day Robes, Outlaw Armor Set, and everything else that’s shown up on the Cartel Market. Which means they know how much those items cost to develop and how much they need to earn in order to cover the development costs. Here’s the thing though: Once they are done, they’re done. The designers and developers move on to the next items, and the items can be created in infinite quantities with zero production cost from that point forward.

So here’s the million dollar question:  What should be the price point on these virtual items to maximize profit? The answer isn’t a simple one and it’s surely one that BioWare and EA continue to try and figure out.  It’s a delicate balancing act. Price items high and you have to sell fewer to turn a profit, which is a good thing. The downside of pricing items high is the $80 jeans dilemma – the majority of people might decide that the item is not worth the cost. Price items low and you have to sell more of them to turn a profit, which is a bad thing. The upside of this approach is that a lower price could make the item enticing to a much larger group of people, meaning that the amount sold could be magnitudes greater than what would have sold at the higher price. The ideal situation for the seller is to find the “sweet spot” for pricing. What that means is finding a price point that is as high as possible while making people still think it’s worth that price.

Crunching Some Numbers

Who’s ready for some math? I know I am. Let’s take two different items available on the Cartel Market and do some numerical analysis – some theoretical and some real. Obviously since some of these numbers are made up, the overall numbers won’t be a completely accurate representation of what these things cost to make and how much it takes for BioWare to turn a profit, but I think the examples will give people a good idea of how important these price points are to the overall success and long term health of the Cartel Market.

Let’s take a look at one of the items that launched with the Cartel Market and is fairly unique: The Carbonite Chamber. This item has an original animation that shows the player surrounded by the freezing device, blasted with smoke, frozen in carbonite, thawed out, and falling to the ground. The item also acts the same as the player’s “rest” ability restoring health and energy/heat/force resources. This item appears to be a fairly resource intensive creation. The designers will need time to figure out exactly how this thing will work and what the steps of the animation will be. They will draw concept art which will morph into actual design art.  From there it goes into the hands of the developers, in this case they will need some graphical artists (to model the actual artwork of the item), animation engineers (to animate it and make it come to life), and some gameplay developers (to tie it in with the “on use” functionality and also give it the “resting state” ability). Let’s pull some numbers out of our asses, shall we? Let’s say 40 hours to design, and 120 hours to draw, animate, and develop. Oh, and QA, let’s not forget the testing phase. Let’s throw in another 24 hours for QA testing and bug fixes. That brings us to a grand total of 184 hours from start to finish to create the Carbonite Chamber.

“How much is that in dollars and cents?,” you ask? Well, without going out and doing a search for the average salaries of all the design, development, and QA people involved in the Austin area, let’s just use an easy round number of $50 per hour. (Probably a little high. If someone wants to figure out a more realistic number and redo the math, by all means, have at it.) 184 hours times $50 per hour equals a grand total development cost of $9,200. That might seem like a lot for a single item. But is it really? More math will tell us!

The Carbonite Chamber is currently sold on the Cartel Market for 720 Cartel Coins. Converted to real money, that falls within the range between $5.26 and $7.92, depending on the size of the Cartel Coins package that was purchased. Let’s round it to $6.50 in the middle. At a total development cost of $9,200 and a selling price of $6.50 per item, BioWare/EA would have to sell 1,415 Carbonite Chambers in order to earn back their development costs. Anything sold beyond that is profit.

Next let’s take a look at a recent addition to the Cartel Market: The Clandestine Officer Armor Set.

ClandestineOfficer

This item is basically a recoloring of an existing armor model and shouldn’t be very resource intensive. The designers will need time to figure out which parts of the armor to change to what colors. They will likely take existing design art and simply make a copy of it with the new color changes. There is a stripe down one of the legs which may be new, so they might have to draw that in on the artwork.  From there it goes into the hands of the developers, in this case they will need some graphical artists (to recolor the models and maybe make some minor tweaks like the leg stripe) and… well, that’s pretty much it for this one. There’s no new animations involved, no new gameplay or ability development.  Let’s make up some more numbers for this item. Let’s say 16 hours to design (it shouldn’t really take two days to recolor an armor model, but let’s give them some room for discussing and debating which colors make it look good), and another 24 hours to create the item, recolor it, and make some minor visual tweaks. We don’t really need much QA here for simply making sure a new armor set doesn’t look broken, so we’ll throw in a single 8 hour day. That brings us to a grand total of 48 hours from start to finish to create the Clandestine Officer Armor Set.

