Next-Gen Pricing Still A Hot Issue

GamesIndustry.biz has two articles taking a look at next-gen pricing, both from Microsoft's point of view. Xbox VP Peter Moore says that next-generation pricing is actually going to be an excellent value for the money. From the article: "...he predicted that many games may be offered in limited edition bundles, similar to the already announced Perfect Dark Zero bundle, which costs an additional $10 but adds a significant amount of bonus content to the title, and that premium downloads costing 'maybe another $5' will also be a key strategy for publishers." Additionally, the Xbox marketing folks are already planning price reductions for the 360. From that article: "'We will wind up cost-reducing the product every year,' Todd Holmdahl, corporate vice president of the Xbox product group, told Reuters. It's estimated that the 360 costs approximately $100 less per unit to manufacture than Sony's PS3, giving Microsoft more scope for price cuts."

Comments

Because They Are Too Expensive

[MBCook]

I expect Nintendo to release at $250 and clean up.

That said, let's look at the fact. According to IGN the NES launched for (an adjusted) $351.91. For that price you got two games (Mario and Duck Hunt), the console, two controllers, and a light gun (you even got R.O.B. if you bought one of the earliest ones in the US).

The XBox 360 is launching at $399 (for the REAL version, not the "XBox three-shitty" as Penny Arcade has termed the cheaper one. For that price you get the console, one controller, a headset, and a one year subscription to live. If you assume that live costs $50 a year, that means that the same price as the NES (adjusted), you get.. two fewer games, one less controller, and no lightgun.

The Sega Genesis which cost $389.67 at launch (again, adjusted) came with two controllers and Sonic. Again, you got two controllers and a game.

The N64 cost $242.75 at launch. So for what the XBox 360 will cost you could have bought the N64, Mario ($60 lets say), Pilotwings ($60 lets say), and a controller ($30 lets say). Two games, two controllers for that price.

Now let's look at the GameCube. $210 at launch leaves us with an extra $190 (three games) before we hit the price of the XBox 360 without a game. Add the price of a game to the 360 ($60-70) and you could buy two controllers for the 'cube, or a controller and a memory card.

Now MS is doing better than the NeoGeo ($1040), the 3DO ($920), and the Atari VCS ($810). But with the exception of the Atari (the first real home system), the other two FAILED in the marketplace (largely due to high price).

The NeoGeo had games costing upwards of $200 at the time. Sure they were arcade PERFECT, but most people didn't buy $200 games. I hope MS is smarter than that. They will probably only charge $80 for their games.

Re:Because They Are Too Expensive

[kryogen1x]

It doesn't matter if the price isn't as high as we think because of inflation. I don't care if $200 back then costs $351 now, especially since my income hasn't increased since then.

Re:Because They Are Too Expensive

[Irish_Samurai]

If people would hold off a second, they wouldn't have to pay the "early adoption tax."

If console sales are really sluggish in the beginning, MS will lower the price to get the install base. The whole business model depends on it. If people don't buy the system, they don't get license fees, and they don't make money. Third party developers do not make games for systems with no installed user base. This is a leason every console maker knows full and well by now.

This is just as much the fault of the consumer accepting the ridiculous pricing because they cannot exhibit self control as it is of the console makers who inflate the price in an attempt to offset the pre-known losses they're going to incur.

Re:Because They Are Too Expensive

[MBCook]

I agree. I'm a geek, I love games, and I've been buying consoles on launch day since the original PlayStation. I would have done it for the 360 and PS3 is they had reasonable prices ($300 or less).

Now there is NO QUESTION that I won't be buying a 360 (maybe when the price drops to $300, or buy a used one from any unhappy early adopter). The PS3 is looking iffy (as much as I like Sony. But we don't know the official price yet). The revolution I know I will buy at launch, because I trust Nintendo. But then I also expect them to have a lower price (I'm guessing $250). They'd have to charge over $400 to make me wait.

I agree, the problem is self control. They are too far out there on price, and I think they'll take a hit for it. They want to launch in time for Christmas with the XBox. Unless they cut the price before the end of December, I predict "sluggish" sales of their new "hot must have console".

Re:Because They Are Too Expensive

[Keith Russell]

You need to make up your mind. Here, you're complaining that Microsoft doesn't provide any bundled games, and that you have to buy one to "uncripple" your $400 purchase. But in this post, you complain about how retailer bundles include games you don't want. Goes to show that you can't please all of the people all of the time.

