27 minutes ago, abrams_tank said:

Of course they need to make a profit.  But how they price is irrelevant of any sunk costs they have made.  It doesn't matter whether it's the flight simulator business, popcorn business, or furniture business.  All businesses, if rational, don't price based on their sunk costs.

Not true in most circumstances.  Companies are in business to generate a profit, which by definition means you are covering all costs, including those “sunk costs” necessary to develop and bring a product to market.  All of that factors into how a company prices a product, but most importantly, what the market will bear.  If they went in to this project knowing the market price wouldn’t cover their full development costs (sunk cost) then I dare say there wouldn’t have been a project to begin with.

Sunk cost fallacy would be relevant if the market dictated a lower than anticipated selling price.  Therefore they would need to decide if the lower profit margin is such that variable and incremental costs are at least still covered.

Edited February 17, 20224 yr by Gilandred

Ha Ha, I'm yawning too!

 

5 minutes ago, tpete61 said:

Ha Ha, I'm yawning too!

 

Yeah, considering the effort you put in I can understand this. 

😉

 

Edited February 17, 20224 yr by Swe_Richard
Smiley added for levity.

20 minutes ago, Gilandred said:

Not true in most circumstances.  Companies are in business to generate a profit, which by definition means you are covering all costs, including those “sunk costs” necessary to develop and bring a product to market.  All of that factors into how a company prices a product, but most importantly, what the market will bear.  If they went in to this project knowing the market price wouldn’t cover their full development costs (sunk cost) then I dare say there wouldn’t have been a project to begin with.

Sunk cost fallacy would be relevant if the market dictated a lower than anticipated selling price.  Therefore they would need to decide if the lower profit margin is such that variable and incremental costs are at least covered.

They probably would have done an initial estimate of cost to develop the MD 11, and number of units sold of it, and how much expected profit they would generate, before they started the project.

But market conditions change.  The best example is the Concorde by FSLabs for P3D.  I'm sure FSLabs also did an estimate of the cost to develop the Concorde for P3D, and number of units they expected to sell, before they started it for P3D.  What FSLabs could not foresee was the implosion of the P3D add-on market.  As you may know, the P3D add-on market has dried up, with some developers such as Aeroplane Heaven, even making their P3D catalog free, probably because Aeroplane Heaven sees very few P3D add-on sales lately.  

Going forward, whatever FSLabs spent developing the Concorde already is a sunk cost.  The P3D add-on market has changed, and whatever initial estimates FSLabs made for the number of Condorde units they expected to sell on P3D, is probably off.  The choice for FSLabs moving forward is to determine whether the future costs of developing and selling the Concorde on P3D will outweigh the revenue they get back (ie. whether the future revenue of their Concorde P3D sales will be greater than all future costs to develop & support the Concorde).  If FSLabs determines that the future costs will be greater than the revenue they get back from Concorde P3D sales, it's in FSLab's best interest to stop developing the Concorde and eat whatever sunk costs they have put into the project. 

The same goes for TDFi.  Of course they are in it to generate a total net profit.  But if they are thinking rationally, they price the MD 11 to maximize their total profit (if it's possible to profit from it).  If TDFi determines the future costs of the MD 11 will outweigh the future revenue of MD 11 sales, it's also in TDFi's interest to stop the MD 11 project too (but unlike FSLabs, I'm pretty sure TDFi is not in the same position because MSFS sales have been very good for 3rd party developers).  There is also the case where TDFi can make still make a net loss on the MD 11 project but still has an incentive to proceed with the MD 11 project because they can minimize their losses - this is where (sunk costs up to this point + future costs)  > total revenue of MD 11 sales, but future costs < total revenue of MD 11 sales.

 

Edited February 17, 20224 yr by abrams_tank

1 hour ago, tpete61 said:

Your very correct that's the way I see it as well.

At the end of the day this is basically a game so having a $100 add on is not going to appeal to the masses.

I'm sure the developers will make money at $100. They know the market.

