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The $60 price tag is just a starting point for next-gen AAA games
The $60 price tag is just a starting point for next-gen AAA games
June 12, 2013 | By Kris Ligman

June 12, 2013 | By Kris Ligman
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Coming away from the first official day of E3, Sterne Agee & Leach Inc market analysts forecast average revenue per user on triple-A titles to reach $80 to $90 U.S. in the next console cycle.

"Our sense is next-gen games will launch at the same $60 retail price point as the current-gen games," says Sterne Agee & Leach. "However, increasingly, publishers are striving to enhance the ARPU [average revenue per user] closer to $80 or $90 for their triple-A titles through greater focus on DLC and in-game micro-transactions, etc."

Digital distribution including full downloads of triple-A games will contribute to this take, but not without facing significant technological challenges, analysts say. Inconsistent bandwidth availability across the market mean that full downloads of some of the larger titles could take as much as 24 hours, meaning that boxed retail is not likely to go away this console cycle.

"While the switch to digital is inevitable, it seems the conditions are not quite ripe for that yet and discs will likely dominate in the foreseeable future," says Sterne Agee & Leach. "This should benefit GME [GameStop], at least in the early part of the next cycle."


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Comments


Mike Rentas
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$60 is just the starting point currently. There's nothing new about this.

Doug Poston
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True, but I think the news is that publishers are going to *really* push DLC.

Not just 'Horse Armor' or 'Pay to Win', but 'Pay to Unlock the Rest of the Game'.

Kujel s
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And less and less people will pay that until the market implodes.

Dane MacMahon
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Pretty much. Certainly no huge influx of new people will be willing to pay it to counteract rising budgets. The price is too high already considering the wealth of options out there as a consumer.

Joshua Hawkins
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The price of games has very little to do w/ the price of production, and more to do w/ how much people are willing to pay. Personally I feel that there's a large enough market that's already buying special editions that $70 isn't really going to stop these consumers. I'm surprised people are paying $60 especially since most games are marked down under $30 after 6 months.

Season passes are probably going to be a big player next gen also which I'm not sure if that's what Sterne Agee & Leach are talking about when they mention $80-$90 price points.

Nicholas Lovell
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I think you misread the article. The analysts are not saying that games will cost more than $60.

They are saying that some people will, as they always have, buy games. The publisher, having got over the biggest hurdle (finding a customer) will offer you ways to spend more money on things that you value. They will offer DLC and microtransactions to increase the Average Revenue Per User to $80 or $90. But an average is very misleading.

For example, let's say that only 10% of users buy any additional content. But the Average Revenue per User has increased by $20-$30 across the whole user base. So those people who *do* spend money, that 10% of payers, will need to spend an average of $200-300 to make those numbers add up.

The secret of the next gen is that some people will spend hundreds or even thousands of dollars on a title. And the entry price will stay at $60 or fall, even as far as zero.

Dane MacMahon
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I understood that. However in my opinion that revenue stream is just not going to be there in any reliable way. The day one $60 purchase is a lot to ask in the current market, unless you're Skyrim. And pumping customers for $15 DLC isn't as easy as it used to be, and isn't going to get easier with more and more competition from cheaper alternatives.

No one is saying Skyrim can't survive on next-gen, but does this model honestly help a game like Hitman Absolution? Will next-gen excitement make a game like that double in day one sales and grow significantly in DLC purchases? I just don't think the market is there at these budgets.

Would love to be proven wrong though.

Ramin Shokrizade
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I'm going to suggest that for single player and massively single player games, this price point will not budge significantly in the near term. To break past this barrier to triple digit average game revenues, AAA will have to make the switch to "Social AAA". Here I do not mean social network games, per se, and a return to Social AAA will not occur first on Facebook. That said, companies will also have to learn how to monetize social collectives and stop treating them like a bunch of individuals because this is not how they behave in these environments.

Yong Wu
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While I see the rationale behind this all I can think about is how this will lead to even more focus on AAA games and any AAA failures will most likely cause more financial issues. Reason for this being that more companies will focus on trying to get that AAA game that can generate x% more profit from all the extras they can get people to play. Audience spending purse amount hasn't changed much as wealth of the masses has stayed the same or shrunk in the last couple of years. So this will mean that audience will be spending more on each game but buying less number of games per year.

Nicholas Lovell
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It's too late to worry about that. That's what the market already looks like. That's why Atari and THQ have gone bust.

Gil Salvado
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If there wouldn't be a rising F2P model I would I agree with you. I am much more concerned about the small chances for a small start-up studio with low budget, as F2P gets more and more high-quality and AAA titles are no option for those studios.

Mark Fronstin
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Why do we need publishers any longer in this age for PC games? Consoles I can understand why.

Kujel s
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Because you can't get on steam without a publisher and that is the only place to make a living on pc gaming.

Zirani Jean-Sylvestre
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>> Because you can't get on steam without a publisher

Are you sure of that ? I think there are games on steam that have no publisher

Besides there's Greenlight... Sure, you might argue the system is bogus and flawed but so was steam in the beginning.

