Tag Archives: Microsoft

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Xbox Game Room’s Dummy Pricing (Not for Dummies)

[Note: A version of this article appeared as my column in Gamasutra and GameSetWatch.]

Microsoft recently augmented their Xbox Live and Games for Windows services with something called “Game Room,” which allows you to buy and/or play classic arcade games like Centipede, Space Invaders, and the like. Basically, it’s just like when we used to hang out at the neighborhood arcade, only with fewer cigarette burns on the machines and no attendants selling weed out of the back office ((Or maybe not; I’ve never been to your place)).

What I thought was interesting, though, was the price structure for the games, which breaks down like this:

  • 40 points – Play a game once on either Xbox Live or Games for Windows
  • 240 points – Own the game on one platform but not the other
  • 400 points – Own the game on both platforms

So if we rate those three options from 1 to 100 on an “Accessibility” metric and plot them out, they look something like this:

Game Room Graph 1

Figure 1

I don’t think it takes much insight to guess that Microsoft would rather you not take the first option (about $0.50), since won’t take long to figure out that playing like ONE game of Frogger is quite enough for you. They’d rather you spend the 240 points (about $3) to buy the game on one platform, or even better 400 points (about $5) to buy it on both. But I don’t think these prices are optimal for that. I think there’s a way for Microsoft to actually get more money out of people by raising their prices.

How? Well, I’ll get to that. But first let’s talk about magazine subscriptions. In his book, Predictably Irrational ((Ariely, D. (2008). Predictably Irrational: The Hidden Forces that Shape Our Decisions. New York, NY: HarperCollins.)) behavioral economist Dan Ariely describes seeing an ad for the periodical The Economist with the following annual subscription options:

  • Economist.com website only: $59
  • Print edition only: $125
  • Print edition PLUS website access: $125

Bluh? Why would they try and charge $125 for just the print edition and then at the same time offer that PLUS the website access for exactly the same price? It make no sense.

Or does it? These people know economics. It’s RIGHT THERE in the name of their publication! To test things out, Ariely showed The Economist ad to 100 MBA students and asked them which they’d choose. He got the following results:

  • 16% chose the Economist.com website access for $59
  • 0% chose the print edition only for $125
  • 84% chose print edition PLUS website access for $125

Okay, no surprises there. But then he removed the “print edition only for $125″ option and asked the SAME students again. Same people, same choices –the results should have been identical, right? Nope.

  • 68% chose the Economist.com website access for $59
  • 32% chose print edition PLUS website access for $125

What? They flipped their preference even though the two remaining choices were the same as before! Why? (Click here to read about all this in an excerpt from Ariely’s excellent book, or better yet go buy it –it’s a great read.)

The reason, as usual, is because of how our brains are wired. We simply aren’t very good at evaluating things in absolute terms, like the value of having a subscription to a Web site versus a print magazine. Instead, we tend to compare things to other similar things, especially when trying to quantify something abstract like value or fun. How good is this apartment for rent? Well, it’s better than the last one you saw but worse than the first. How much fun is Game A? Well, it’s more fun than Game B, but not as much as Game C. If you want to see this kind of thing in action, just ask ANY group of nerds to rank the Star Wars movies and then STAND BACK.

Decision making requires more deliberation and data when our evaluation of the options are spread out, as in the graph of Game Room purchase options above. But when some of the options cluster together, our decision-making process tends to exclude or downplay the options outside the cluster because including them in our evaluations makes things pretty complicated. For example, imagine you’re trying to decide between three downtown restaurants for dinner after a movie. Two of them are nearby and one requires a bit of a walk. Let’s assume your feet hurt and you’re on a tight budget, so both distance and price are equally important. Most people will end up making their decision by going to the cheaper of the nearby places, despite the fact that the restaurant farther away may not only be cheaper than either, but enough so to warrant the walk.

Why? Because just using price to decide between the two otherwise most similar options is an easier decision to make than trying to figure out the relative value of proximity and price and combine those values in a precise weighted combination so as to come to a completely rational decision. People’s brains tend to slide into the path of least resistance when making anything beyond the simplest of decisions. ((c.f., “Why We Love Genres So Much”)) So savvy companies like The Economist try to frame and simplify their sales pitches so that you glide right to where they want you.

