Slashdot Mirror
Game Piracy Results in Lower Prices?
meejahor writes "The BBC reports that Sony will soon launch the PlayStation 2 in China, following Nintendo's lead with the GameCube. Most interesting about the story is the news that, because of widespread piracy in China, PS2 games 'will cost far less than they do in the US or the UK, but still be slightly more than pirated discs.' We've always been told that pirate games push prices up, but doesn't this news suggest that piracy in China has in fact pushed prices down? The story also notes that 'only two or three games will be available at launch' which seems crazy considering the likelihood that people will pirate imported games instead of waiting for them to be released officially." While the Chinese launch of PS2 has been known for a while, the pricing of Chinese games is pretty interesting, given their long history of piracy. I imagine this sort of thing would be considered in the U.S. and other countries were pirated games as widespread as they are in China.
come from competition, not piracy.
When anger rises, think of the consequences.
Confucius (551 BC - 479 BC)
i think that piracy will actually help to sell more. i prefer to have a original boxed game with manuals and stuff than a pirated cd... only if the price is too high.. i'll get the pirated version.
Even if game costs 2$ you can still find release of it on warez sites and p2p networks.
They are pusing down the price to combat the pirated games that's available cheaply, thus puttinng on the cost elsewhere ie. the western world, buy yourself some clue
and uncontrollable here in the US, it would push the prices down. Most piracy here in the US is of PC games...not exactly the same can of worms, or political situation. Clif
clifgriffin > blog
If the Chinese market makes enough money for selling there to be profitable, then you can be sure that the overall margins are being propped up by extremely high margin sales in richer countries.
Isn't this also the same rationale used for region coding with DVDs? They're sold in high piracy markets for much lower prices, which are still profitable for their makers, and the region coding protects their high margin markets from imports.
And the same is true for drugs and a host of other things sold overseas. Have the US/Japan/Europe make the real profit and subsidize low-margin (but not unprofitable) Third World markets. Use legislation to enforce this model. Profit!!
I imagine this sort of thing would be considered in the US and other countries were pirated games as widespread as they are in China.
Or you might just end up with a situation like the one in the music industry. Some sort of video game RIAA that is formed and then proceeds to try to regain control via lawsuits.
~gb
>We've always been told that pirate games push prices up,
>but doesn't this news suggest that piracy in China
>has in fact pushed prices down?
Ever hear of profiteering? It's easy to compete with pirates if your prices are bloated to begin with. In the bygone era, profiteering was a dirty, ugly word. Today it is heralded because it makes shareholders happy.
and only capitalism details that IP and copyright are capital goods. Sure, they might make some concessions to attract investment but ultimately if it suits China they'll tear up any agreement to recognise Western-derived copyright. This is how it's always been.
Piracy effectively becomes "exercise of the People's right to pool and share resources".
"It's not your information. It's information about you" - John Ford, Vice President, Equifax
Piracy is whats lowering the price of music CDs accross the country. Piracy is what keeps Microsoft from selling Windows for over $500 a copy to college students. Its piracy that controls a monopoly and prevents the company from setting the price. Please support P2P and piracy so that we can force these monopolys to work via supply and demand. I'll never buy another RIAA CD, but I know alot of people would if they were $5 each
People don't exist to serve systems, systems exist to serve people.
A pirate has come to mean something too cuddly and innocuous. In fact, the loose use of the term to describe otherwise ordinary people engaging in distribution of material copyrighted by others has done much to diminish the proud tradition of "pirate".
From now on, all official BSA pronouncements will obide by a new naming scheme. Opponents of BSA will be referred to as "digital terrorists", "hackers", and "pedophiles", preferably in the same sentence
It's only for products that are correctly priced that prices will rise, because costs will rise enough that the company can't afford not to raise prices. For products which have previously held monopoly-like protection, piracy essentially serves as market competition. I'd tend to think that video games are a competitive enough market that this doesn't apply here -- chances are it's just going to raise the price of games in Western markets, and the revenue from China will just be treated as found money -- but there certainly are cases where we've seen piracy lower prices.
This shows that they CAN afford to make game prices cheaper. I was led to believe that almost every last penny is going into developing and distributing the product where there is very little profit. This shows that they actually have the power to make games cheaper. So the question now is, 'Why don't they?'
And the most obvious answer is they're money grubbing bastards, which is why I'm happily pirating games. Prove me wrong and maybe I'll stop.
DUH!
