Game Prices: Editorials - The Armchair Empire

Is the current price structure for games flawed?

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I Can’t Buy That for a Dollar…or Even Twenty Dollars

For many of us, we’ve looked at our wallet forlornly at least once after a wild orgy of spending at our game shop of choice because we just had to pick up two or three new releases as soon as they hit the market. Sure the games were fun, we wrote off more weekends than we’d like to admit, and some of us may even have taken a sabbatical from bathing (much to the chagrin of those downwind), but yikes, games can really inhale a person’s income if they aren’t careful. Even a single game will likely run someone $50US and that’s no small beans. Why do these games cost so much? Why aren’t their retail prices more in line with other entertainment mediums like the DVD market for example?

Now, I’m certainly no master economist, but I’ve been finding myself asking these questions more and more over the last few years; probably because I don’t live at home anymore and no longer have the luxury of enjoying large sums of disposable income without the need to worry about rent, bills, food, and all of the other incidentals that real life throws at a person.

Drawing the comparison most people seem to gravitate towards, that being the comparison of the videogame industry to the film industry, it isn’t hard to start wondering why games cost more than twice that of their cinematic counterparts on store shelves. Games can run from a few million dollars to the tens of millions of dollars to produce and more often than not have an initial retail value of about $50US. Conversely, most movies (other than low-budget independent films) can easily have a starting production cost in the ten million dollar range, if only because of the astronomical pay notable actors make per film, and still manage to retail for approximately $20US on DVD.

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Of course, it could be argued that a big reason for the considerably lower price of DVDs at retail compared to games is that the movie industry has the advantage of working in a “duel” market. It may cost $20+ million to make a movie, but it will first hit the big screen where it will presumably make back it’s production costs, and then come to DVD a few months later where the sales will be almost all profit as studios enjoy the home market gravy train.

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But the problem with this logic is that one has to assume that all movies make enough from box office sales that they can afford to be sold at a reasonably affordable price when they make the leap to the DVD market. Obviously this just isn’t the case, as we’ve all seen countless big, or even modest, budget films not perform all that well in theatres, yet still get its DVD release at the $20US price point. If anything, the film studios will market some of these titles even more rigorously for their entrance into the DVD market when it didn’t pull in as many movie goers as expected when the title was on the big screen. The logic here is to try to get a buzz going for the DVD and get it sold en masse for the home market where people can pick up the movie and watch it as many times as they want for a measly twenty bucks.

This is one area that game publishers seem to often shy away from. The closest they seem to come to doing anything en masse in North America is the uniform release of 80% of their goods in time for Christmas – then wonder why their quarterly results don’t look so hot when they come to the not-so-startling conclusion that $50 is a lot of money no matter how you try to sugar-coat it. If the average consumer is only going to budget $100 for new games over the Holiday Season, chances are they aren’t going to budge from that. Sure, he or she may plunk down an extra $50 for one more game, but that’s about as far as it will go. And with so many games out at once vying for people’s attention, the large selection is only going to dilute their purchasing decision or acutely focus it on one or two games, with perhaps a handful of others selling well as sloppy seconds as someone buys THE game for the Christmas season and are tracking down a couple more games to blow what’s left of their $100 gaming budget. Just look at Christmas of 2002 where Vice City dominated game sales. It took the lion’s share of the profits for that quarter with a few other games coming along for the ride. This past Christmas there was no real standout title that everyone agreed was the title to get so sales were divided amongst a number of great, slightly lower-tiered games (at least in the eye of your average consumer that likely doesn’t frequent a site like this), causing a number of titles to under perform and likely more than a few game publishing execs to become just a tad nervous.

The problem here is not only that way too many games are being released in a short time frame; it’s also the mindset that their retail price instils in shoppers. With a $50 MSRP, games are more likely to get consumers counting their pennies before making a new purchase, but at a lower price point we would start drifting toward the magical world of impulse buying. How many times have you visited your local music shop or movie outlet with a vague notion along the lines of, “I think I’m going to buy a few CDs or DVDs today” then get to the counter and find out that it’s going to set you back $10-$20 more than anticipated? If this has never happened to you, then kudos, you’re stronger than a lot of us. For the rest who have had this happen before there’s a good chance you shrugged it off because, hey, you just got an armload of DVDs or CDs that you’re interested in and on the whole it didn’t cost all that much when you consider how many items you bought relative to the price. One has to wonder why the game industry doesn’t try to tap into this mentality.

But the answer to this could come from a couple of reasons. Firstly, console and handheld games have licensing fees to be dealt with on top of the production costs for game XYZ. Whenever a game publisher sells a title for a console, they have to pay a predetermined fee to the manufacturer of the console the game was made for. Of course the game publisher isn’t going to swallow the cost, it’s going to pass it on to the customer. That right there will likely increase the price of a title by a good $10US, and worse still for consumers is that this licensing fee just isn’t going away as much of it goes toward R&D on future consoles (so we won’t have to pay $1,000 for a PS3 or Xbox 2).

The other hurdle is again to do with perceptions and mindsets. Many people associate cheap games with low quality products unless it has “Greatest Hit” written on the box in big blazing letters. It would really take an industry-wide concerted push to change this frame of mind and whether or not the big wigs would be willing to put in the blood, sweat, and tears to do it is anyone’s guess.

Really, there are no easy solutions to seeing a fundamental change in game pricing procedures as countless more $50 titles hit store shelves every week. Nonetheless, one has to wonder when the industry will hit a saturation point where sales will start to suffer because of current MSRP trends. It looks like we may already be starting to see it from looking at recent game-related sales of the past few Holiday Seasons as many well-crafted titles under perform at the cash register, despite all of the hoopla and crocodile smiles from press releases and industry associations who are constantly telling us that the game industry has Hollywood’s number. I guess that whole argument depends on whether you’re a glass half full, or glass half empty kind of guy…

- Mr. Nash

(February 15, 2004)