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As a gamer, I spend money buying games. Sounds simple. But there's a
complex internal calculus of sorts that goes on whenever I want to buy
a game. There are inevitably more games out there that I want to play
than I will be able to - at least until I win the lottery and don't
have to work.
And so I must choose among numerous games, until I find
the one that is right for right now. For me, that comes down to a
question of value. I want to get the most out of whatever I decide to
buy.
It's not just a matter of fun - if a game will only entertain me
for 10 hours, I'm not likely to feel it's worth the $60 price tag that
this generation of console games come with out of the gate. I'm happy
to wait a few months or even a year to play a great game for half that
price. That's my pricing happy spot.
Which leads me to wonder why more games don't arrive on shelves
priced differently. Surely GTA IV cost bundles of dough to make and
hence it needs its sixty bucks over and over, but not every game
requires such sizable resources to develop, market and publish.
It'd be
great to see a company try to sell a good game at a competitive price.
I doubt they can honestly tell you what would happen if a game with
half as much hype as GTA 4 released at $30 or $40 dollars. Given that
GTA 4 sold 8.5 million copies as of May 31, 2008 (sorry that data's
sold old, best I could find), according to Take-Two Interactive, total
sales revenue should be $510,000,000.
However, there are 27.93 million
Xbox 360s in the world. That means the GTA4 tie ratio was 30%. If a
price point of $40 would have raised that rate to 50%, they would have
$558,600,000 in revenue. I can't say how many more people would have
bought the game at $40 versus $60, but I can say this: I didn't buy it
at release.
This may be an exercise in futility - I lack the data to make a
serious argument about particular price points. But the industry is
obviously waking up to the attractive nature of small payments.
Just
take a look at the number of get-rich-quick-stories
that iPhone apps has spawned. Need I state the obvious? At $5 or so a
pop,buying an iPhone app is an easy, thoughtless, guiltless impulse
purchase.
Along the same lines, free-to-play games with micro-purchases
are moving their way west, where the same psychological strategy is
employed - $2 for a new outfit for your 'toon is a small, harmless
drop-in-the-bucket. The key, of course, is to get a high user count
with low overhead and to rake in the pennies.
All in all, I think the gaming industry needs to wake up to the
relevance of pricing games and the importance of the psychological
impact a price tag can have on potential consumers. If they're going to
consider a micro-payments model, they need to also think about
releasing games in the $20-40 range. Then maybe people like me will
find them worth the value.
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For a game like GTA 4 I think the high price makes sense. There were probably a lot of people so hyped for that particular game that they would have paid $100. If it was priced for $40, they would lose a potential $60 for each one of these people. It's all about finding a balance.
I'm not sure your GTA revenue argument holds up. For every unit sold, there is a fixed amount of money that goes to the console maker as a royalty, a fixed amount goes to manufacturing the disk and packaging, and a fixed amount goes to the retailer. Let's say these fixed costs are $20. The rest goes to the publisher. So if the game sells for $40, the publisher gets $20 per unit. If the game sells for $60, the publisher gets $40 per unit. So it's possible the publisher would still get less money even if 6 million more people bought the game.
As for the L4D scenario, I personally assume that Steam users are, in general, more educated than the average person walking into a store. Note that this is pure speculation, but using Steam seems, to the outside world, more advanced than walking into a store. Also note that Steam, when a title is placed on sale, still shows the original price of the product. Yes, you're paying $30, but the price telling you the game is worth $50 is still right there.
I have no problem paying $60 (or more) for a AAA game, but most games are not AAA games. It's obvious what had to go in to games like GTA or Halo, so the cost is warranted, but with lesser produced titles (I don't want to call any specific titles out) it's hard to justify the price.
How I buy is this: if it's a game I really want, I'll pay whatever it costs without hesitation. If it's a game I'm unsure of, I will very much wait for a price drop or look for it used. If it's a game I have a mild interest in, I will buy it if the price is cheap enough. Last weekend, I snagged 6 360 titles priced petween $10 and $20. Not one of these games I would have paid full price for, but if any of these titles were originally released at $30-$40, I would have made a consideration.
