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Do Video Games Cost Too Much?
Valve's Gabe Newell gave the keynote address at this year's Design, Innovate, Communicate, Entertain (DICE) Summit about the cost of games, the effect of piracy, and how to reach new players. Valve undertook an experiment recently to test how price affected the sales of their popular survival-horror FPS, Left 4 Dead. They Reduced the price by 50% on Steam, which "resulted in a 3000% increase in sales of the game, posting overall sales that beat the title's original launch performance." They also tested various other price drops over the holidays, seeing spikes in sales that corresponded well to the size of the discount. This will undoubtedly add to the speculation that game prices have risen too high for the current economic climate. G4TV ran a live blog of Newell's presentation, providing a few more details.
Yes. That was easy. Next!
Don't fight for your country, if your country does not fight for you.
The points he makes in the Gamasutra summary sound remarkably clueful for the co-founder of a semi-major media firm. He seems to essentially "get it", that when selling content you're in a market, and if you're failing to sell as much as you'd want, the best solution is to figure out how you're failing to succeed in the market rather than whining about pirates.
Basically:
1. Price points are not given from God. There's a supply/demand curve, and if you price things higher, you'll get more profit per item but sell fewer items. What shape this curve takes, and where you ought to locate yourself on it, can vary on a lot of factors, and it's your job as a company selling things to research that, rather than decide "games cost $50/$60, and that's that". Maybe they should cost $20, maybe they should cost $100, maybe it varies based on the game and your goals.
2. There are a lot of people are willing to spend money. Some people will always get your stuff off Bittorrent purely due to the price (because it's free there, and you want money). But this is, contrary to what many media firms think, not the only or main problem. There are a lot of people who are willing to spend money on a lot of things. You'd do best to ask yourself if your company is doing something wrong that's keeping even people who would be willing to give you money from doing so (e.g. region-locked DVDs making it impossible for them to buy a legit copy).
3. Along the lines of #2, DRM can be counter-productive, by making the legit copy seem like a bigger hassle than the cracked copy off Bittorrent. People who are willing to give you money for something they like may not be willing to give you money if you come off seeming like you hate your customers.
Of course, #3 is slightly strange since Valve does in fact use DRM on Steam to authenticate your account to a particular machine. I suppose in their defense it's not nearly as draconian as much DRM, so they at least seem to be making efforts not to piss off their customers. And the existence of Steam in the first place, several years before any other major companies did anything similar, seems to indicate a certain understanding of, "if you make it easy for people to buy your things, they might do so".
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
If Sony & Microsoft didn't try to make money by selling their consoles at a loss and making the money on games sales then this proof would never have been nessessary. If you sell a PC game then it's generally priced in line with the console release, which is inflated by the console markup. Rather than blame themselves for pricing games out of peoples spending brackets, both are trying to blame the second hand market for reducing sales and work out ways to kill it. Pro Evolution Soccer on the PS3 is the start of the slope. If you buy a second hand copy you can't play it online if it has been used online before. It won't be long before disks brought in shops only count as a "non-transfereable licence to play" rather than ownership of the game and it'll still be at the current prices.
I did this in Economics long ago. Have a look at http://en.wikipedia.org/wiki/Income_elasticity_of_demand.
I think, it means that when stuff costs less more (or less) people buy it differently. It works differently for different stuff. Fuel, for instance probably is not very elastic because it is not a discretionary purchase - you have to get it. I think some really expensive stuff might actually sell more because it is expensive - caviar anyone?
A game is a highly discretionary purchase and so it will be very elastic. Proper capitalism should mean that you try and maximise your profit by lowering the price and increasing sales. Obviously, you can only cut the price so far because you need to make some profit per unit but the theory is sound and fairly obvious to me.
The idiots in charge in the industry seem to see the whole thing differently. Obviously MBA/parasite economics is not the same as real economics.
I'll see your Constitution and raise you a Queen.
Also, the ability to return a game that I do not like.
It used to be that this was a given, since before the media companies forced their will upon the rest of us, games were treated like any other merchandise. When I could return a game I didn't like, or that didn't work, to the store in the mall (at the time it was Software Etc.) I bought many more games than I do now. I could take a chance because the risk to me personally was extremely low.
I would frequently browse the shelves holding PC games (which were far more numerous back then). Hmm, that looks like it *might* be fun/interesting. I'll buy it and find out. Maybe it is, maybe it isn't, but I'll soon know first hand.
Publishers constantly whine about the risks of developing new IP because it is very hard to know how it will do in the market. If I, as a customer, have the ability to make low risk purchases, I'm far more likely to try new games.
