August 8, 2011 | By Adi Kamdar

Developers and Fans Benefit From Humble Indie Bundle Pay-What-You-Want Model

By now, we’ve all heard the traditional content industries complain about how technology hurts their business model. But, of course, the story does not end there. While the record labels, movie studios, and video game producers have not figured out a way to compete with free, others have. And this is good news for the rest of us, because it reduces the influence of the traditional gatekeepers who formerly operated an ironclad monopoly on what content we could experience and at what costs, and also because it allows developers and artists without major deals to widely distribute their work and to find new ways to get paid.

The problem, as the content industries would have you believe, is that it is “impossible to compete with free” (without resorting to law enforcement). But as the Humble Bundle has shown us, it is possible, with creators and distributors finding new and exciting ways to compete with free. It’s hard work, and it takes a distinct investment in time and effort compared to providing content the old-fashioned way, but – when done right – developers, content providers, and even those who provide the business model can successfully compete with free.

Back in 2010, Jeffrey Rosen and John Graham were working at a small game studio called Wolfire Games when they realized that selling games is hard, especially when you are not a large, established company. In their efforts to find a solution to the game sales problem, Rosen and Graham noted that developer 2D Boy had launched a successful pay-what-you-want campaign for their hit game, World of Goo. They also noticed that the practice of bundling multiple games to sell together as a single unit had proven to be highly viral on user-driven sites like reddit, and Wolfire Games had experienced success with an earlier bundle of their own. "The Humble Indie Bundle was an attempt to combine every awesome idea we could think of," said Graham.

So, for the first Humble Indie Bundle, they worked with various independent game developers to offer a suite of quality indie games that worked across platforms—on computers running Windows, Mac, and Linux—and priced the collection of games as pay-what-you-want, with the minimum charge being $0.01. To add even more awesome, the games were DRM-free. (According to Humble Bundle, "DRM always ends up punishing the honest user while the pirate goes free.") On the site, fans making a purchase could choose how their money was allocated between the developers, two charities (including EFF), and a "Humble Tip" to go towards the organizers. Finally, the Humble Bundle operators offered downstream incentives, including the release of more games should enough money be raised and offering certain game engines as open source software.

The response was huge. Communities like reddit enthusiastically praised the Humble Bundle, and fans competed amongst each other to raise the average donation levels. It was an immediate success: The first bundle earned more than $1.27 million. And a few months later, Humble Bundle decided to try it again. "The launch of [the Humble Indie Bundle 2] was suspenseful because some people were accusing the first bundle of being a fluke," noted Graham. "However, when HIB2 launched and we found that we had already raised $500,000 in 24 hours (twice the amount raised on the first day for HIB1), it seemed clear that the Humble Indie Bundle was indeed repeatable." The second bundle ended up earning more than $1.8 million. The group then teamed up with indie developer Frozenbyte to release a third group of games, collecting just under a million dollars. A year down the line, the newly formed Humble Bundle, Inc. is in the middle of their fourth bundle, which has already grossed more than $1.9 million dollars, with about one day left to go.

It turns out that the combination of empowering fans and offering desirable features is incentive enough for people to donate substantial amounts of money for something they could receive for cheap (or acquire elsewhere for free). The special sauce? Making the whole thing easy to use. Humble Bundle aimed to make it painless for a user to pay what they want, allocate their payment, and receive their games. (They even made it easy for users to increase their donation amount after downloading the games!) Nobody needed to create an account or download anything special, and the entire user experience was boiled down to two webpages.

Through transparency, the Humble Indie Bundle also turned the act of purchasing into more than just a typical exchange of goods and services. The purchasing page allowed donors to tout the operating system they were planning to run the games upon. Combined with real time updates on the amount of money raised, it was, at all times, abundantly clear to the community how much was being earned, which platforms were drawing the most donations, and who the top individual contributors were. Pairing social and competitive motivations with a low barrier to participation drew hundreds of thousands of users.

The large uptake, however, turned out to be a blessing and a curse, revealing that offering your content for virtually free is still a lot of hard work. With the first bundle, Rosen and Graham were the only two on customer support, forcing them to pull a few consecutive all-nighters in order to tackle everyone's problems. For later bundles, the duo realized that having strong customer service was key to reducing friction for their audience; they set up live chat as well as a ticket support system and enlisted help in order to answer questions. The magnitude of the payments also led to some unforeseen financial issues: PayPal's fraud team placed an indefinite freeze on $800,000 of their assets. The freeze was eventually lifted but demonstrates one of the challenges that can arise when suddenly successful under an inattentive online payment provider. "It was quite a rollercoaster," said Graham, "especially since the money was largely not ours but funds we needed to pay out to the other developers and the charities."

Despite the low, low starting price of $0.01, some still found ways of downloading the games for free. In line with the "experimentation" streak that characterizes the Humble Indie Bundle's approach, the team took this as an opportunity to learn by offering an anonymous survey to individuals who acquired the bundle through unofficial means. They used the findings from the survey to tweak their distribution (they added BitTorrent support, for example), and also learned that some customers simply did not have access to a credit card. Early on, the Humble Bundle team acknowledged that some level of unauthorized sharing is a normal part of digital distribution and have ultimately proven that focusing on customer service and optimization is profitable.

Undeterred by the unforeseen hiccups, Humble Bundle has shown that it is very possible to "compete with free," by embracing technology, pleasing fans, and supporting independent developers. It's a rousing success story that is paving a better way forward for independent game developers and indie game distribution overall.

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