Don't get me wrong... I buy A LOT of games, and there are still at least a dozen or so coming out this year I will happily be paying full price for, but there are about a dozen more I'd like to check out.
I really feel that publishers can make a lot more profit selling a game it knows is not a AAA game for a slight discount. I don't like to see any game tank in sales the first month of release, and I believe variable pricing can have a posotive impact on sales. Personally, I'd ratrher sell 200,000 copies of a game at $40 than 50,000 copies at $60.
Also, I think consumers are smart enough to know the difference. I can recognize the concern of not wanting your game to be seen as "lesser" than the more expensive one next to it on the shelf, and also the reverse concern of trying to sell a game at $60 when every other title is cheaper. We have come a long way from the Atari2600 bargain bins, and not only believe that consumers are smart, but also that these price adjustments are what they are asking for.
@ Tom Krausse: I didn't think about the idea of perception and the consumer-awareness. I'd be curious to see some polling about the assumptions behind such a comparison ($60 game vs $30 game), such as one being older or worse, and whether those thoughts hold up. Come to think of it, why isn't polling done by the industry? You know how many people wander into GameStops in cities, and how many would likely answer questions?
@Ted Brown: That's a great analogy, and basically what I'm getting at. Though hopefully the gaming industry won't be needing any bailouts anytime soon.
@ B N: As a fan of marketing, I believe strongly in the ability of sales figures to drive future sales. That's one of the reasons I feel it's important to price games better. If a game comes out at $60 and doesn't sell, I don't need reviews to tell me it's bad - I'll know just because no copies will have moved. But if it comes out at $40 and hence more people find it a value, then maybe I pick up a copy as well. Maybe this is simply naivety, but I feel there's a certain momentum to be had in sales, and starting off on the right foot (take for example the important of opening weekend box office sales for a new movie) can really set the tone for a product and perhaps define the difference between success and failure.
In this industry all publishers love those first-week sales, but probably not at the expense of total lifetime revenue.
For example, consider if it costs a studio $1 per unit sold in royalties to the voice talent, that's 2% of a $50 title, but 5% of a $20 title. There are often many such fixed costs (packaging, talent royalties, middleware royalties, licensing fees for intellectual property), and often the contracts do not have a sliding scale for these fixed cost items; lowering the price of a game would lessen the profit in both absolute and relative terms.
There comes a point where these fixed costs set an absolute floor for pricing, in which a publisher would contractually lose money for every unit sold. People saying "if the price is halved they would sell three times as much" are not taking into consideration that many of the costs would be three times as much as well.
Game pricing isn't selected capriciously. It's a balancing act between many different variables, and with the cost to develop a AAA title these days, if a studio can't sell it for $50 retail, they might as well not do it at all.
Money in must exceed money out. That trumps any other consideration if you have employees whose ability to pay their rent is dependent upon the studio's ability to operate in the black. And fixed costs play a major role in the red/black pricing point.
We are already starting to see this with digital distribution. Instead of paying Microsoft $20 a copy for the privilege of selling a game on their system, you pay a percentage of the sales. I assume middle ware such as the Unreal Engine has some sort of sliding scale licensing contracts because I've seen it in some relatively inexpensive games.
Analogies to industries with a physical product don't work because our marginal cost of production is almost nothing. Do you think that Toyota would keep their pricing model if it cost them $200 per car (after spending millions on the design)? The real question is at what price point is price*quantity the greatest. I think that few games are prices correctly at $60.
- new indie games tend to cost between $10-$20
- new Nintendo DS games tend to cost about $30-$40
- new PS2 games, rare as they are, tend to cost about $30-40; that doesn't take into account older games still for sale, like many of the greatest hits games; many people still play the PS2 as their primary console
- Wii games have quite varied pricing, but are almost always $50 or less
- top-tier PS3/360 games tend to cost $60-70
That's actually a pretty huge variation in pricing, and I suspect it's a big part of the reason that the DS has sold as many copies as it has. People who want less expensive games can get them just fine by not trying to stay current with the latest HD consoles.