I'm pretty sure it's income that you report on a 1099 MISC form or something like that, if they're paying you personally.

If you have an actual business collecting the money, and you are receiving anything substantial at all, then you should talk to an accountant

Part 3! "Pay What You Want" and the 4 Currencies

IANAL, however, we had a lawyer for our latest project and this is what we did:

We have a EULA that essentially absolves us of all responsibility for anything bad that could happen and tells the user they are assuming all the risk. This sounds like kind of a jerk move, but given the massively litigious culture many of us live in today, it's to protect you from a random drive-by lawsuit.

That being said, we then go out of our way to make things right for our customers whenever something goes wrong, even though we don't legally "have to."  So, I often give refunds if someone can't install the game for some random reason, and offer all kinds of other help whenever there's a problem. (For instance, very occasionally someone would lose a save game when importing from the demo, so we started keeping a save game database that could get them back to more or less where they were before).

Customer service takes quite a bit of time, so you have to be careful about over-promising if you've got a small staff, but generally customers really appreciate it. This is one area as an indie that you can compete brilliantly with the big boys.

So basically - make sure you release yourself from as many legal obligations as possible, because otherwise the full force of civil law can put you out of business in a day if you ever slip up and are unfortunate enough to get in some greedy lawyer's crosshairs, but then make sure you bend over backwards to offer amazing volunatry service to all your customers.

["value"]

@Faceless,

I definitely agree

My theory can be expanded into any number of currencies - whatever you perceive as having to "pay". All that goes into your decision to get something or not, so the "four currencies" are by no means an exhaustive list and is limited only by your imagination.

I think what you're describing with "incentive" with regards to a quality multiplayer experience is less of a "currency" along the lines of the other four, which is mostly there to measure what the user "pays," but instead part of "value" - ie, what you're getting for your money, time, pain-in-the-butt, etc.  In most of my examples, I assume that the value of the pirated version is exactly the same as the legit version, which is definitely not true in all cases, as you point out here!

So, a fully exhaustive cost-benefit analysis of piracy vs legit would weigh both the value of the product with the cost of acquiring it. In this case, the value of a high quality multiplayer system on a well maintained server with lots of other players can definitely tip things more towards the legit purchase, even if the pirated version costs less time, money, pain-in-the-butt, etc.

BTW: StripeyWhale is me writing from my friends' house, I was accidentally logged in to his account 

My experience with ads is making epcm's (Earned Cost Per Mille) in the tens of cents. So, every 1,000 plays can get you like, 30 cents, maybe up to a dollar if you are phenomenally lucky. So, 500,000 plays could net you a whopping $150-$500. And that's for half a million plays!

Generally, if you want someone to pay for something, you need a bigger pull than just "no ads." If you're leveraging on flash portals those will have tons of ads anyway, and might even roll some before your game, or refuse to allow you to have your own in-game ads on the version you upload.

Also, demo-upsells are tough with the flash market. When we initially launched under a demo format, we got a late of 1-star hate reviews, and had to quickly respond to the comments and fix our game information and title (turns out the problem was we weren't advertising enough up front that the game was a demo, and people were suddenly hitting the upsell screen and getting pissed).

After that, our score started going back up. We're at about 4.1 right now. Previous games I've done (which were completely free) were at about 4.3-4.6 at their height. So, if you do a demo up-sell, you'll have people who hate it no matter what, but these aren't your customers. Their votes do matter, though, because they push your visibility down if the score drops too much. That's why most people tend to do some kind of free-to-play situation where the core game is free and they only sell premium content - the freeloaders don't get pissed, and the customers have something to buy.

So, we had success with a demo up-sell format, but it's not the way people usually do things in the world of flash games, and most people (including myself) were surprised it worked. The other game I've heard of that made this format work was Creeper World: http://www.kongregate.com/games/whiteboardwar/creeper-world-training-sim

Conventional wisdom is to do free-to-play, and there's tons of articles on that. We tried something different and it worked for us and we're still not entirely sure why 

Flash portals like Kongregate and Newgrounds are generally more "meritocratic" than heavily hand-curated portals like the AppStore, Steam, BigFish, etc.

I know for a fact that on Kongregate whether you get featured on front-page is nearly 99.9% dependent on your aggregate user review score. I've been able to get my past 4 games on the front page at least once each, so the only real obstacle there is the quality of the game itself and how well the audience receives it. I've been able to wrack up several million lifetime plays for my past 3 games combined on all the flash portals, but of course they had absolutely zero monetization strategy so I made a couple bucks on advertising and that was it . Defender's Quest has done much better because it drove traffic to our website and converted to sales. Your mileage may vary, but flash portals have been great for us!

I can't speak to mobile strategies at all, have no experience there at all.