What next, Sony reduces the price of PS2 games in Africa by a factor of 100 compared with US! If a the average household income of a country in Africa and China is say $1000. How the heck do you think they are going to buy a $50 game? Be realistic. People pay rent in those countries for say $10-$15 a month. What in the world will justify them to pay $40-$50 for a game? It is not fair to charge them $50 and deprive them, at the same time, yall will feel it is not fair to charge you $50 and charge them $5.
This is all about what the market can afford. Even if there was no piracy, the prices will be far more cheaper, else they will only be selling 100 games a month. China has population, imagine if they can get to sell to 250,000,000 people at only $2. That's some major money right there!
------ Curiosity killed the cat. {satisfaction brought it back | it didn't die ignorant | lack of it is killing mankind
More importantly, think how much more expensive nike's will be without all that cheap chinese labor.. do you know what war with China would do to many of america's current businesses? There's a reason we haven't gone to war with china, and 'freedom' has nothing to do with it. -- vranash
pirated games (and other software) are widely spread here. even with punishments from fines to 5years of jail, pirates continue to support us in cheap copies. typical prices in poland:
:). dont judge people who live in much poorer parts of the world, ok? maybe at the end of century China will be richest part of the world, and we'll be pirating from them :).
1 cd (game, productivity, OS - no difference): 2-3 euro.
1 cd (movies, mp3) - 1 euro.
licensed copy of windows XP - 100 euro.
licensed, localised, new PC game from upper shelf - 30 euro.
licensed game from bottom shelf - 12-15 euro.
ticket to the new hollywood movie - 3 euro.
new SF book - 8 euro
cost of hiring a room for student - 60 euro.
most people earn here about 250 euro monthly. (like math teacher, policemen, nurse...); best untergraduates can get 80-100 euro.
I suppose reality in China is much closer to ours, than yours
[sorry for my bad english]
As for whether publishers and distributers take a bigger cut in the gaming business than the movie business, that's a toughie - I don't know enough to say for sure. But a successful movie might take in 50-100 million dollars so there is more to go around. However, retail chains get much more favorable terms for PC games than for DVD movies, simply because return rates and compatibility issues are massive. Publishers have to deal with support issues, which are also massive.
Try writing a 3D game, which has to run on EVERYBODY'S PC and compare to doing some animations in Maya, which just have to look good from one angle and get rendered once. Not dissing on the Matrix or other heavy-FX movies, but it's really a hell of a lot of work to support and distribute a modern 3D PC game.
This, of course, is why nobody really wants to develop for the flooded PC market and why the console market exists, if you are well capitalized and can afford to hire the right people, get all the SDKs and negotiate good terms.
Ever since growing up in the 1980s I have heard the game producers (then for the Amiga) claim that with less piracy they would sell more games and thus be able to sell them at a lower price.
For me this has always been a flawed argument. It is economical theory: If somebody sells more of a product they will just reap the profits, not lower the prices to fix their profits at a certain (low) point. It is not like a company will go: "Damm, we are really selling a lot, lets lower to price so we don't earn too much money".
If more people bought original games it would only mean that game companies would earn more money, not that the prices on games would change. It would probably have the side effect, though, of more games being produced as more companies would be willing to enter an industry where there is profit to be gained.
As a real-world example we can just look at some of the PC top-sellers, like for example Quake 3. This game was relatively cheap to develop and everybody knew that it was gonna sell a shitload of copies. Does that mean it was sold at a lower price? Of course not, it just means that ID Software would earn more money.
Then would you like to explain why piracy was so rampant on the NES and SNES in China? Cartridges make it more difficult, but they don't make it impossible. DRAM-based copiers that connected to the cartridge slots and loaded games from floppies weren't at all uncommon, and pirated games on floppies were sold by stores much like pirated CDs are now.
Bít, zabít, jen proto, ze su liska!
Farmers have been selling oranges for centuries while at the same time anyone equipped with a single orange could grow their own tree.
Water comes out of the sky for free. When it's bottled it's a $5 billion industry.
Piracy will have very little effect on the market.
Shortly after capitalism was introduced in Poland, many software companies emerged, producing games for most common computers - primarily 8-bit Atari. I was a lucky owner of one at that time, and I recall that times with some nostalgy.
Multitude of games was written. Some of them really exceptional. Spy Master, platform game with built-in 'DOS' in which you could launch mini-games from floppies you found thorough the game. Viki, a game with over 1000 rooms (on 64K RAM!), Barahir, really exceptional graphics, 'Dwie Wieze', gfx imported from Amiga, many, many more.