Sticking with the $50 per hour rate for our Austin team, that brings the total development cost to $2,400. The  Clandestine Officer Armor Set is currently sold on the Cartel Market for 1,440 Cartel Coins. Converted to real money, that falls within the range between $10.51 and $15.84, depending on the size of the Cartel Coins package that was purchased. Let’s round it to $13.00 in the middle. At a total development cost of  $2,400 and a selling price of $13.00 per item, BioWare/EA would have to sell 185  Clandestine Officer Armor Sets in order to earn back their development costs. Anything sold beyond that is profit. And I think it’s also worth mentioning that there are several different armor sets available on the Cartel Market, most of which fall into this category of being a minor re-coloring of an existing armor model.

So, is $6.50 a good price for the Carbonite Chamber? Is $13.00 a good price for the Clandestine Officer Armor? That really depends on whether or not players believe the price is fair. Are most players who have some interest in obtaining a Carbonite Chamber willing to pay $6.50 for it? Are most players who want a cool new armor set willing to pay $13.00 for it?  That decision will vary from player to player.  If so, then great! But then the question becomes, “Damn, could we have gotten even more for this?” Price it too low, and the sellers are leaving money on the table. If most players think to themselves, “I like it, but J is too expensive, I won’t pay that much for it,” then the sellers risk pricing the item out of their target market and not making nearly as much money as they could.  BioWare and EA are most certainly collecting the data and analyzing it closely. More on this later.

One thing that’s probably obvious by now is that the development effort for a particular item doesn’t necessarily dictate its specific individual price. I think it is safe to say that something like the Carbonite Chamber or a new mount will take more resources to create than a recolored armor set. Yet the armor sets are generally sold for a higher price. So it does appear as if BioWare and EA are treating the market as a whole and considering player buying tendencies rather than simply pricing items based upon development cost. Interesting…

Would More People Really Buy This Stuff For Less?

When the Cartel Market was first announced, players were concerned that it might introduce a “pay to win” aspect to SWTOR. What that phrase refers to is the situation where players who spend real money to buy particular items have an unfair advantage over players who choose not to spend real money. For the most part, SWTOR has avoided that pitfall to this point. That means there really aren’t any “must have” items available for purchase – the vast majority of products available for purchase are simply cosmetic or convenience items.

How interested are most players in cosmetic and convenience items that typically don’t have a real impact on gameplay? Good question. Clearly the interest in this varies from player to player. At one end of the spectrum you have the players who don’t care at all about how their character looks, what they’re driving, what emotes they can perform, or what types of pets follow them around. At the other extreme are the completionist collectors – if it’s something new, they must have it! Most players fall somewhere in the middle. So just where in the middle do most players fall? Let’s find out.

Darth Hater recently conducted a survey asking players about their Cartel Market experience. According to the numbers, 80% of players have purchased at least one Cartel Pack. Most of the items inside these random packs can be considered of the “cosmetic” variety. However, this number doesn’t tell us the intent of the players buying the packs. If they get some of the highly sought after rare items, will they keep them for themselves or attempt to sell them? Let’s look at the numbers from a different angle. 33% of players have said they’ve purchased armor from the Cartel Market. 46% of players have said they’ve purchased Cartel Market armor via the GTN with in-game currency.  Looking at other cosmetic items, 7% have purchased mounts directly from the Cartel Market and 4% have purchased weapons from the Market.  36% have said they’ve purchased vehicles from the GTN while 34% have said they’ve purchased weapons from the GTN.

The Cartel Packs throw a bit of a monkey wrench into analyzing these numbers, as many of the armor pieces, weapons, and mounts are not available via the Cartel Market directly. They can only be found in the random packs or on the GTN, which will not doubt skew the numbers towards more people buying those items directly from the GTN.