As it stands now with the draconian return policies, I almost always wait for a stack of reviews to be published before I make any decisions. This hurts the developers and publishers in a number of ways. First, I have to take the initiative to find these reviews which all but eliminates the chance of an impulse buy (or even a semi-researched buy). And second, I am relying on the reviewers subjective opinion. I know that I am getting filtered information and that my views on what is good/bad are likely different from that of the reviewer, but what choice do I have?
Demos can mitigate this problem, but only a little. They still eliminate the chance of an impulse buy. Plus, I find I give a demo much less time to "win me over" than I do something I have paid for. And, of course, depending on what genres you like, the availability of demos varies greatly. Adventure games, strategy, RPG/JRPG? Good luck finding demos.
Elrond, Duke of URL
"This is the most fun I've had without being drenched in the blood of my enemies!"-Sam&Max
A lot of people say that this price increase is due to inflation etc. and that the prices we all remember are impossible today.
I can only think of the games that come out for Spectrum - 1980's, £10 for a "full-price" game, 99p for a budget game (rising to £1.99 and then £2.99 before the end of the 80's). Let's ignore the high-end stuff for a while, because people buy stuff just because it's full price and just came out - they are the people who are stupid.
Even taking into account inflation, etc. that is a hell of a markup. And these people formed teams like Codemasters etc. (Two brothers started out programming Spectrum and C64 games under the name Codemasters and soon built a company out of it before the Speccy era had ended.) so it's not like they didn't profit from it.
Now, let's look at the Wii... not the newest console but a good seller. The cheapest "new" (not used) game I can find in an average shop is £10 and it's an unpopular title. The average "budget" game (i.e. a popular game that has had it's run and needs to sell more units) is around £20-30. The "good" games can cost up to £60, not including other hardware bundled with them, and stay at that price for YEARS.
The 99p - £1.99 - £2.99 was a fast expansion of price - 300% inflation within 10 years. But since then, we've seen nearly 1000% inflation in 20 years (£2.99 in 1989 -> £20-30 in 2009), just for budget titles. That's exponential growth. Real inflation in developed countries hangs way under the 5% a year mark, so even with the best maths in the world (you can't really necessarily just "add up" the year-on-year inflation for the last ten years), it's not anywhere near 300% and certainly not 1000% inflation over 10 or 20 years.
Prices will be set to whatever people will pay. Unfortunately, people are stupid and a lot of parents spend this ridiculous sort of money because they think they have to. But for, say, half a dozen new (but been out for a while) games to cost a week's wages for the average person, that's just stupid.
However, the prices of the hardware are relatively static. The Spectrum cost £100-200 when it came out, the same price bracket as the Wii. The hardware has inflated a little but not anywhere near as much. Considering that is bound by real-world economics like availability of parts, bulk-orders, raw material prices, I expect it to model inflation quite well and it does. But the software seem to be nothing but pure profiteering - probably based mostly on the fact that once you've bought the hardware, you "have to" buy games for it.
Steam's sales are great. I haven't bought myself anything on Steam in years (I bought my brother a birthday present of Half-Life 2 when it first came out, and nothing before that at all) but I went on there the other month and ended up getting about 12 games for about £25. That's perfect for me, and they were all games I wanted, all big names, two Half-life 2 episodes, the entire GTA and UFO series, (but not GTA4) etc. I could easily have bought another 12 games for around the same price. But when I look at the "normal" prices of some of that stuff, I shriek in horror. £30-50 for a game? Come on, that's *4* DVD's even at "brand-new" pricing, and there's no way that a Rainbox Six game costs as much to make, even taking into account the difference in the amount of final sales, as four Hollywood movies. £50 is a LOT of money. That was once-a-year birthday-treat kind of money back when I was a kid and I could make that run to games, films, books, magazines, etc. for ages. Now that's the price of one game (which isn't guaranteed to be a blockbuster). Inflation hasn't grown that fast.
The scales aren't right - software is far too expensive, especially for the effort that goes into updating and supporting most of it. Multiplayer games are left to die after a few years, patches dry up a matter of months after the initial release, support is non-existent fo
I bought Dawn of War 2 yesterday for £24.99 which personally I don't mind paying for a game.
But then I got home and tried to install it and it requires you install Steam and Games for Windows Live and activate the game via Steam. I tried to activate it and was told I can't because it's not for sale in my country- presumably because although some shops are selling it THQ decided the actual release date was today.
So yeah, that changed my mind, £24.99 is fine for a game I can play when I want and whatever system I want but it's far too overpriced for a game I can only play when they decide I'm allowed to play it whilst also having to give away a bunch of personal details to Valve for Steam and Microsoft for Windows Live.