And the companies were pretty successful, despite the fact piracy was widespread and legal. How?
The games always did have some copy-protection scheme, but not uncrackable one. More skilled pirates did circumvent it. BUT the games were released at prices very comparable to the pirates. Usually one game costed the same as one disk (with 5 or so games) from a pirate. And people were buying them, because they were very available at affordable prices, and every Atari user held it as a point of honour to support the authors... Well, with exception: games that sucked
Time passed, Atari died and even best Atari games couldn't compete with Amigas and PCs. No local 'scene' for games for such appeared - all was either import or pirates.
Once originals prices suddenly rose from like, 3 zl (our prices) to 100 zl (western prices), sales suddenly died. Despite introduced anti-piracy law, piracy was more widespread than ever before. It just wasn't legal, small firms that made profit on it, just mafia sindicates. Hardly anybody buys originals nowadays. "We suffer from low sales because of piracy" claim the releasers and increase the prices more to increase profit from the few games they sell even more. And users, just pissed off, "How DARE they to demand such money for that", just buy pirated games instead.
And almost nobody remembers that selling and buying original games in Poland at one time was not only very comon, but quite profitable - and the key was LOW PRICES.
45 5F E1 04 22 CA 29 C4 93 3F 95 05 2B 79 2A B2
I really wish some of you pro-piracy folks would work really hard on something that you care about for a long time and then have it stolen by thousands of people. Maybe then you'd wake up and smell what you're shoveling.
_/\ - Sturgeon's Law: 90% of everything is crud.
High prices creat piracy. It can be plotted on a cartesian coord plane. The price on the y axis, and the number of people buying on the x axis. As the price goes down, more people will be able to afford and therefore, buy stuff. This is what the idea of a sale is; you normally sell your pants at $100, if you sell them for $90 demand will increase and if it's during a busy season, you'll move more merchandise and therefore, creat a higher profit than you could before.
When prices are high, piracy/theft/ect are going to be high aswell. When prices are low, the same things are going to be low. Why do you think the p2p networks are so huge? Because people's opinions differ from buisnesses and the goverments , just about every one of them infact.
The really sad part about this is that if the trend continues with people thinking that piracy is ok, xyz gaming corp will creat an awesome game and nobody will buy it, and they'll go out of buisness instead of making new games. After the RIAA and MPAA are deceased, cd's are cheaply baught at $2 and $3 a cd with extra's and a movie is around $5 opening night. Will piracy decrease or will it continue to rise?
As for software, I'll agree as much with the next guy that when I go into a store and buy a software package and it sucks, I'm pissed and can't return it. As for games, there's a lot of cookie-cutting going on as there always has been in the computer industry. Doom came out, and then you got blake stone, duke nukem, etc. BF1942 came out, and now we've got mohaa and it's expansions, ET, call of duty. All of them are based off of the same engine (afaik) and all of them have similar gameplay.
My worries aren't the monumental failures when corperations spend millions building a cookie cutter game and loose millions. My worries are when xyz corp creats the super ultra neato game and puts it out and the overall reputation and respect for gaming softare is so low that nobody will buy it for fear that, even though there's hype in the magazines, hype in the stores, hype in the forums and hype in the news and even a good playable demo (which everyone knows is bribed because they'v been burned before) will xyz corp be able to make any money for making a truely excellent game? Will xyz corp go out of buisness?
Cartels like the riaa make a bad name for companies like xyz corp. The major reason people go out and buy anything is because they think it is good, well, if they're a thinking consumer.
Candy-Coated Knowledge
Your radical ideas about legal routes to egalitarianism have already occured to others.
In China they have stores that sell pirated "silver" disks. Look around the web for DVD Silvers and you can see what the problem is.
In countries like the US you need to purchase a console, find someone to mod it, and then rent/borrow/download and burn copies of the games.
In China, you buy a console and have it pre-modified, or modified while you wait (you can do that in the US, but it's not nearly as common), and then you can go purchase pirated disks for $5 a disk or so.
The problem with pirating in China isn't that there are people downloading and burning games, it's that there is a whole production sector for them. Disk duplicating facilities produce the copies, they are then distributed to stores, and stores then sell them. Law enforcement does try to combat the piracy; however, it can be as bad as shutting down a store and conficating the goods, and another store will then open across town selling the same things.