I'd have to dig more into our stats to say for sure, but everything points to the flash portal traffic being mostly self-contained.

People trying the flash version on our site were often directed there from the review sites, but the kong/ng portal stuff took off on its own. I have a friend who works at Kongregate that I can ask for more details as he has more of an insider's view.

Of course, your mileage with this technique might vary. Our design was something that appealed strongly to the flash crowd, and the price point was set pretty low.

@Xienen:

It depends on how big your total audience is. For instance, on Kongregate (the source of about 80% of our sales), we've had ~ 500,000 plays total. Not sure how many uniques that represents, but even assuming it's something like 100,000 unique players, a 1% conversion rate is still 1,000 sales, which ain't bad.

We've actually had about 10,000 sales so far from Kongregate, so we're somewhere between a 1-10% conversion ratio (because I'm unsure what the real unique player count is).

Of course, this is because we have a free browser demo that we uploaded to flash portals. There's no way we'd ever be able to drive that kind of traffic to our own site by our own power, so in the case of a "traditional" downloadable game sold on a site without a public demo, and not being on a big portal like steam, in that case you'd need a muuuuuuch higher conversion %.

Pretty much. "Marketing" is at least as important as making something good. Even if you have something great, you need to accomplish the following things to succeed:

• Tell lots of people
• Get their attention
• Convince them that it's great
• Convince them it's great enough to give you money/respect/love/etc

Every single one of these steps is quite difficult. There are plenty of cases where "people will do your marketing for you" but these are generally specialized cases where you were able to cross a certain magic threshold for these individuals. Or just get lucky.

There's things you can do to "increase" your luck, etc, but these are also difficult.

So, with all due respect, yes I think your position is a bit naive

[Site]

In the interest of providing some additional data points for the debate, here's some basic stats from our January launch of Defender's Quest. I've written an upcoming article that goes into more detail but Gamasutra has it under embargo for now until it runs next month.

We were reviewed (and previewed) in several major media blogs, I've listed a few of them below. So I think we attracted some pretty decent attention.

• Joystiq: Indie Pitch
  
• Destructoid:
  • News Post
  • Review (8.5/10)
• Rock, Paper, Shotgun:
  • Review
  • Preview

Here's a full listing.

So how did that all translate into sales? One thing we did was make coupons available, and in most cases the reviewers included these in their article (Destructoid did on the news post, but not on the review, so their numbers in this chart are likely under-counted).

Site	Coupon Sales
Kongregate	3,652
Newgrounds	476
RPS	390
Joystiq	225
Reddit	108
Destructoid	93
Site Newsletter	83
Zeboyd	41

These are just coupon sales. Total sales were significantly higher.

The forthcoming article will go into methodology a bit deeper, ie, coupons are just one metric and present an incomplete/limited picture, blah, blah, blah, but what's immediately clear from even this rough sample is that the flash portals had a way bigger effect on driving traffic to our site and converting to sales than even the biggest media mention (RPS), and had a much longer lifespan. We're no longer getting traffic from these old media articles now that they're buried in site archives, but we still see daily traffic from flash portals, even though it's slowed down a bit now.

Using other metrics (site traffic referalls, etc), we're reasonably sure at least 90% of our total revenue is being driven by flash portal traffic from our free browser demo. The lion's share of that is from Kongregate.com, though Newgrounds alone brought in more revenue than RPS did.

Smaller flash portals like minijuegosgratis.com that "stole" our swf file from Kong/Newgrounds were giving us as much or more traffic referrals than some of the other articles.

Thoughts:

-Media is important
-Media hits usually give you big sales spikes, then dip back down
-Flash portal presence > good media reviews
-Make a browser based demo. See what happens.

We released the browser demo on a whim just because we were already using Adobe AIR and it wasn't much effort to make a vanilla flash demo build. I will never release a game again without a browser demo. Even if I make a game in something other than flash, I'll ensure I have a pipeline to make a browser demo somehow, such as Java, Unity, Chrome Native Client, HTML5 javascript, whatever. Flash has the unique ability (today) to leverage flash portal distribution, but above and beyond this, I think our non-flash-portal sales were higher because of how easy the demo was to play.  Furthermore, it probably made it easier to get reviews because a skeptical and time-strapped journalist would be more likely to click on the "free web demo" link than to even plug in their free review code to download and install the full version.

We didn't quite "go viral," ie, the media hits didn't launch us into a chain reaction. Most of the media posts were the result of us directly contacting those sites, so the only people who wrote about us without us sending them a press release or personal email to the editor were some lesser known sites.