A few more points:

• Those big $1000 4-games-and-extra-accessories bundles are from the retailer, not Microsoft. In fact, I'm not sure Microsoft can do anything about it without running afoul of price-fixing laws. (Besides, those bundles are a scam that makes it look like there's a shortage, when you'll be able to walk into any random Target and pick up exactly what you want, and nothing more.)
• Sony and Nintendo do the same thing. The box, one controller, and lowest common denominator AV pack. That's how I bought my XBox, that's how I bought my PlayStation 2. Of course, given the difference in cost between the XBox360 bundle and the XBox360 core + hard drive + wireless controller + etc., well, Gabe and Tycho have it right.
• I have yet to buy a DVD player, at any price, that included the latest top selling Michael Bay explosion-fest, or a CD player that included a new saccharine pop artist.

Re:Because They Are Too Expensive

[MBCook]

I agree that Nintendo and Sony are doing the same thing do a degree, and I understand that the $1000 thing was a case of one retailer. But there was quite a bit of talk about MS doing that themselves, and I wouldn't put it past them.

As for bundles, it depends on price. If you want to sell your console without a bundle, then offer it cheap ($200). If you want to sell it in a bundle offer it more expensive but reasonable ($300, $350). But the idea of offering the console alone (not in a bundle of games) for $400 (hence the bundles start at $500+) is insane.

Bundles are fine if they are a value. But taking an already expensive console and adding on games and calling it a "value" is a complete sham.

I think I would prefer the bundle (especially if there are two or three versions depending on what game you want packed in). I think what Nintendo later did with the 'Cube (buy it for $xxx and you can choose one of these games (Mario, Metroid, or something else good) for free) was good. The ideal is offering that, and offering a non-bundled version too (you wouldn't have to do that if your bundle was $150 or less).

My main complaint is the base price point is too high. To charge $300 without including a game is pushing it. To charge $400 is outright mean.

I agree that the $400 version has a VERY fair cost compared to the $300 version (considering all it includes). But my complaint is the $300 version is overpriced, and thus the $400 version is overpriced.

Bundles are fine, done right. But at the prices MS if offering the XBox 360, I feel that it should be a bundle, and the bundles that 3rd parties are making are (due to the core cost) too much to be considered a value.

Hope that explains my logic better.

Re:Because They Are Too Expensive

[BenjyD]

Precisely. I operate about 18 months or more behind on games, so I pick them up second hand or on sale for about 30-50% of the new price. It's not like I lose anything by not buying a game on its release date - I still have loads of games to play.

Re:Because They Are Too Expensive

[Metal_Demon]

You are forgetting two things about the $400 version of XboX 360:
1. Hard drive (sold seperately for like $80)
2. The controller you get is wireless (like for instance the WaveBird ($25)).

In regards to PDZ...

[Alkaiser]

The "significant additional bonus content" has already been reported to be jack shit.

1 of 9 collector's cards? Behinds the scenes footage? Who cares.

Meanwhile on the other hand Firaxis is offering:

Collector's case: Navy blue "leatherette" bookshelf case embossed with the Civilization IV logo.

CD Soundtrack: Containing original compositions by Christopher Tin (http://christophertin.com/news.html) and Jeffrey Briggs (composer of Civilization II), as well as classical pieces throughout the ages.

Keyboard template: A die-cut keyboard layout for quick reference to keyboard commands during the game.

Tech Tree map: A foldout poster that displays the tech tree for ease of reference. A tech tree is a path you need to take with your scientific research in the game in order to reach certain goals. The path you take helps shape the society you create and help shapes you as a leader. Here's an example: http://www.civfanatics.com/civ3/techtree/

Spiral bound manual: The 250pp+ manual is upgraded from the standard perfect bound to a spiral bound version, allowing it to sit flat while open.

All this for the low, low price of FREE if you preorder. Microsoft wouldn't know "excellent consumer value" if it kicked them in the nuts and punted their dog off a suspension bridge.

Re:Who cares, it's still $500 at launch

[Digital Vomit]

Buying a new video card every 3-4 years for that much is one thing, a new console every year is quite another.

Huh?

PS3/XBox360/Revolution = 2005/2006

PS2/XBox/GameCube = 2000/2001

PS1/N64 = 1995/1996

SNES/Genesis = 1989/1991

That's about a five year time span between generations. If anything, console upgrades are less frequent that pc video card upgrades.