So no pirated in China does not normally equal free.
The game Sony is probably releasing over there are really old games. Games where the developer has already made back their development costs and profited. Games where the publisher has already made back their marketing cost and profited. The only costs of selling these old hits will be manufacturing and distribution. All revenue greater than that cost will be pure profit because the US, Japan and Europe have already paid for all of those other 1 time costs. Because of this they can afford to drop the prices like a rock.
The GeekNights podcast is going strong. Listen!
We've always been told that pirate games push prices up
A bunch of thieves (pirates) being lied to by a bunch of liars (publishers.) What's this "we" white man? I was never naive enough to believe what I have been "told" on this subject. What is said to discourage theft and what is done to sell products are two distinct matters.
but doesn't this news suggest that piracy in China has in fact pushed prices down?
This so called "news" suggests a lot of things, one of which is that publishers are attempting to establish themselves is a market on the hope that one day in the not too distant future that market will grow up and be worthwhile. It also suggests that, like the drug industry, there is a massive price differential between the US and everyone else. Of course, Chinese street vendors probably do not sell shelf space by the square centimeter, either. Much is suggested by this, and attributing all of it to the minor matter of thwarting piracy is either naive or dishonest.
Maw! Fire up the karma burner!
You can sell goods only at so much as market is ready to pay. Who would've thought?
Game Manufacturers don't seem to be following a business model for Mass Marketing... They seem to prefer to use a model where they are priced as high as possible to maximize profit per copy rather than a model where profit comes from mass copies.
Its this business model that fuels the majority of piracy in North America.. If a game were 25$ and I could walk and pick it up in 15 mins at the game store near by.. Or spend 1-2 days downloading it... I would rather pay the 25$ if the company/game had a good rep for playability.
Its hard to shell out 40-80$ for a game that may only have 2-3 days of playibility to it. That also fuels piracy... So they have a few obstices to overcome in that reguard.
Who needs WiFi when we can have Packet Over Sheep! http://datacomm.org/PoS-InternetDraft.txt
Personally, I think the single most effective "leverage" game makers have found in recent years to combat piracy is the creation of multiplayer titles that require a server-verified key in order to allow online play.
To be perfectly honest about it, that's what made me go out and purchase both Warcraft 3 and the Frozen Throne expansion. I really have a problem with Blizzard's legal attack on people creating freeware alternatives to their "Battle.net" servers, yet I was really looking forward to playing WC3. If it was as easy as just downloading a "warez" copy, I probably would have done so (justifying it in my mind as better than the alternative of contributing more funds to Blizzard). But alas, the "key generators" don't seem to make keys that their Battle.net server thinks are real, valid key codes. So to ensure I could play it against other people online, I had to go buy it.
That said, though, lowering game prices would certainly help improve sales and fight piracy. The people "cheap" enough to keep wasting time downloading programs they could buy for $10 or less aren't really the "target customer base" to begin with. Eventually, they'll go out and get jobs - and start realizing that "time is money". Then, they'll become customers for the reasonably priced game titles too.
I live in China. If you go to the electronics market, people practically drag you into their stores to buy DVDs and VCDs. All software you can possibly imagine, and movies usually 3 days out of the theater. Average price: USD$1 for a movie, up to $10 for a really big software set. And the chinese only sell things when they make money on them, of course. Don't give me that "communist" nonsense. Sure, the substructure of the country is commie, but at the street level and more it's free-wheeling capitalism. The reason it's so cheap is they are paying production costs ONLY, obviously. That's what pirates do. And absolutely NO-ONE in China will buy legit games if they are not only marginally more expensive than copies (like 10-15%)
Not sure where I'm going with this, but thought it might be interesting.
So Sony is raising the price of PlayStation 2 in China and lowering the price of the games.
I'll restate this for the reasoning impaired: They're taking their money upfront on the console, rather than later on the games.
No electrons were harmed creating this post, though some may have been subjected to electrical and/or magnetic fields.
