The People Speak Week 9: Price Wars

[danielrbischoff]

Didn't hear that the PSP-3000 is getting a price cut? Well it is!

Of course, the PSP is old news! The NGP is coming out soon, who cares about the PSP?!

Well, I do, and I'm guessing if you've never picked up a PlayStation Portable of your own, you're probably eyeballing the large library and the reduced price as hungrily as I am.

Is $130 the sweet spot for the PSP? If it isn't, what is?
What about the 3DS? What about the Wii, Xbox 360, and PS3? How about an awesome gaming PC?

What about games themselves?

Put yourself in the shoes of the publishers, developers, and retailer-middle-men. How much should our hobby cost? What's an appropriate pricing structure for the gaming landscape?

 

[UghRochester]

It depends on people. I do feel the price on some products are overpriced, but I'm not complaining to developers to lower the cost. Reason why? We have morons who love to steal. Stealing just makes the price of that product go up. Think of the law of supply and demand. People who steal the product makes supply lower, which the demand for it will increase. Therefore, increasing the cost of that product and having people complain about it.

The gaming products I feel are overpriced are the games themselves. Companies most likely make most of their money of the games, rather the consoles themselves. The reason is people are constantly buying games, not consoles. That also gives you the reason why consoles are priced so high, people aren't going to buy much consoles.

 

[De-Ting]

While development costs must certainly factor into the price, I think the main reason why Xbox and PS3 games cost so much is because you're paying for the convenience. For example, game consoles cost a lot less than an adequate gaming PC, with processors, video cards and RAM being so expensive. Not to mention how hard it can be just to get stuff to work. I bought Spider-Man Shattered Dimensions for $20 on PC, had all the system requirements and even ran the game on minimum settings, but it still lagged massively. Point being, for how much trouble you have to go through as a PC gamer, games SHOULD cost less.

As for the PSP, I'm disappointed that they didn't drip it to $100 like they did with the PS2. Not just because it's cheaper, but the number looks prettier. Noticeably more people would buy if they made it more appealing.

 

[TheDiesel]

Most people believe that $60 is a hard price to bargain with on these current-gen consoles like the PS3 and XBox 360, but with how much games cost to make and publish nowadays, most developers, unless making AAA titles, won't make a profit.

With current-gen games, production cost of making the game alone range between $10-30mil, and unless you sell your product to the likes of EA, Activision, or 2K: that money is coming out of pockets, and most of it won't come back. So as the present times would indicate, if something costs more to make: it's going to sell at a higher cost.

So really, I have no problem where the current-gen games cost since if we enjoy the game and want to continue enjoying games from said companies, we need to get them the appropriate funds to continue.

 

[Green_Lantern]

Think of the law of supply and demand. People who steal the product makes supply lower, which the demand for it will increase. Therefore, increasing the cost of that product and having people complain about it.

You have that mixed up.

 

[SpitefulSerpent5]

Pricing with games is a pretty tricky subject, but there are two things my mind goes to immediately when I think about it: Quality and DLC.

Let's look at the Best-Selling Games for the current consoles:

PS3
Gran Turismo 5 (6.37 m) / GT5 Prologue (5.2 m)
CoD: Modern Warfare 2 (4.8 m)
Uncharted 2: Among Thieves (3.8 m)
MotorStorm (3.31 m)
Black Ops (3.269 m)
Metal Gear Solid 4 (3 m)

Xbox 360
Halo 3 (8.1 m)
CoD:: Modern Warfare 2 (7.481 m)
Gears of War (5 m)
Gears of War 2 (5 m)

Wii
Wii Sports (75.66 m)
Wii Play (27.38 m)
Mario Kart Wii (26.50 m)
Wii Sports Resort (26.35 m)
Wii Fit (22.61 m)
New Super Mario Bros. Wii (21.28 m)
Wii Fit Plus (17.74 million)[68]
Super Smash Bros. Brawl (9.48 m)
Super Mario Galaxy (8.84 m)

(Source: Wikipedia)

Though PS3 Users seem to actually have more diverse tastes than the 360 and Wii, which are dominated by shooters and "minigame" products respectively, variety isn't too big a problem as all many different genres of games can sell big. Racing, shooters, adventure, and minigames are all on the list. Looking beyond the consoles (or further down the lists) will bring you RPGS like WoW of Final Fantasy as well as Strategy games like StarCraft or Civ.