Re:Who cares, it's still $500 at launch

[Anonymous Coward]

I believe the grandparent is talking about Microsoft's idea to release upgraded versions of the console in quick succession. I don't have a link handy, but I know this has been discussed on Slashdot before. If that's not easy to find a quick Google search should be sufficient.

Choose your poison...

[nmaster64]

My Speculation...

Xbox 360
Perfect Dark Zero
Wireless Controller
Headset, Media Remote, + 20GB HD
Partial Online Access (Live Silver)
Total: $450

PS3
Metal Gear Solid 4
Wireless Controller
Media Remote
Online Access?
Total: $450

Nintendo Revolution
Super Smash Bros. Revolution
Wireless (Revolutionary!) Controller
Analog Stick Attachment
Full Online Access
Total: $300

Depending on how the Rev controller thing turns out with Smash Bros., I personally have to go with the Revolution. If, for no other reason, because that's all my wallet can handle, and it might not be able to handle that!

Re:game prices

[Chemical]

Game prices, if adjusted for inflation, are significantly cheaper than they were in the NES era. A game these days costs $50 new. A game in the NES days costs $40-50 new. Adjusted (1987 dollars) that is $67-84. And think about how much more it costs to make a game vs. in 1987. If anything, were getting a way better deal since the days of the NES. I wouldn't complain. I think $50 is perfectly reasonable.

N64 was a good example of bad pricing

[Rolman]

The N64 was the last cartridge-based home console Nintendo made, throwing themselves out of the industry throne because of the implications of that choice alone.

Producing the N64's cartridge media was literally hundreds of times more expensive than the PSX's CDs. Thus, to remain profitable, Nintendo had to raise the price of their games up to $70 per cartridge. That just helped Sony to strenghten their position in the industry since they had a far superior bang-per-buck ratio for both users and developers. Nintendo finally settled for a profitable, yet distant second place in that generation of the console wars.

The current consoles from Sony and MS are sold initially below cost (Xbox is still bleeding like in a Tarantino movie), while the development costs are skyrocketing because the market demands higher complexity. I can't help but think this will only get bloodier in the next generation of High-Definition, Online-enabled, high-performance, BT/Wi-Fi, _______ (insert trendy buzzword here) gaming.

I think that the PSP's media prices are already outrageous ($50 for a non-original game!). That fact alone makes me expect things to be worse for next-gen console games.

Nintendo, OTOH, definitely learned something from that awful $70 experience as it showed us with their cheap, powerful AND highly profitable Gamecube, GBA and DS. I certainly hope Revolution games and console are cheaper than the competition. I also hope gamers take notice and stop buying slightly prettier versions of existing games at a $10-$20 premium.

Re:game prices

[Leiterfluid]

You know, I hear this "logic" mentioned quite a bit, and I would like to point out that the cost of optical media, used by all three major manufacturers, is significantly less than the cartridge-based games of yore. Nintendo tried upping the price when the N64 was released (Shadow of the Empire was $90!) and they couldn't maintain that price point for long. The fact of the matter is, regardless of what the development and marketing costs are for a game, manufacturers save a BUNDLE on manufacturing because of the minimal duplication costs, which help maintain the price of the games at about $50.

Add onto that the fact that developers can slap a sequel together for most licences without having to rebuild the game from the ground up. Grand Theft Auto is an excellent example of this. While there were ginourmous differences between GTA II and GTA III, the base elements of GTA:SA haven't changed much since GTA III.

The other side of that coin is that casual gamers are quite simply not going to spend more than $50 for a game. Sure, the gaming elite will spend three times that for a "super special limited edition" that comes in "collectible" packaging, but I'm starting to wait for games to become a Greatest Hits/Platinum Hits/Player's Choice (yes, I own all three consoles) title before shelling out the $20 for it. And sometimes I'll wait until a retailer has a 2 for $30 deal before spending my dough.

I won't buy a next-gen console until they hit the $150 mark. And I dig on video games.

When

[PenguinCandidate]

did American kids get so damn rich? Did I miss a memo? Same goes for the parents, I had to beg for an N64 and that was $250 and umpteen years ago. Message to Sony/MS: We don't all live in houses with Viking ranges, infinity pools and boat houses. Remember that video games have 'game' in their title. You can shove all the 'value' into a system you want, but if it's expensive it's still, well expensive. Otherwise we'd all be listening to Bose theater systems after a jaunt around the country club in our Ferraris.