That's absurd. The market for movies is huge, compared to the market for PC games. Actually the game and movie market are compareable. Do your research or shut the hell up. Game development shops, for the most part, run small, low margin businesses. Your calculation is absurd, because the game that sells a million copies returns about 2 million to the developer, 3-4 million to the publisher, 3 million to retailers, and the rest to assorted other folks. I said a game which costs 3 million dollars to make. This includes publishing and everything else. Games usually cost between 3-5 million dollars total, which means this is how much money the game company needs to make to break even. That includes paying for everything including marketing and publishing. As for whether publishers and distributers take a bigger cut in the gaming business than the movie business, that's a toughie - I don't know enough to say for sure. But a successful movie might take in 50-100 million dollars so there is more to go around. A successful game such as Final Fantasy, or an EA sports game like Madden can easily take in 50-100 million dollars. PC games like Starcraft which were very cheap to make, take in hundreds of millions of dollars. Starcraft is one of the best selling PC games of all time, sold well over 5 million copies, and at the time under 5 million to make. When each copy sells for $20, thats 100 million dollars from 5 million sold. Try writing a 3D game, which has to run on EVERYBODY'S PC and compare to doing some animations in Maya, which just have to look good from one angle and get rendered once. Not dissing on the Matrix or other heavy-FX movies, but it's really a hell of a lot of work to support and distribute a modern 3D PC game. What if I told you I have? Listen you do not know shit about the game industry. Game companies do not write 3d engines they license them from other companies, or use open source engines and add onto them. Sega was one of the few companies which did not do this and they went bankrupt after making games like Shenmue. Most smart and profitable game companies however use the same engine over and over again for all their games. This, of course, is why nobody really wants to develop for the flooded PC market and why the console market exists, if you are well capitalized and can afford to hire the right people, get all the SDKs and negotiate good terms. The problem with the PC market is the hardware keeps changing, and its the most competitive market. People do develop for the PC market, where do you think new companies start? The PC market is where you make your first couple of hits and then you move on to the console market, its rare for a company to start in the console market because you have to pay Sony, Microsoft and Nintendo a fee just to make games for their system. The fee is not small. Please do some research before you comment again. 1 Games cost around 3 - 5 million to make, except for the rare Sega game like Shenmue which costs 50-80 million to make and 50 million more to market. 2 Game companies license 3d engines from other companies and rarely develop their own. This is done to save money, you cannot do this in the movie industry. 3 Game companies make sequels which require almost no new code, with added levels, a new musical score, and some new marketing, its basically repackaging the same game over and over and profiting off of it. Check out Tomb Raider and Madden. 4 The PC market is the only market you can start in because the console market is for big compaines only. You will pay so much in license fees that you'd be better off making your game for the PC.
People don't exist to serve systems, systems exist to serve people.
Okay, doesn't look like this is being applied to the right entertainment market. I don't have a problem with game prices at all. There is generally a lot of creativity and work that goes into them, and the prices do fall after the item has been on the market for a while, even if it's still popular. That doesn't seem to happen with music or movies (or Microsoft software).
Still, it's backwards. High prices encourage "piracy". And lowering the prices enough will make casual users of illegally copied material say, "hey, it's more convenient to just buy it." Of course, there still has to be some enforcement of copyright for this to work. I see hints of this happening in the music biz, but I've yet to see real price competition between labels. Thank heavens we are seeing a real-world example of this, and hopefully it will give the anti-entertainment-cartel crowd some ammunition.
Fred
"A fool and his freedom are soon parted"
-RMS
You'd hire your own programmers, write your own 3d engine, spend millions of dollars writing it, and release a piece of crap game which has good graphics. Look, people can license a good 3d engine, and theres many to choose from. There is no reason to write your own realtime 3d engine when theres a million companies trying to license them to you. Turbine licenses 3d engines, pay them and you can use their state of the art engine. Basically, you need the eye candy to sell the game, but the eye candy support in the API layer is shitty and nonstandard. It's tough, so you try to make tradeoffs that will let you sell well to the high end gamer market without losing too much of the casual gamer market, and deal with undiscovered hardware dependencies though patches. Eye candy alone does not sell games. Quake does not sell because of eye candy, the game looks ugly, its in a closed in area, its dark, it sells because its a shooting game that people like. Look I could find an open source 3d engine, and hire programmers to make a game out of that. I admit the engine wouldnt be as good as an expensive licensed engine but i'm proving to you there are ways to save money. If you are doing a big budget 3D game you can afford a horde of testers with a sufficiently broad variety of test hardware to detect _most_ of the major issues up front, but this requires a substantial budget. You pay one or two testers, then you offer a demo or announce on your website you are looking for beta testers and let the world test it for free. You do not have to pay alot of beta testers.
People don't exist to serve systems, systems exist to serve people.
If you don't believe that illegal copying is just like kidnaping and murder, you might prefer not to use the word ``piracy'' to describe it.