Here’s the bottom line: Almost half the players who took the survey admitted to buying some of the new Cartel Market armor via the GTN. These people have at least some interest in how their characters look. These people are potential targets for future cosmetic products. There could be two reasons why more people buy armor from the GTN rather than directly from the Cartel Market. The first reason is that they are looking for armor found only in Cartel Packs. That armor is not available for direct purchase from the Cartel Market. So these players would rather spend credits to get something they know they’re definitely going to get rather than spending real money on a chance to get it. The second reason is that players would rather buy armor with in-game currency rather than real life currency. This reason again goes back to the main question here: Do people think the Cartel Market prices are fair? If the prices were lowered, would more people be buying armor sets directly from the Cartel Market rather than from the GTN? I think so.

Personally speaking, there are two armor sets I like and have seriously considered buying for my Imperial Agent: The Outlaw Armor Set…

Outlaw

and the Clandestine Officer Armor Set.

ClandestineOfficer

I’ve wavered back and forth between pulling the trigger on the purchase and kept an eye on the GTN prices for these items. I haven’t bought either one yet. The $13.00 price tag seems steep for a new outfit. So far we’ve been talking about Cartel Coins in terms of real cash, but let’s take a look at them from the point of view of a subscriber. I receive 600 Cartel Coins per month for staying subscribed to the game.  I just have a hard time spending over two months worth of my subscriber’s complimentary Cartel Coins on a single set of armor. I would have liked to believe that my subscription payments were worth enough to BioWare that they would at least allow me to buy a single new outfit each month. Nope. My complimentary coins give me just enough to buy exactly five sets of armor in a single year. If the armor sets were cheaper, I would have bought several by now.

Looking Ahead

The Cartel Market is still very young. BioWare and EA are surely collecting and analyzing all the data that goes with it. This isn’t just limited to how many of each item they’re selling. Buying patterns among players, frequency of purchases by individuals, and dozens of other metrics can be looked at by analysts to figure out what is working well and what isn’t. The GTN data for Cartel Market items is also important. Cartel Pack items that are top sellers on the GTN make likely candidates for future products. Revan’s Mask is one of the most popular Cartel Pack items. How much would people pay for it on the Cartel Market if they could buy it directly? $10? $20? $30?!

The special event items (such as the Life Day items) and limited time sales (such as the 30% discount on the Gamorrean Axe that just ended) are additional ways that BioWare collects data. How many Axes did they sell at full price? How many did they sell at the discounted price? Which made more money? How many people bought Life Day items? (Only 8% according to the Darth Hater survey.) While they were limited time and will become rare now that they’re no longer available, the general consensus seems to be that they were not worth the cost. It will be interesting to see how the Life Day sales results influence the pricing on future items related to limited time special events.

It’s also possible that we’ll see a more drastic shift in prices in the near future. The release of the Rise of the Hutt Cartel expansion seems like a logical time for the Cartel Market to be rebooted with a ton of new items and adjusted prices. Even if the new items retain the existing prices, it makes sense to permanently discount the older items.

Conclusion

Overall, the Cartel Market and the Free to Play model appears to be a success for BioWare. People are buying items. People are paying real money for additional Cartel Coins. Early reports from BioWare indicate that it has exceeded all expectations. Hopefully that success will help the game grow and prosper and it can eventually become the MMO that many of us envisioned when we first heard about the project.

The bottom line is that BioWare and EA have all the numbers they need to make important business decisions regarding the future of the Cartel Market. Their goal remains the same as it always has been – make as much money as possible. As players, hopefully that means the cost of many items will be lowered so they can try to sell more of them. Because, damn, as much as I like those $80 jeans, I’m not paying $80 for them. The same jeans for $40? I’ll take four!

  1. Editor’s note: awwww!

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    Comments

    Guest Post: Cartel Market Pricing, by Jaspor — 16 Comments

    1. Interesting write up and great job of putting “numbers” to the items. Quantifying it this makes things more interesting and for me is going to make me think more about my purchases.

      • Thanks! I’d be curious to see what the real actual type of efforts are on items like the ones I’ve described, but I don’t think that’s the sort of thing game developers are usually willing to talk about.