I play the game quite regularly but have been disappointed enough by payware that I wouldn't spend $100.

To each his own!

You sure like to bash MSFS don't you?

 

Wow!  We're going have like 5 different airliners showing up at the same time lol!  It will be raining airliner addons for you suffering simmers!

1 minute ago, ryanbatcund said:

Wow!  We're going have like 5 different airliners showing up at the same time lol!  It will be raining airliner addons for you suffering simmers!

Credit Card companies will be very happy. 

18 minutes ago, abrams_tank said:

They probably would have done an initial estimate of cost to develop the MD 11, and number of units sold of it, and how much expected profit they would generate, before they started the project.

But market conditions change.  The best example is the Concorde by FSLabs for P3D.  I'm sure FSLabs also did an estimate of the cost to develop the Concorde for P3D, and number of units they expected to sell, before they started it for P3D.  What FSLabs could not foresee was the implosion of the P3D add-on market.  As you may know, the P3D add-on market has dried up, with some developers such as Aeroplane Heaven, even making their P3D catalog free, probably because Aeroplane Heaven sees very few P3D add-on sales lately.  

Going forward, whatever FSLabs spent developing the Concorde already is a sunk cost.  The P3D add-on market has changed, and whatever initial estimates FSLabs made for the number of Condorde units they expected to sell on P3D, is probably off.  The choice for FSLabs moving forward is to determine whether the future costs of developing and selling the Concorde on P3D will outweigh the revenue they get back (ie. whether the future revenue of their Concorde P3D sales will be greater than all future costs to develop & support the Concorde).  If FSLabs determines that the future costs will be greater than the revenue they get back from Concorde P3D sales, it's in FSLab's best interest to stop developing the Concorde and eat whatever sunk costs they have put into the project. 

The same goes for TDFi.  Of course they are in it to generate a total net profit.  But if they are thinking rationally, they price the MD 11 to maximize their total profit (if it's possible to profit from it).  If TDFi determines the future costs of the MD 11 will outweigh the future revenue of MD 11 sales, it's also in TDFi's interest to stop the MD 11 project too (but unlike FSLabs, I'm pretty sure TDFi is not in the same position because MSFS sales have been very good for 3rd party developers).  There is also the case where TDFi can make still make a net loss on the MD 11 project but still has an incentive to proceed with the MD 11 project because they can minimize their losses - this is where (sunk costs up to this point + future costs)  > total revenue of MD 11 sales, but future costs < total revenue of MD 11 sales.

 

But also remember, a business, well a good business (which I'm sure TFDI is) will be studying the market and projecting what they will make off the product. Now like mentioned before, you need to take into consideration the niche market flight simulation is on top of that the niche product the MD-11 will be.

Personally, I would've taken a look at PMDG's md-11 release years ago and studied that, next you do know that you're not going to make the $$$ that any 737 or a320 will make, so I would then yes jack up the price to cover my costs. Why? because I know that most casual simmers probably wont get it, and the hardcore simmers who will, have been waiting on an md-11 for years and will be willing to pay. That way with the smaller customer base, the company is still making a profit off this particular product, maybe even breaking even.... but definitely not at a loss.

Just because MSFS sales numbers are high, doesn't mean its the hard core simmers spending the cash... it can be the entry level or casual simmers spending the cash on the useless 737 that's been for sale for a while now. Do more complex aircraft designers need to lower their prices to make a profit? Time will tell... its a niche on niche market with the higher tier aircraft. Would I like to pay less and get a great product? Sure. However business is business in my books and if I'm getting a quality addon and supporting the devs at the same time to keep their business going... I'm all for it. 

10 minutes ago, Ridvan Celik said:

But also remember, a business, well a good business (which I'm sure TFDI is) will be studying the market and projecting what they will make off the product. Now like mentioned before, you need to take into consideration the niche market flight simulation is on top of that the niche product the MD-11 will be.

Personally, I would've taken a look at PMDG's md-11 release years ago and studied that, next you do know that you're not going to make the $$$ that any 737 or a320 will make, so I would then yes jack up the price to cover my costs.