No GNU has been Hurd during the making of this comment.
Such a practice scheme has been around for a while in Russia. Some publishers are wise enough to sell PC games for as low as 10$ per boxed version and 5-6$ per cd only (compare to 2-3$ for a pirated cd). And the most interesting part is that people do actually buy these licensed products. I guess if Sony gets their prices right, Chinese people will buy their products.
Generally I would agree with you on piracy of copies of software and media that is single-source and significantly more expensive than it should be. In a system without viable competition, piracy is a compelling form of competition as a market reality. It can be argued that it's piracy which keeps people from examining alternatives, thereby continuing the monopoly.
But I'd like to point out here that most gaming companies don't make money. Large publishers, who are in the best position to be raking it in, are merely scraping by. Nintendo and Microsoft lost money last quarter. Gaming companies are not greedy monopolists keeping prices high because they want to milk their position. Game companies keep prices high because they are afraid of losing money.
A few gaming realities. %50 or more of a game's total sales will happen during the first two months of a game's release. This demand is relatively inflexible, and will not generally go up if you decrease the price. As they age, price becomes more of an issue for impulse purchases, though not generally for the people who have mentally chosen the game. As impulse purchase games are likely to be the "greatest hits," unless your game has some serious name recognition, it is in your best interest to sell to the choir who will purchase it at full or near full price.
Assuming the retailer takes half, and half of what remains goes to paying the developer, for cheap 2.5 million dollar game to break even it needs to take in 10 million overall, or 5 million in the first two months. 5 million dollars is 100,000 copies during the first two months, assuming $50 per copy. Compared to movie tickets that's somewhat small, but for the pool of gaming that's pretty large.
A given metropolitan area will have one to three game-specific stores where the cash registers ring every few minutes. They will also have music and mega stores where one can purchase games, but sitting down and watching that section for a day is like watching paint dry. On the other hand, there are at least 7 theaters here in boston, and those ticket counters almost always have a line. If you talk to your co-workers, the launch of Return of the King has entered public consciousness, but Metroid Prime barely registeres.
We're in a small pool, in other words. To stay afloat, game companies need to keep prices high. I would like to believe that lower prices would increase demand, but I have seen companies attempt to go down that route with little success. The fact of the matter is that most people don't play games: they feel they are a "waste of time," and "for kids." One could argue the hipocracy of clinging to the puritanical belief in a lack of wasted effort in a society where the average person watches 4 hours of television per day, but it is (I fear) the latter perception is the more insidious and will only be overcome in a herse.
But gaming companies to listen to sales. A few years back the Playstation 1 had a rigid price structure where every game was $50. Crash Bandicoot 2 was just released at $50, and as such SCEA decided to lower the price of the original to $45 as an experiment. The original Crash sold as well as Crash 2 that year, showing that indeed, price was an issue. From that we have our multi-tiered pricing system of today. Just in case you forget that it has been tried, there was (and remains) a rung on the pricing ladder below "greatest hits." Ball Breakers, and many other games were released at the $10 mark for the original Playstation. Yes, some of them were terrible, but some were rather good. Sadly, the increased sales didn't offset the decreased cost, and that experiment was largely abandoned.
If you want to send a message to publishers, buy games on the cheap. They have no way of knowing that someone just pirated a copy of Max Payne 2 in protest, but they could see a thriving market in used games as a sign that they should lower prices. If there is a hot game coming out for $55 dollars, and an older one that you really
The ______ Agenda
There are some major misconceptions spread on this site in the name of basic economics. Often, the arguments are a partial application of economics, creating misleading conclusions.
.. but the cost does not differ for 100,001 compared to 100,000). Marginal cost is the pure production cost, the incremental cost of pressing and retailing an additional copy of the game.
... this is the famous P=MC result.
... this is what people usually refer when they say that they need to earn a reasonable rate of return on their capital ... they need to earn enough to cover the f ixed cost and the opportunity cost associated with sinking the fixed cost in this endeavor as opposed to another.
... although it does happen to a much lesser extent in the form of generics).
For this article, the misleading economic argument is that piracy has lead to lower prices and that this is a justifiable result of piracy as competition.
