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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.'"
"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.
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