    2. Yeah must say, for the most part, I am
      Starting to hate what I see on the cartel store. They are literally ripping people off on it and many don’t care and keep buying. ThTs why swtor devs are doing it. Cause people are still buying them even though it’s completely ripping us players off for their profit.
      I haven’t bought anything for a month now other than xp buffs which imo should be higher xp for the cost. 25% is crap. I agree though with all your post

      • Well, saying they’re ripping people off is still a matter of perspective. I’m seeing a LOT of those new pod racer mounts around the fleet. And while some people would consider the price on those a “rip off,” it looks like a fair amount of people think the price is fine.

    3. “Cartel Pack items that are top sellers on the GTN make likely candidates for future products.”

      Unfortunately, I think this will NEVER happen because of the effects it would have on sales of future Cartel packs. If you were reasonably sure that you could eventually purchase the Revan mask for $30, would you EVER purchase 10+ Cartel Packs (3600 Cartel Coins) trying to obtain it? They could do this once and make lots of money off of it once, but people will remember the next time a new pack comes out. And given all that Bioware is saying about how profitable the packs are and how they’re already working on the third wave of four Cartel Packs, I can’t imagine them killing the golden goose.

      The thing that I find unfortunate is the color crystals. Setting aside that Artificers don’t ever get to make new colors anymore, a unique colored lightsaber is such an iconic thing that I would seriously consider buying a crystal from the Cartel store. Unfortunately, the one crystal in the store is both expensive (900 CC) and a specific color that I don’t want. You’d think it would be easy to just add more, but the plan appears to be to add colors one at a time as prizes in Cartel packs, and never for direct purchase, so I probably won’t even know if they do decide to make a color I really want.

      • I’m actually a bit undecided on that exact tactic, and I kind of purposely worded that so it could be interpreted two ways. On one hand, they would make TONS of money by putting Revan’s Mask up for purchase directly. But yeah, the people who bought 10+ packs for it would be pissed off and could be less inclined to buy more Cartel Packs in the future. Unless they waited a reasonable amount of time (say, 6-9 months?) so it was no longer the latest and greatest new shiny thing everyone wanted. And they wouldn’t necessarily make every single Cartel Item available, just some of them. So people couldn’t absolutely bank on the fact that the random items would eventually become available – there’s a chance they will, but no guarantee.

        On the other hand, it also could guide what types of items show up for direct sale, not necessarily those exact items. The Nihilus, Phantom, and Revan masks all seem incredibly popular, right? Well, next badass mask/helm? Instead of making it random, price it directly at something where people would think it’s worth it and cash in. Would people pay 500 CC for, oh, I don’t know… a true Boba Fett-esque Mandalorian helmet? Maybe even 1000?

        And I do agree that color crystals seem like some low-hanging fruit they could probably crank out for fairly low cost and sell for a very nice profit.

        Thanks for the feedback, always fun having these types of discussions. :)

    4. Great write up. I agree with pretty much everything, although I think that they would probably have enough data by now to make an informed decision on whether they feel the price points are set correctly. The catch 22 is if they lower the price points on anything, for example future adaptive gear sets for less than 1440cc, people will scream blue murder over the stuff they’ve already bought at the original price. So maybe they feel they’ve already painted themselves in to a corner.

      My biggest gripe with the CM is the “per-character” aspect of the non-consumables, like the armour sets and speeders. If the armour sets were Bind to Legacy then I’d be happier spending money on it, because it means if I delete the character I originally bought it for (for whatever reason) I can then pass that along to the new character I replace them with, without having wasted my CC stipend or real money.
      As for the speeders, I believe all the Cartel Market ones should be similar to the one you could get in the Collectors or Digital Deluxe editions and be Account wide. Again, its a lot of money to invest if that character for some reason is deleted. I know people might argue “Why would you delete a character that you’ve paid for a speeder on?” but I’m an altoholic and it does happen, even with the new purchasable character slots, we still have a limited number of slots per server. I would just feel happier knowing that my 1800 CC was a permanent investment for the account, rather than a single purchase.
      To put it in perspective, it would actually be more cost-effective in the (not so) long run to set up a second account, refer that account from my first account and pay for a month’s sub to get the refer-a-friend speeder than it would to buy the Incendia just for one character, in real money terms. Another, possibly unpopular, example but one I feel is relevant is the cash shop mounts in WoW. They are of comparable price and once purchased are available to all characters, present and future, created on that account. Like you say, it’s not necessarily the price point, but the perceived value that’s the problem. 1800cc for a mount for one character? Sorry, not interested. I’ll wait until I can farm up the 1.5 mil credits for the GTN and if that means I miss out, so be it. But 2400cc for the same mount, on every character I’ll ever create? Sold!