Well, I disagree with you once again.  TDFi's goal, if they are a rationally thinking business, is to maximize (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11).  And Total Future Costs of the MD 11 include future development costs, future support costs, future marketing/advertising costs, etc.

That's it.  Just keep it to a simple formula: (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11)

Their price can affect the (Total Revenue of MD 11 Sales) part for the formula from above.  Their price can also potentially affect the (Total Future Costs of MD 11) part of the formula, because if they sell more units of the MD 11, they may need to hire more support staff. But at the end of the day, it's about maximizing (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11).

This is also why sunk costs are irrelevant.  The formula above of (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11) doesn't even include sunk costs.

PS. I hate that I have to get into the exact formulas, but if you look at the formula, it becomes more obvious what TDFi should do (and also what FSLabs should do with the Concorde for P3D).

Edited February 17, 20224 yr by abrams_tank

4 minutes ago, abrams_tank said:

Well, I disagree with you once again.  TDFi's goal, if they are a rationally thinking business, is to maximize (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11).  And Total Future Costs of the MD 11 include future development costs, future support costs, future marketing/advertising costs, etc.

That's it.  Just keep it to a simple formula: (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11)

Their price can affect the (Total Revenue of MD 11 Sales) part for the formula from above.  Their price can also potentially affect the (Total Future Costs of MD 11) part of the formula, because if they sell more units of the MD 11, they may need to hire more support staff. But at the end of the day, it's about maximizing (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11).

This is also why sunk costs are irrelevant.  The formula above of (Total Revenue from MD 11 Sales) - (Total Future Costs of MD 11) doesn't even include sunk costs.

PS. I hate that I have to get into the exact formulas, but if you look at the formula, it becomes more obvious what TDFi should do (and also what FSLabs should do with the Concorde for P3D).

I'd have to disagree with that way of thinking as I said before they are a business and do need to make their money. But we can talk business all day here and you'll stick to your guns and I'll stick to mine, it will just go on and on. 

I just hope we get a great MD-11 which I'm sure we will and that TFDI make their pricing decision however they see fit (reasonably of course ha!)

Anyone remember TFDI took nearly 14 months to cure the CTD when switching views to outside with the 717? Then almost as long to optimize True glass and the lights as well. That's when they lost this customer. Expensive abandonware IMO

Instant buy for me no matter the price..TFDi has never let me down.

7 minutes ago, RW1 said:

Anyone remember TFDI took nearly 14 months to cure the CTD when switching views to outside with the 717? Then almost as long to optimize True glass and the lights as well. That's when they lost this customer. Expensive abandonware IMO

Yeah that was a bummer back then, but when they came they came heavy and delivered. 

The reality is the gamer crowd are a different market to those who consider themselves hobbyists and enthusiasts.

Hobbyists and enthusiasts will willingly spend for their chosen genre, even if an item is a little pricy (I watched a racing sim enthusiast spend ~$2,000.00 on a carbon fibre steering wheel), plus hands up if you've a 3080+ GFX card (which is a very pricy spend), although commercial is the real path to income in niche types of markets.

The company I work for sells commercial use software at $12,000.00 per license plus an additional %20 per year as annual software maintenance and there are no shortage of sales.

MSFS would have a long way to go before it is usable is a commercial sense though, e.g. there has to be repeatable saved senarios, weather managment including historical, full multi-monitor, plus commercial use licensing for every software component and toolset in use within the system.

Sure, looking pretty attracts the plebs but ultimately the experience is shallow as it stands now.

Still I would expect hobbyists to spend for the MD11 considering what else is there ??? plus it's an interesting plane considerably different to other jetliners.

Cheers

 

 

12 minutes ago, Rogen said:

T

Sure, looking pretty attracts the plebs but ultimately the experience is shallow as it stands now.

 

 

 

MSFS is miles ahead of any other home  sim I have flown, and I have flown them all. You can't compare a home sim with something like a sim built by CAE, at around $25,000,000 .