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Why Games Cost $60
eldavojohn writes "Crispy Gamer is running a very interesting article on why games cost $60. Many games start out at this retail price — but why? Did the makers of The Beatles Rock Band game just happen upon $59.99, as did the makers of Batman Arkham Asylum? After all, those two titles surely took different amounts of man hours to develop, and result in different averages of entertainment time enjoyed by the consumer. They interview a director at Electronic Entertainment Design and Research, who breaks down the pie as $12 to retailer, $5 to discounts/returns/retail marketing, $10 toward manufacturing costs and shipping. That leaves $30 to $35 in the hands of the publishers. Though lengthy, the article looks at three forces of economics on why game publishers continuously end up in lockstep for pricing: sensible greed, consumer stupidity or evil conspiracy. When asked about the next step up to $70 or $80, Hal Halpin (president and founder of the Entertainment Consumers Association) says, 'I'm not sure that we'll see a standard $70 price point at all. To my mind, emerging technologies, subscriptions and episodic and downloadable content should all enable price drops — increasing accessibility to a much wider audience.'"
The thing I hate most is that for xbox360 (sure it's the same for PS3 but I don't own one so I don't know) every game is $60. Some games definitely deserve it like the huge RPG games with fantastic stories and voice acting and emersive worlds, the great multiplayer FPS games, and so on. Then there's the other games, which probably spent a quarter as much time in development than the much better games, and all of a sudden the developer is like "hurr hurr it's in high def and on the 360 it's worth $60" Games based off movies come to mind first-- usually terrible mock ups hashed together for insta-profit from the movie's success. Some cartoon graphic puzzle games next. And some blatantly terrible games.
"That leaves $30 to $35 in the hands of the publishers."
So why can't we just download games for about half the street price?
"I bless every day that I continue to live, for every day is pure profit."
"You pay atleast $15+ to go the movies, "
I don't. Matinee prices for me or I wait for the DVD.
I won't pay $70 for a game either. I got burned by immediately paying $50 for the unplayable Splinter Cell Double Agent PC game and I swore off paying those prices. Saved me another $50 when Wolfenstein turned out to be sucky as well but for different reasons.
On the other hand, I paid $20 for Killing Floor and I've put hundreds of hours into that game unfortunately. I'll get Left4Dead when it hits $20 as well.
You suckers keep paying $50 and $60 for games and the prices will only go higher.
Relative to the 1970's and 80's the prices now are a real bargain. I recall Pac-Man for the Atari 2600 being something like $50 at first.
Do really dense people warp space more than others?
What is killing console games is the inflexibility in pricing structures. Although AAA release game is okay at $60, a game like "Darkest of Days" is not. But since they are stuck in the same distribution channels they are forced into this pricing structure that doesn't make sense for the game.
This is why online stores like Steam have taken off. "Plants vs Zombies" is a hell of a lot of fun and would have died at the fixed $60 price. A developer may notice their game sales are slowing down so they do a price cut weekend which is impossible to do with the classic distribution chain. Even in the citation, half of the cost instead of being consumed in the distribution chain just putting disks on shelves can be put elsewhere. I don't have much illusions the big boys with the big games will pass the savings on to us but having the flexibility is at least a start.
Why do games cost $60? Because that is what the market will pay. Does this even need to be discussed?
I would think yes; yeah, we all know basic economics, but from someone not working in the industry how much do we know about how this price point was reached? Was this found by trial and error? Market research? Both/other? To what extent have there been deviations and what were the results? To what extent do Nintendo/Sony/MS play a role with "suggestions" about pricing? How does price set expectations about quality? What about the impact of historical prices on the perception of current prices? And whatever else I forgot...There's probably a lot of detail that can be explored about the topic that goes beyond just saying "that's what the market will pay". The article isn't great though it mentions a few points but could have been more detailed and researched.
Actually, what the publishers typically do in order to maximize revenue:
Release day price: $60
6 months after release: $55
1 year after release: $45
2 years after release: $30
3 years after release: $15
4 years after release: $5
That way, they get the early adopters paying $60, and also get the people they just priced out of the market with their 3-4 year old titles. That's because the timing allows market segmentation, which allows them to capture a greater portion of the consumer surplus.
I am officially gone from
We all know the supply and demand thing, but the question the author asks is, games don't inherently have a value, so how does the market determine its price to be $60 ? That is, why isn't the market clearing price not $30 or $90 ?
In addition to the points the author mentions, another explanation is in the phenomenon of anchoring. Humans inherently do not know the value of any good, so the first price they see for a product stays in their mind and they compare all prices for that product off that anchor. We have grown used to seeing $60 as price for games - it has become an anchor - so all new games are priced at that.
A brilliant example of anchoring is given in the book "Predictably Irrational" by Dan Ariely. He gives an example of Tahitian black pearls. When they were discovered all pearls used to be white, so black pearls had no market and no value. But a very clever marketing campaign was launched to *anchor* the black pearls with very expensive jewellery, and hence there value became very high.
Economics assumes that people are rational. However, people are often irrational. There is a subject called behavioural economics which studies irrational behaviour of people and the limits of normal economics.
However, there are certain games where I have more than gotten my money out of them, namely, Zelda Ocrina of time(still have no clue why I am compelled to play this game start to finish every year or 2), 007 Goldeneye, Mariokart 64 and wii, Starcraft, Warcraft III and baulders gate II (even though only played through once, the hours discussing, playing and thinking alone have put pennies on the dollar for enjoyment.)
CS: It is all sink or swim...oh and did I mention there are sharks in that water?