Justin Ko's Blog

Stumbling on this gem in a blog post by Clarence So (found here), has provoked some thought into  how effective pricing can solely determine the success of a game. To make it clear at the beginning, I am biased towards DotA and see all of these new iterations as cheap imitations to the original great game that defined the genre. However, it intrigues me how a game of inferior quality has managed gain such a loyal following and in some ways surpass the original. I feel the answer lies in effective application of the pricing elements.

Riot Games uses a sales and competitor oriented objective to determine the pricing of their product. Competitors such as DotA and HoN offer their games at very low cost, the first being a free mod for Warcraft 3 and the latter a standalone game originally retailing around $30. In order to take part of the loyal following from these games, LoL has decided on the most extreme pricing strategy and offered the game for free. This is a perfect reaction to the price war between the big players in the Action RPG genres that has essentially driven the base price to zero. Further, due to the large amount of substitutes and high elasticity, decreasing the price has a substantial effect on the quantity demanded to maximize the market penetration. Unfortunately, there is a cost of making a online game that is frequently updated. Riot used a system of micro transactions to basically capitalize on the loyal LoL followers to essentially finance the development of the product. These consumers are more than happy to support the game they like so much, while others are able to enjoy the game for free.

LoL…this is a perfect example that free is the best price.