      • Doesn’t the digital deluxe edition ($20 extra) include (among other things) a mount for every character on your account? If so, it’s a much better investment to simply upgrade to that if you want to spend real money for speeders.

        (My point being that the pricing is internally inconsistent – Bioware itself charged $20 for an account-wide speeder and is now charging essentially $18 for a per-toon speeder.)

        • Yeah, they totally did that. Even when I create a brand spanking new character now, I log in to about 5 or 6 emails with special account wide items attached, like the CE items (including mount), Founder title thingy, Taunlet pet, and pre-order items. So yeah, account-wide Cartel Market purchases would be great.

        • I’d actually forgotten about the DD upgrade, even though I have it, and yes it does, the Longspur STAP. I just checked and it’s actually a lot less than $20 now, I would only have to pay Kr. 19 which according to XE.com is about $3.50

          So yeah, we were both making the same point, although yours was a lot more elegantly put.

          Although if you are willing to jump through the hoops, the Refer-a-Friend speeder is an attractive option simply because it starts off at 110% speed and level 3 dismount protection. Plus it looks better than the STAP. I hate that stress position the standing speeders have you in.

      • I actually considered the “bloody murder” shouts while writing this and almost included some thoughts on that, but the article was long enough as is, hah.

        Here’s the thing though – This happens with tons of things in the real world every day, and people are okay with it. Want the newest car model? You’re paying top price for it to have the latest right now. You could wait a year and pay a lower price for a new car of this same model when the new year’s models come out, and people understand that and are okay with it. Want the latest video game that just came out today? $60 today please! Or you can wait 6 months and get it on Steam for like $10. And people are okay with that.

        So the people who paid the higher prices to get items as soon as they were brand spanking new still got that for their money – they were the first ones to have them.

        The one reason why this could cause some outcry with the Cartel Market is because players didn’t know (and still don’t) if it will really happen. They don’t know if the items they’re buying now will be cheaper in 6 months, so they couldn’t make that decision at the time of purchase. But if and when it does happen, then the pattern will have been established and people can decide “Buy now for 600 Cartel Coins and get it while it’s shiny and new and prestigious” or “Buy in 6 months for 250 Cartel Coins when everyone and their mother will have it.”

        Great point, and thanks for the feedback!

        • I was referring to them lowering the price point for brand new outfits being put on the CM, rather than depreciating older ones, which like you say, that happens all the time in the real world.

          The problem I can foresee is if the data they’ve got supports Njessi’s “2 pairs of jeans for $40 each” analogy, can they act on this and start offering brand new outfits at half the price of the original ones? In terms of value, there is essentially no difference between the old and new outifts and I could see it generating a lot of ill-will from people who have already bought the older outfits at 1440cc.

    5. I’m generally a player who is pretty obsessed with how my characters look- I played GW2 for a couple months despite the fact that I kind of hated the game just because I liked all the stuff you could to make your character look cool. But despite that, I haven’t bought any armor from the Cartel market. I’ve bought some packs, because they’re fun, but I can’t justify spending as much money on armor as they seem to want me to.

      If the price were lower, though, I’d be buying a ton. I mostly want the Cartel market outfits for my companions, and if they were in the 200 to 500 cc range, I’d probably have bought a dozen of them by now.

      • Yep, this is my point. I guess the final question is “How many other players feel the same way?” From what I’m reading and hearing, a lot. I haven’t heard too many people say, “I wouldn’t buy anything cosmetic from the Market even if they lowered the prices.”

    6. Re: Exclusivity. There are a few players who care about that. And I wouldn’t be the happiest if my entire raid were dressed the same. But the vast majority just want an outfit that looks cool, and it doesn’t matter who else happens to be wearing it. Also, if there are enough choices, variety will just happen. Maybe not exclusivity, but certainly people will have unique looks that they only share with a few other people. If mixing and matching were more encouraged (by selling pieces separately), there would be even more differentiation.

      Also, exclusivity doesn’t seem to affect the reasoning of the morons in bikinis. Tons of identical bikinis.

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