The box at least said an internet connection and registration was required to play but it still said nothing about having to give away details to register to Valve AND Microsoft and it certainly said nothing about them being able to choose when I can and can't play the game.
It's been said here many a time that pirates provide a copy of a game cheaper (free) and that you can play without restriction when you want and where you want. If companies want to increase sales then perhaps they need to accept that they have to beat pirates on at least one of these levels, by either matching them on price (not gonna happen) or by beating them on product quality. Whilst they continue to do neither they wont get anywhere.
As for me and DoW2? I file a complaint with UK trading standards and will be returning the game tommorrow and they can damn well take it back even if it is opened because as far as I'm concerned if I don't have the guarantee of being able to play it when I want and have to hand over personal details to two third party companies to be able to play then it's faulty or simply misadvertised. Just as I got burnt with Spore's DRM I've now been burnt with Dawn of War II's. You see when I was young I used to pirate games because I couldn't afford to buy them, now I make plenty enough to buy these games I do so, just as I *gasp* bought a copy of Windows for my most recently built PC. I also bought music from iTunes only to find the only music on my iPod that would play on the game Lips on the 360 for my girlfriend was downloaded MP3s and none of my legally purchased music would work. Some may think it's not a big deal having to wait a day to activate but my concern is that they can revoke my access just as easily as they've prevented my access to a game I've legitimately bought.
What they need is a change of attitude and price is only part of that, I wont buy brand new XBox 360 games at £39.99 but at around £29.99 I don't mind because at least the restrictions are pretty obvious when you buy the game and console. It's not ideal that there restrictions exist but it's light years ahead of the unadvertised 5 install limit with Spore on release and the "Valve gets to choose when you can and can't play" with Dawn of War 2. So whilst I'll buy 360 games, I wont buy music, I wont buy PC games, not even if they were £9.99 anymore it's not just worth the hassle.
So yeah, even Valve with their "Hey look at us guys! we think DRM is silly, we love piracy and think it helps! hell we even do great discounts sometimes!" are still the scum of the Earth and as bad as EA when it comes to draconian DRM in that they prevented me playing a game made by the company THQ and bought from the company GAME and could just as well prevent me again any time they wish.
I remember being SHOCKED at the prices of games on Steam. They sold, and still sell, at the exact same price as games at MSRP, which as we all know is more than most stores, let alone online retailers. Yet, apart from the expense of running steam's servers/bandwidth, it looks very much like Gabe Newell just eats up what would have been the costs of distribution, media and the retailers approx 30% cut on top!
Why is this not coming back to us, at least in part? When we were told that one of the advantages of online distribution was a reduction in costs, were we expected to celebrate a rise in profits for industry players? I think we all rather expected online distribution to make games cheaper! Hell, Bioshock RAISED the price of games when it was released on Steam.
When you combine this with the fact that Steam has cut users off from their games who have LEGALLY saved on the price by buying from a different country, and you've got one of the biggest contributors to the high cost of games preaching about how games should be cheaper. To quote the movie Airplane: What an asshole!
Let's also not forget inflation. Let's compare today's games to the games of the 80s and 90s.
A top-priced game costs $60 today. But then consider the budget that goes into making the massive 3D graphics, including modern rendering and lighting techniques, R+D, possible budget for voice actors (and unlike the 90s, they can't just rely on local talent, some of these games require big names), etc. All that budget is being used on games that cost $60, surely, but adjusting for inflation, a game that costs $60 in 2009 would equal half-price in 1989.
Let's stick with 1989. Back then, new games for the NES typically went for $50. Then, consider that proportionally, game budgets were much, much smaller - even when you adjust for inflation - and then affix 2009 inflation to 1989 prices; that $50 game cost about $85 when adjusted (calculated here: http://data.bls.gov/cgi-bin/cpicalc.pl).
Plus, once you get into subjective arguments, you can argue that the quality of games today has gone way, way up; yes, there's a lot of crap out there, and like some of you, I haven't fully evolved from my 80s self and aren't very good at 3D action/platformer games, or FPS titles. Taken on the whole, the average game today is much, much better than the average game of the 80s was; the crap is still crap, but the ratio is much better today than back then.
It can be argued that the American per capita income hasn't adjusted properly with inflation - that's an argument to itself - but I think that the main point stands: we're getting more games today than twenty years ago, we're getting better games, we're getting them comparatively cheaper than we did in the 80s, and companies are making less money than they did in the long run (on average).
Let's stop dilly-dallying and just change "-1: Overrated" to "-1: Disagree" or "-1: Doesn't Subscribe to Groupthink".