What justifies skin cost being so high?

GROMMI·Apr 27, 2014·1 votes·626 views

[EDIT: I managed to post this in the completely wrong section. If a moderator could please fix this for me, that would be fantastic.]

Dear Riot,

I've been a very big supporter of your game for years. At first, I thought I would never like this style of game - (I hated DotA in WC3) - But over time, I grew to really love this game, and it is now my favorite game. I have over 1,500 normal games played, and I can only imagine how many ranked I have. I've only made it to Platinum (Plat 1 last season, Plat 5 now) so I'm not too experienced with the game.

But my question doesn't have to do with mechanics. Instead, I wanted to ask -

***What justifies skins being so expensive? ***

I understand that when a business creates a product, they often overprice it for profit and ingredient cost compensation. But, with the brilliant business model Riot has going on, there is little to none ingredient cost. By this I mean, were I to sell fruitcakes, I would have to pay for the materials to create the fruitcake, whereas with Riot it seems like the only possible cost is the labor involved in the creation of the skin.

Now this I COULD understand,** if...**

The skin had to be recreated each time someone desired it, like a work of art. But, in your brilliant business model - It does not have to be recreated! Whatever time goes into creating this skin is the best type of investment.

It's like creating a blog website with interesting blogs. Once you put in effort to create one blog, that blog can generate viewers for however long you keep it up. You don't have to recreate the blog every time someone wants to read it.

So, if I created a skin, for example, and it took me three months...

After those three months, it is pure profit. The skin is digitally replicated and costs nothing for players to 'purchase' or 'download' into their client.

When I first played this game, I never saw myself capable of paying 10$ for a skin. I don't feel like it's worthy of 10$. But, I love Riot, and so I support their game by paying 5$-10$ for RP, which I can then use to purchase their skins.

So, my question is,

I'd like to know why skins are so expensive. It seems to me that these type of digital merchandise could easily be sold for 2$ a piece, and legendaries 10$ max. Is it simply because players WILL buy at this price?

Or is there a lot behind the scenes I'm missing?

I'm not angry -- I love this company, and want it to be successful. So, by all means - Please keep it up. LCS is fascinating and I love having an Esports scene along with my own playing game.

I would just like to be educated.

P.S.: Is it possible (from someone smarter than me in business economics) to generate more profit by lowering the price on skins? I know I'd be more skins if I felt like they were a better price.

11 Comments

2dsystemApr 28, 20142 votes

Skins are their primary source of income, the money they make on skins doesnt necessarily cover the cost of just the skin, but rather it goes towards a pool of money which is Riots gross income, and they take that, and use it to pay employess, upkeep, etc.

MackleDogeApr 27, 20141 votes

The way it works is that their is basically a price point where they get maximum profit. If the price is too high they get more money per purchase but less purchases so it ends up being less profit. If the price is too low then they make less money per purchase but don't get enough purchases so they end up not getting as much profit. As far as Riot is specifically concerned, I'm actually inclined to believe that they could charge more for skins then they do and make a larger profit, but they try to price skins in the appropriate range as best they can as they compare to previous skins, so it doesn't make the community feel as if they are constantly having to pay more and more for new skins.

TsiddiqueApr 27, 20141 votes

^Exactly what I'm learning in my Economics class right now. xD

the Anarchit3chtApr 27, 20141 votes

I doubt the could raise the prices anymore. Mos anybody who played LoL before the prices rose like this is pretty fed up. You want a skin? Drop $10-20 bucks and you can get one. Before? Drop $10-20 and you could get like 5. And I mean without hunting the already cheap skins and waiting for them to go on sale or purchasing mystery gifts. The raise the price anymore and they seriously won't be making any money but from a minority fringe who has enough money to toss around at whatever they want.

MackleDogeApr 27, 20141 votes

....that's exactly what I just said.

the Anarchit3chtApr 28, 20141 votes

No, you said "I'm actually inclined to believe that they could charge more for skins then they do and make a larger profit" Which is the exact opposite of what I said. I believe that if they were to lower the prices, they would see such an increase in purchases that they would make more profits. For easy math, let's say instead of one person buying a $20 dollar skin, you have like 8 people buy a $5 dollar skin. $40 > $20

MackleDogeApr 28, 20141 votes

You missed the first section where I explained the idea of price point balancing. The last bit is just editorial nonsense that is entirely my opinion and based off of zero facts or evidence of any kind. My bad for not separating those, probably should have used two paragraphs instead.

Also, I won't talk easy math numbers, because I could just as easily use some random ass numbers to say that charging more will get them more. Unless we have access to in depth financial data, I don't want to waste time speculating price points with actual numerical values. Nothing personal of course, just don't much see the point in it.

the Anarchit3chtApr 28, 20141 votes

No, I understood that point exactly. But just because you understand that there is a sweet spot between price and number of purchases does not negate the fact that you said that if they raised prices they would make more money. I will give you the easy math part, because I myself thought it was a rather bad example as well.

You said that is your opinion that they would make more money if the raised prices, but it is just as well my opinion that they would not.

LouisLeGrosApr 27, 20141 votes

The whales pay for it instead of demanding for more value for their money.

The number of people who have spent thousands on his game is scary and it seems like they make it not worth it for Riot to let more people enjoy skins and buy RP at a lower price. They are also kind of stuck at current price points because if they decreased prices to go for the higher volume of sales model they'd have a lot people raging at them and demanding refunds.

GROMMIApr 27, 20141 votes

I like the discussion going on here. But I'd still like to know behind the scenes information :<

GROMMIApr 30, 20141 votes

Aw, I guess my argument was a bit flawed, huh? Bummer. :p