This is why I think Microsoft could alter their Game Room pricing to something like this:

  • 40 points – Play a game just once on one platform
  • 360 points – Own the game on one platform but not the other
  • 360 points – Own the game on both platforms

Which we could graph like this:

Figure 2

Figure 2. Saying things like "Figure 2" makes it sound all legit, right?

Do those two options on the right jump out at you more so than before? They do me. And I’d bet that a lot fewer people would be interested in just dropping two 40 points for a one-time play. Or maybe you could bring the price of both the “own on one platform” and “own on both platforms” option down to 240 points. Your choice! And you could take this concept even further –how do you think a fledgling MMO could benefit from pitching prospective players on monthly, quarterly, or annual subscription packages? Do you think you’re any better equipped to avoid this kind of manipulation after reading about it?

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Red Rings and Research Methods

Why do surveys overestimate the number of people experiencing the Xbox 360′s dreaded Red Ring of Death?

Lord knows I’m familiar with the Xbox 360′s “red ring of death,” or “RROD” as it’s not so affectionately called. I’ve encountered it twice myself. The term refers to what you get on the front of Microsoft’s console when its notoriously high failure rate kicks in and the thing stops working. This tends to be a touchy subject for Xbox owners, who tend to light up the torches and grab the pitchforks whenever it’s brought up.

Earlier this year the magazine Game Informer made a lot of headlines by reporting that according to their research, a mind blowing 54.2% of Xboxen crapped out, which is a failure rate traditionally reserved for mundane things like marriages. ((Just kidding. I LOVE MY WIFE!)) Immediately across the Internet people started screeching this number as fact.

RROD

I should know about the RROD. I've had 2 myself.

But how much stock can we put in the survey and the methodology used to conduct it and interpret its findings? Sure, I think it’s safe to say that the RROD rate is high (Microsoft’s Peter Moore admitted as much publicly), but is that 54.2% overblown? (SPOILER ALERT: Yes. Yes it is))

Game Informer surveyed 5,000 of its print subscribers to gather the data. I couldn’t find a copy of the actual survey, but let’s give them the benefit of the doubt and assume that there were no leading questions or other shenanagains that would influence subjects’ responses. The problem that persists, though, is related to what psychologists and others refer to as “sampling errror.” This is when the sample of data you collect is somehow biased, skewed, or otherwise not representative of the larger group of people that you’re really interested in (“the population” in inferential statistics parlance).

Presumably, what Game Informer wanted to do was infer that was was true of its sample (the readers it surveyed) was also true of the population of interest (all Xbox 360 owners). ((At least they got an adequate number; 5,000 is actually way more data points than you need for something like this)) What Game Informer did was send out a survey and then ask people to voluntarily respond. I can easily think of three reasons why this may have inflated their results:

  1. People who had experienced a RROD and been justifiably pissed off about it would be more likely to respond to the survey (an example of what’s known as “self-selection bias”)
  2. People who subscribe to enthusiast magazines probably play more games and thus put their machines through more wear and tear
  3. People who subscribe to enthusiast magazines are more likely to be early adopters who bought initial runs of the console before Microsoft improved their process and reduced RRODs

Think of it this way: If you were interested in measuring the prevalence of drinking in your home town would it be wise to only survey patrons at bars? ((SPOILER ALERT: No. No you would not.))

So what should Game Informer have done? The best way to eliminate sampling error is to survey people from the population of interest randomly and not rely on self-selection to be in the sample. Sending surveys randomly to people who have registered an Xbox 360 would reduce (but not eliminate) sampling error. Same for randomly surveying people in a shopping mall or cold calling them. Sure, this is hard and expensive and not always practical, but the bottom line is that if your research has flaws like potential sampling error you should note it, and reporters –even in the gaming enthusiast press– should be savvy enough about these things to note them when reporting on them instead of screaming “54%! 54%!” because it makes for good headlines.

As an example, look at this online survey done by CNET UK on exactly the same question. The survey has most of the problems described above, but the authors are good enough to cop to it:

This was a self-selecting survey, so it doesn’t represent a random sample of console owners. It’s likely that people whose consoles have had problems are more motivated to fill out the survey, but the results are still interesting when you compare the Xbox 360 to its competitors.

…The survey did not distinguish between the Xbox 360 Arcade and Elite versions, which are very similar, or the PS3 and PS3 Slim, which has only just been introduced.

So good on them. The next time you see survey results cited anywhere, think about how credible they are by taking sampling error into consideration.