First off, there are two basic types of costs driving the gaming industry: fixed and marginal. Fixed cost is the development and marketing cost incurred by Sony and the developers whose value roughly does not vary with the number of sales they make (obviously, the fixed cost differs if you plan to sell 1 million copies as opposed to 100
For most console games (if successful), the fixed cost are recovered during the initial sales in fully developed countries with defined property rights, namely U.S., Japan, and Western Europe. Economics shows that once fixed costs are recovered, competition can drive prices such that they reflect only marginal cost
However, at P=MC, fixed costs cannot be recovered. While P=MC may be a competitive outcome in the short-run, with the fixed costs of existing games already sunk, it is not a long-run equilibrium as no firm would continue to operate under the prospect of not fully recovering it's fixed cost. Note: the fixed cost is often referred to as "capital cost" in some popular press
Of course, this applies to other published products such as movies, books, CDs. This is why we see reduced prices for these items later on, after their initial release (bargain bin books/paperbacks, "budget price CDs," and second-run films): the idea here is that firms can charge closer to marginal price now because they had already largely recovered their fixed costs earlier with the more expensive first-run products.
So the lesson for console games and China? Sony and Nintendo are willing to charge lower prices in China precisely because they were able to charge higher prices in the U.S., Japan, Europe earlier. This is also the same reason why pharmaceuticals are (sometimes) willing to offer drugs to Africa at a much reduced price (they're much less worried about drug "piracy"
That said, are prices in these traditional publishing industries "too high" ? Absolutely. But let's use the right arguments instead of simply trying to legitimize piracy.
Of course piracy pushes the price down. I guess most corporate leaders haven't thought this through. There is always a black market, and it grows in proportion to the price of the legitimate goods. Any company raising their prices to recoup profits "lost" to the black market is insane.
Seems there are a lot of insane companies out there.
It's funny how easily we buy into their story about evil pirating driving up prices. It's _their_ job to figure out how many people will buy a product at a given price, then spend less than that on developing the product.
Cheers.
Oh? What is this "Free Software" of which you speak? People should have a choice as to whether they want their software to be free. If you choose not to make your software free, piracy takes away both your software and your freedom to choose.
_/\ - Sturgeon's Law: 90% of everything is crud.
Games are a monopoly product, you price them to get the largest profit the market will let you, and differently in each market. Chinese buying power is not yet on parity with US ones (or even UK) so the prices must be lower.
Next you need to prevent grey market imports (region code etc) and then you finally have to find an excuse so that the other customers carry on buying the product and don't feel aggreived
Piracy is IMHO the excuse, nothing more, to explain to US and EU customers why they are paying vastly more for the same games. Just like Americans being ripped off with drug and school text book prices, and EU people with DVD pricing.
Inkjet cartridges? Hell, my in-laws just blew about two-thirds of the annual spending power of the average person in East Timor on one printer (HP 2410xi for $220), replacement cartridges (~$70 for 2 tricolor and one black + ~$30 for the photo cartridge with freebie 4"x6" photo paper) and $20 after rebate for 100 sheets of glossy Kodak photo paper (second from top grade).
/. and the figures from ET stuck in my head as my family and I enjoyed thanksgiving.
Total is $220+70+30+20+taxes = ~$360... According to the CIA world fact book ET's per capita spending power is $500.
Ok, I guess that it would make more sense to compare against PRC figures, but hey, this is
a year or so ago (or whenever return to castle wolfenstein came out) activision had a cheap version of rtcw for sale in china. it came to ~10$ or something. anyway they gave you a disc and a number to call to register the disc and to obtain a cdkey that allows you to play online. a friend of mine who has friends over there picked up a few copies over there and send us the keys worked fine (online) for us over here in north america. as far as i know these keys are not pirated as ive never had a key conflict nor has the auth system for rtcw been cracked
games are not a monopoly product. for a product to be a monopoly there must be 1 dominant software producer ie microsft which creates all games. This is not the case. there are westwood, blizzard, microsoft etc.......
US and EU customers why they are paying vastly more for the same games. Just like Americans being ripped off with drug and school text book prices, and EU people with DVD pricing
Actually, this is called price discrimination and it's common business practice throughout the US and the world. Other forms of price discrimination which you may be familiar with are coupons and senior discounts. All business sell at whatever price the consumer will pay, which is why Americans get "ripped off" on text books.
piracy comes down to simple economics: if someone can't afford something, they won't buy it. Likewise, if they can get it in another fashion for less (off the street or via download), with a similar enough product to make it worthwhile, they'll do that too.