As far as I can tell, the popularity on flash portals had little to nothing to do with the media reviews. Getting featured on Kongregate is very closely tied to user review score, so it's more of a meritocracy than strongly curated portals like the appStore. We were less at the whim of a few fickle tastemakers than we were at the whims of hundreds of thousands of fickle players. 

Even without all those great reviews from game sites, based on the data I have I think we still would have made about 90% of our current revenue.

So that's our specific experience. Just one data point, but maybe it will be helpful to someone.

I'm not at GDC this year, but our design lead Anthony is, so I threw this together for him real quick. The white box in the bottom right is for him to write free download codes in

This is a really sweet looking game. Can't wait to play it Halloween forest looks good - I like how the grass is pretty low detail to contrast with the high-detail forest and characters.

Hey, interesting thoughts!

The difficulty in translating $P, $I, and $T into $M is that those values keep changing and will vary between individuals.

It's not impossible to come up with some sort of value, of course, for instance, bribery is a good example of a case where people are more than willing to put an exact dollar figure on their integrity:

"Will you forge this document for me for $10?"
"No."
"How about for $100?"
"Okay."

So in that contrived example, the $I cost of forging is worth 100 $M to that person. For our piracy examples, we might be able to calculate how much $M the $P+$I+$T is worth, but probably only on an individual basis. I'm also no math genius, so I leave that exercise to someone better versed in those fields 

The example you give of online features that don't work in pirated versions is indeed a strategy that works, and usually works best for games that rely on a server. People get that it's an online game so they need to connect to the server, so there's not a big $I cost there, but a server is much harder to pirate than a standalone single-player game. How do you pirate WOW? By connecting to a pirate server instead of Blizzard's, and those pirate servers generally are buggy, suck, have bad connection rates, and in the rare case that they're actually good, they still don't have all your friends who are playing on Blizzard's. The quality of the product is far lower, and the $P cost (as well as $T if you count bad server lag) is higher, and most importantly - only for the pirates.

It'd be very hard, for instance, for us to put any kind of DRM into Defender's Quest that would make pirates pay the $P cost without it falling on legal customers instead. What would likely happen is a cracker would strip out the DRM and put it on a torrent site, so the restrictions would only remain in effect for the legal version of the game.

"Fighting" piracy is difficult because it's so hard to come up with measures that only selectively target pirates. If you have any more cool ideas on this subject, let me know! It's been a fun conversation

If you're talking about the Kongregate version, you're right - Kong made us remove the import button, but then we talked them into letting us put it back

Awww shucks

The $I thing you mention is really interesting - "negative $I cost" for supporting someone you like is even better than just not feeling guilty, it makes you feel good about yourself.

Speaking of, got any games you're working on I should check out?  

@Moczan:

In your particular case, what motivated you the most to buy from digital distribution rather than piracy?

Yeah, this isn't exactly a brand new theory. Someone wrote a very similar article 2 years ago, this is just me putting it into my own words since a lot of people still think in terms of just money.

Hey guys!

After releasing our game Defender's Quest with no DRM, it started showing up on some torrent sites after a few weeks and it made me start thinking about what motivates people to pirate games.  (For the record, I feel that our decision not to put DRM in our game resulted in more sales than we would have gotten had we tried to lock it down.)

So, I wrote some articles about it:

Part 1 - The basic theory

Part 2 - Cases studies (Steam/Consoles/A Game of Thrones)

The basic premise is that the often-quoted RIAA/MPAA complaint "you can't compete with free" is false because it assumes piracy is "free." If we look at costs beyond just money-dollars, it's clear that there are other "currencies" that people are spending when they make a decision.

The "four currencies" in my articles are:
($M) Money-dollars
($T) Time-dollars
($P) Pain-in-the-butt-dollars
($I) Integrity-dollars

Part 1 outlines the basic idea and part 2 responds to comments, includes limitations to the theory, adds nuances, and applies the idea to various case studies to analyze the effect of DRM.

Also this whole thing provided a good excuse to put icons of butts on dollar bills:




Any thoughts?

Cool, if it's not out of line, I've written some articles that might help you with that:

Deployment Strategy

Lessons in Demo Launching

Also, if you need any help with AIR, I know a lot of tricks with it to make it more tolerable to people. Most people don't realize our game is packaged with AIR as we leverage the NativeApp API, which also lets us do cool desktop-native things like in-game resolution switching (I can share the scripts with you if you're interested).

This does increase maintenance a bit, and you need a Mac/Win/Linux box for each platform you want to support with NativeApp (whereas you only need one to do generic AIR).

One last thing - I'll share our full sales numbers and other data eventually in case it is of use to folks like you (on a separate and relevant thread, of course). Right now that data is under embargo because it's part of an article that Gamasutra wants the exclusive on, but as soon as they run it or reject it, I'll post 'em.