The wisdom of discounting GODUS

Perhaps you're right.

Steam's hard-discount sales are crazy. I have a LOT of games in my library that I would never have bought at full price, and I hardly play most of them. Some games I've never even opened, and some I've started but have less than an hour of playing time because I felt kind of "meh" about them. In this way, the Steam sale opens up Godus up to a whole new market - people who don't even particularly want it but get suckered in by what looks like an amazing deal. The added bonus is that these people are less likely to bitch and moan and leave bad reviews. They took a gambit on a super cheap game and don't really care if it doesn't pay off. So including Godus in these sales may be strategic as well as a desperate cash-grab.

There was a discussion on the Steam forums a while ago about 22Cans finances and it's really interesting, though not having any familiarity with how other game developers finance themselves I can't make much sense of it. The year-end financials for 2013 showed a massive balance of short-term liabilities - far in excess of their assets, which is a huge red flag. Short-term liabilities are obligations that fall due within the year, so with no obvious means of paying these, 22Cans looked doomed. The notes to the statements said that they were able to continue as a going concern because they had confidence in raising funds in 2014, and shortly after year-end enough money was avaialble to pay the debts. Could have been money from DeNA, maybe?

We don't have a revenue figure for 2013 but the massive debt was odd. It could have related to a loan that fell due in 2014, but you wouldn't normally expect to see a loan so far in excess of the company's fixed assets. It was over £1m, and I wonder if 22Cans might have been recognising Early Access sales as deferred revenue. This would mean the sales would be recognised as an obligation (debt) to the consumers until the obligation is fulfilled - presumably the release date of the game - which would mean they expect PC Godus to be complete in 2014 (Peter said in one of his Christmas videos that this would "definitely" be the case). Now, I don't know how other companies recognise Early Access sales, but approaching this as an accountant I would say this treatment is incorrect. When a consumer buys an Early Access game they are paying for an unfinished product, and 22Cans delivered an unfinished product. 22Cans is not obliged to finish Godus. Therefore in my opinion, Early Access sales should be recognised immediately as revenue.

Having said that, I should reiterate that we have no information about the liability balance and it may not be deferred revenue.

22Cans has over 30 employees and also makes use of contractors, who are notoriously expensive. A conservative estimate of their annual salary expense would be at least £750k but probably higher. In addition to that they have rent, energy bills and tax. I think sales figures on Steam will have been pretty good due to the immense amount of hype surrounding this game and PM's reputation, but that money will burn out VERY fast if 22Cans doesn't pull its act together. Every month of delay is another month of expenses.

At this point most of their eggs are in the basket of the iOS release. They cannot afford the time it would take to redevelop the PC game. They'd go bust. They can sort out the PC game if they have the will to, but it'll need to be after they've secured a stream of income from the mobile. We haven't talked about the mobile release all that much here, partly because there's not much interest in it but also because there isn't much to say - it's currently as buggy and unfinished as the PC version. It's difficult to see how iOS Godus can go from what it is now to being a lucrative money-maker, but then again, we do know that they've been working very hard on it and we don't know how much income they're already getting from it. I don't really understand the mindframe of mobile gamers who pay for microtransactions in games like this, so I have no feel for whether iOS Godus is appealing to these gamers.

22Cans always has a possible lifeline, which is funding from its shareholders. Peter Molyneux probably has a personal fortune he could put into the company if needed. That would be a serious case of putting your money where your mouth is: if he really has confidence that Godus is destined for success, he has nothing to worry about. But it seems pretty unwise to be loading your money onto a sinking ship, if it should come to that.

It could be either, or both.

I think that depends on how over priced it was to begin with. If the price of say "Sim City" is 80 bucks and they lower to 45 which is half, I think it makes sense. The point being it never should have been that high to begin with and some people will simply not pay that much for a game. Even still, I would start lowering by 5 bucks and seeing how many more bites I got, and if that did not work, then keep lowering it until your sales hit your target. 

Quite the contrary – based on what I've heard, Steam sales are crazy. The lower the discount, the more money the developers make. I wish I could give you numbers to back this up (I've been trying to dig up sources for it myself), but I've been to 2 separate financial developer talks and they both said more or less the same thing.

There's some really good info here: www.gamasutra.com/view/news/174587/Steam_sales_How_deep_discounts_really_affect_your_games.php

Here's data for a specific game (Dustforce): hitboxteam.com/dustforce-sales-figures. Check out the spike when it was discounted 50% off!

You may also find some more here, but I should be working right now so haven't dug into all the links: www.pixelprospector.com/the-big-list-of-game-revenue-sales/

It wouldn't surprise me if Godus had sold in the region of 750,000 - 1,000,000 copies at the moment, maybe more.

Lets take a look at the dustforce sales figures that Greay provided the link to. When they were part of the humble bundle (september 2012), they sold 138,000 copies of their game, including 50,000 on one day. That's a lot of copies. Now if you look at their steamchart, they only went up to a spike of 300 people playing at once (from a baseline of 10-20). That's less than 1% of new players playing the game at any given time! 

For Godus, the first major sale was christmas 2013, and as a result of that, it went from 300 peak players to over 2500. If we extrapolated from the dustforce figures* [i.e 50,000 -> 300 extra on peak], this would indicate sales in the region of 300,000 - 400,000 [i.e. 360,000 -> 2200 extra on peak]

*Now in the analysis here, it is important to point out that the humble bundle deal is spread over a larger period & contains multiple games, so the likely % playing at a given time is probably lower than a direct sale, though this was the steam christmas sale and people would most likely buy multiple games, in the same way the humble bundle provides multiple games, so it might not be as large a factor as expected. 

Well, the one number we do know is that Peter has said before there were over a million installs of the game right? I can't remember the source on that, but I'm sure someone else will.

I don't think you can apply Dustforce humble bundle sale pattern to Godus sale. I think December was a time of some major update and that was a cause of the spike. In fact as far as I remember Godus had spikes only after updates and sales were not represented in usage data.

And I call BS on one million installs.