For instance, if you make a single player game, and sell it in stores for $50, with the CD in a jewel case, no manual or game material (such as the books, maps, etc. that come with Baldur's Gate games), and just a couple pictures on the box, people have absolutely no motivation to purchase the game over pirating it. There's no functional difference, and there's hardly any perceived difference. The cost of finding it online (at most, several hours of searching online and then maybe a couple days downloading it - basically just your time to find it: say, 4 hours), or the cost of getting it from your friend or the guy down the street for a couple dollars, is negligable compared to the 50$ box price.
There are several things that companies can do to increase both revenue and sales. Part of the equation is lowering the price so the investment differential between a pirated copy and a legit copy is less. The other half of the equation is providing game content that doesn't suck.
Let's draw this scenario up in terms of the price of the product. On the 'buying legit' side, I would likely have to download a 200+Mb demo to find out if i like the game, play the demo, (and if I like it) go to the store, buy the game, come home, uninstall the demo, install the game, and (likely) play over the same exact part of the game that was available in the demo - and that's just not cool. I spend $50 of my money and invest (say) 3 hours of my time to get this game. I could also have just gone out and gotten the game and then been disappointed, and returned it, or not gotten the game at all after playing their wretched demo.
On the pirating side of things, I could see an add for a game, read a review or two, and then either ask a friend for the game, or search the web for a little while for the full version - obscenely easy. I might invest a total of 4 hours of active seeking in trying to get the game. I'll install it, and if I like it, I'll keep playing it. At this point, I have no desire to pay for it, since i already have it, and buying it offers me no added benefit (more times than not). If the game sucks (which is much more than likely nowadays) I'll simply remove it and have only lost (say) 5 or so hours of my time. This second approach is the one that seems to be the most common among gamers in my experience: they're a highly social group of folks amongst themselves, and getting an ISO or CD from a friend is much easier and a LOT cheaper than going to the store to buy it, and there's much more benefit.
Neither of these options seem terribly viable for the game producer, in my mind. Here are several options that, too me, seem to be much more viable - either by themselves or in combintion.
1) Sell the games for a lot less money - $15 or $20, or maybe even $10 seems reasonable to me for most of the games out there. I'm much more likely to go to the store and pick out a cheap game for the hell of it on a rainy Saturday than I am ot pick out a $40 or $50 game. I, as well as most gamers aren't diehard gamers, and aren't willing ot spend an arm and a leg for a game unless it warrants it.
2) Provide some sort of positive incentive to purchase the game. Note: the incentive must be positive! This means that throwing in some sort of 'required license key registration' into the installation process would not be a good idea. Instead, go the extra step (it's just a step, when you consider it, compared to the initial mile of actual development) and add some content into the box: maybe a sticker or two, maybe a poster, a nice game manual (whether the game needs it or not, if the game is good, people will read those manuals), and various other "we care about you" gestures. Adding in a license key requirement to get to the more significant part o
~/ssh slashdot.org ssh: connect to host slashdot.org port 22: too many beers
Here's one for all of y'all "games are overpriced!" folks.
First of all, a console game has three groups who'd like to have their share of the sale:
1. The developer, obviously. Ironically, the developer does the hardest work and gets the tiniest slice - by far.
2. The publisher. Takes the bulk of the money. I hate to see those greedy tie-wearing dipshits get rich off what developers make, but then again, publishers front the entire development costs. And you guys don't have the slightest idea how many projects do NOT get released. I have spent a total of more than three years working on projects that got scrapped. Just try to calculate how much money went down the drain there. So good projects have to pay for cancelled projects.
3. Sony/Nintendo/Microsoft. For every media produced, Sony (PS2) or Nintendo (GC) want a substantial (!) amount of money. The thing is, they make barely any money through the consoles (just think about how much you'd pay for a PC with that kind of processing power) - the real money lies in the sale of games. So here they are and open up their hands. Naturally, they want money for every CD *produced*, not *sold*. Once again, the publisher is the one sucking it up if a game doesn't sell well.
Yeah, games are expensive, but not overpriced.
Actually, most of what hte original poster referred to are due to monopolistic practices. I will guarantee you that if a movie, for example, can be released by many companies, you wouldn't get the region encoding thing (which does very little from a fan point of view). Region encoding (in DVDs) is simply a marketing thing to control markets.
Price discrimination is, for example, when a movie theater charges different prices for different ages. This, to me, is different from the above case...
Sivaram Velauthapillai
Sivaram Velauthapillai
Seeking the meaning of life... @slashdot of all places