Why yesteryears' models don't apply

[Red Flayer]

I think that MS and Sony both are making a pretty large mistake with their new consoles.

When new consoles were released in the past, they offered an incredible upgrade in game quality. Graphics, sound, gameplay capabilities (like better controllers, games with more depth, etc) were all significantly better than the previous generation.

Because of the remarkable upgrade in gaming experience, people were willing to part with tons of cash in order to play the newest games.

I don't see this happening quite so much now. Will gameplay on these new consoles be so much better that I have to get one?

The only place I see these consoles being remarkably different is with online play being better utilized. Is that enough to swing enough buyers, especially considering monthly fees?

I'm not a Nintendo fanboy -- but a cheaper system better reflects the smaller incremental increase in game tech.

Also, for those of us who bought PS/PS2/Xbox but not N64 or Gamecube, the re-release of classic Nintendo games allows us to experience content that we may have missed.

For those entering the console market for the first time, however, the Xbox 360 and PS3 may have more appeal.

Re:Games do go out of print.

[jimi the hippie]

Only if the game sux will they discontinue it.

Adjusting for inflation?

[hal2814]

I see a lot of posters trying to make themselves feel better about the next-gen pricing structures by adjusting yesteryear's system launch prices for inflation. This will not give you an accurate picture of what's going on for two reasons:

1. Electronics are getting cheaper. How much was that TV you bought in 1983 adjusted for inflation? How about the VCR you bought in 1985 for $250? Or even your refrigerator or oven? The price of a next-gen system SHOULD be cheaper by this logic.

- BUT -

2. Consoles are becoming more powerful compared to their peers. Back in the day when the NES came out, it was significantly less powerful a machine than the PCs of the time and the arcade machines of the time. Now the XBox and PS2 are about 3/4 as capable as a PC that came out around launch. As these consoles become more and more powerful compared to their peers, they SHOULD become more expensive.

The important thing isn't what the XBox 360 or PS3 will cost compared to the NES. It's far more important that you think the XBox 360 is a good value from the money. Judging by these "adjusting for inflation" defenses, I get the idea that a lot of people aren't happy with the price but are willing to pay it.

Three pricing strategies

[UES]

It looks like there will be three discrete strategies to grab differing types of consumers.

1) Sony

-Very high price point.
-Going after large installed user base as well as hardcore gamers.

Negatives:

-High manufacture cost means less opportunity for dicounting.
-Casual gamers and Parents (who buy gifts for minors) will likely balk at ultrahigh prices.

2) Microsoft
-Very high price point.
-Going after installed user base as well as hardcore gamers.

Negatives:

-High manufacture cost means less opportunity for dicounting.
-Likely consumer confustion over various hard drive options*
-Casual gamers and Parents (who buy gifts for minors) will likely balk at ultrahigh prices.

* Spare me your lectures. If you have ever worked retail, you know customers are dumb about stuff like this.

3) Nintendo

-Lower price point than Sony or Microsoft.
-Going after casual gamers, Women, and nostalgic gamers, as well as Nintendo Fanboy base.

Negatives:

-Unusual controllers may have tech glitches, forcing costly recall.
-Hardcore gamers think Nintendo is 'kiddy' and will probably avoid.
-Going after people who usually don't buy games is risky. They may still not care about games.

Just from this sketch, the best case scenario for each company is:

SONY
-Devotion to the Sony brand and superior graphics carries PS3 to victory.

MICROSOFT
-Marketing 'cool factor' and online elements, including exclusive licensing deals, carry XBox 360 to victory.

NINTENDO
-Expansion of the market due to lower priced option and attempt to keep games simple and innovative carry the Revolution to victory.

Note: 'Victory' means THE MOST PROFIT, not THE MOST UNITS SOLD. If you are a shareholder, you care about PROFIT.

I'd put my money on Nintendo. Sony and Microsoft and going to beat each other to death with their unlimited marketing checkbooks while Nintendo creates new customers.

Sony has the most to lose. Why should consumers pay hundreds of dollars for graphics that are somewhat better than what they have now?

I don't see where Microsoft goes. THey aren't innovative like Nintendo. They don't have the huge installed fanbase that Sony does.

Nintendo is taking a very high risk strategy, but the payoff could be immense.