And finally, you can sell the game through you own channel and furthermore there are other monetization channels

Gil Salvado
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Because word of mouth aint enough for marketing. You still need a publisher for PR and if you run a no-name studio or one with a small track record you're getting the same bad contracts as usual.

Dane MacMahon
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Word of mouth is plenty enough to get on Steam if you make an amazing game. The problem is most games are not amazing.

Jane Castle
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Truer words have never been spoken...... There are lots of indies that have no track record to speak of and NO publisher that are able to get on Steam.

Gil Salvado
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I really don't like this integration of microtransactions in AAA titles, it's a fair monetization model for f2p titles in my opinion and aint much else.

Also I don't think this is a good way to increase ARPU, because you can't guarantee a certain amount of purchases with this model especially for microtransactions. Supcriptions and season passes are be a better way to increase ARPU and a model that fits AAA titles more properly.

As I recall it, the integration of microtransactions in Dead Space 3 wasn't generally well received and I doubt this will change in the future for upcoming titles. Low priced DLC, like weapon and armor packages, are the way to go but a money sink will offend most AAA customers. The majority of whales make 5-10% of a gaming community, that's not enough to have an impact in the communities voice - especially if the gap between rich and poor continues to increase.

Nicholas Lovell
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Why do believe that subscriptions and season passes are a better way? They limit the amount more a person can spend. If, say, you have a season pass and 2 packs of DLC, then you cap out at the most a single player can spend on the game at sub $150. With microtransactions, that figure can be in the hundreds, thousands or tens of thousands of dollars. It is much easier to affect ARPU.

Jonathan Murphy
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We charge too much with reckless abandon to the facts. People aren't getting richer. Game companies that adapt will grow. The rest will join THQ, Midway, Atari in the trash bin. You won't be missed. Stop thinking like a dinosaur. That meteor called reality is going to wipe you out.

Jane Castle
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EA dinosaur looks up, then goes back to eating palm leaves......

Michael Stevens
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I'm not convinced that $20-30 extra is even remotely attainable in the current console environment. Players will need to be spending more time with fewer titles to justify that sort of expense. People have grown to expect short campaigns and less than a year of multiplayer support (both in terms of content and players) , I'd be shocked if more than 5 titles a year hit those numbers now.

To get those numbers you'll either need to go episodic, which means a lower starting position, or heavy into multiplayer in a way that will stay novel and insulated against competition for a few years. It's might be doable, but you'd need to discard most of what the current gen is built on to get there.

Nicholas Lovell
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If this is not attainable, then publishers will start dying off even faster than they are now.

When iOS and browser games regularly get customers spending $10,000, I find it hard to see why the same won't be possible in console games.

Kujel s
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Those games don't cost anything to get on your system then use skinner box techniques to squeeze whales for all they can.

Kevin Carpenter
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I guess I should be glad that someone out there still sees a reason to drop $60 on a game and then $30 on a DLC subscription, because I sure don't. So I'll just continue to buy my games six months to a year later and pay considerably less for them. I got burned one time too many on full price day one purchases a few years ago, and that taught me to change my ways.

Mario Kummer
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And thats what I also did and why I think that the XboxOne only has a chance when they start to adopt steam like sales and prices.

For me there was also a different factor, I started to hate DLCs with only a few hours, you have to get back into a game that you already finished and before you are into it again its already over. I am also someone who delayed the buying cycle and now waits till the games are done and the all-in-one happy packages arrive, and to my surprise they are often very cheap.

Marc Schaerer
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I agree that the pricing policy is a bit fishy.

Its not that I consider $100 too much for real games with a real value proposition.
But the way they get there and the degeneration of single player content, experience and replayability really makes it 0 tempting.

I'm absolutely willing to pay for post launch DLC that extends and enhances the experience (Skirim, Oblivion, Morrowind as shining examples or WC3 / SC / SC2)

The industry definitely needs to find ways to offer reasonable DLC and return to the point where they sell great experiences, not 'cash milking trash with no right to exist at all' due to massive design errors due to gearing it towards 'pissing of customers that don't pay' (Dead Space 3). Thats just not the way its meant to happen and I hope that the managers that enforced these decisions get fired and never hired again in the game industry as such a rotten moral does not deserve any form of gratification or even future support.


The only games for which I consider DLC an option to even think about paying are:

1. F2P (I've to admit that Riot Games already got 300 EUR from me since spring 2012, thats 200EUR more than Steam in the same timespan and I spent about 20 times as much time in LoL as in the other games combined aside of super mario bros 2 and super mario bros wii u). Especially Riot shows how its done. Don't sell power and don't cripple the experience.
Instead sell time savers.
I would be willing to add BF Heroes to this mix too as they at least had a similar approach.

2. Star Craft 2, where I will likely buy ever addon without informing myself upfront as it happened with Heart of Swarm, which was a fantastic decision (guess that one goes under longterm fan-morron - I will definitely not buy extensions and DLC for diablo and wow though)


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