What do all these games have in common? They are all considered either high quality or at least well made. While Wii Sports Resort isn't on the same level as CoD, it does what it sets out to do fairly well. In addition to that, they appeal to a wide audience. An online component is helpful, but many of the games on the list are bought primarily for their Single Player appeal as well - MGS and Uncharted being key examples.

For nearly all these games that are considered of a higher quality, it can be generally understood that they had fans who were quite willing to pay the full $60 in most cases. Buying used is another topic I'll address shortly. For the games not "high quality" (i.e. those on the Wii's list) they had to rely on appealing to a wider audience. They obviously succeeded since they're sale numbers widely outpace those of their counterparts. One must take into account the slightly lower prices of Wii games as well as the special bundling deals of Wii Play and Wii Sports, but I still think the statistics back me up on this.

Either way, most gamers in my personal experience do not spend large amounts of money actually BUYING the majority of games they play outright at the MSRP. They will rent from Blockbuster or Gamefly, or buy used. I personally have a circle of two to three friends that I will trade games with regularly. My roommate bought New Vegas and I bought Mass Effect 2. They spend equal times in both of our PS3s. The point is that the mediocre games that are published year after year and seem to suck so much money from developers are either marketed towards kids who won't recognize or care about the quality (especially prevalent in games based on movies) or are simply money sinks that most won't care to buy anyway. The games most people buy new are the ones they know that they'll be playing repeatedly for a long time or can't wait another day to play. If not, renting or buying used is much more economical.

Gaming companies seem to have two real solutions to this problem that I can see from the admittedly limited time I've put to thinking on the problem: focus on making games with real quality that they know fans will want to buy new and encourage buying in that manner through use of DLC.

Bioware is an EXCELLENT example of this. Mass Effect 2 was a high quality game that many bought new, with week one sales moving 2 million copies. Oh, and those are the numbers for the PS3 port.
Source: http://www.1up.com/news/mass-effect-2-week-sales

Not only were enough people excited enough to buy it new, Bioware also discouraged buying the game used by putting some elements of the game in DLC that came free with the new copies of the game. They did the same thing with Dragon Age when it first came out. Buy the game new and you'd get several quests as well as another party member. They plan on using the same method with Dragon Age 2.

While I have my own thoughts on Launch Day DLC being available, I don't have a problem with it being included for free with the new version of the game, it's a sound business tactic, and one I respect Bioware for using. It's potential for abuse worries for me, but for now I see it as an excellent example for how a developer should treat price. Bioware games may not come out too often, but when they do customers and critics have recognized them for their good quality and have been encouraged in a fair manner to buy them new and support the publisher. If other developers would focus on methods like these we'd hopefully have a less saturated market filled with higher quality games that we'd have no problem paying for.

I'm sure that this concept has quite a few holes in it that I welcome any subsequent posters to punch (if they have the patience to read all my ramblings) but I do think the idea has merit.

 

[UghRochester]

Think of the law of supply and demand. People who steal the product makes supply lower, which the demand for it will increase. Therefore, increasing the cost of that product and having people complain about it.

You have that mixed up.

How so? If supply is low, demand rises and price increases. Is supply is high, demand is lower and so does the price.

For example, Gold. Gold has low supply, and people demand. The less gold there is, the more it will cost.

 

[Longo_2_guns]

Ugh, you don't understand economics. Don't act like you do.

 

[UghRochester]

Ugh, you don't understand economics. Don't act like you do.

It's simple economics, everyone knows this.

 

[Longo_2_guns]

Except you, apparently.

 

[UghRochester]

How was what I said wrong?
Excess supply? Excess Demand???

 

[Longo_2_guns]

Because that only matters when you're purchasing the goods. Stealing has little effect on the supply/demand curve, since it has little effect on the big picture of it all.

Plus, if you're talking about games, then there's no decrease in supply at all when it comes to piracy, since it's all copied. Instead, the demand just decreases since people are still acquiring the goods. So the price increase would be due to demand being too low to meet the optimal amount sold.

 

[De-Ting]

Yes Ugh. Sadly, your logic could only apply to tangible goods.

Video game piracy doesn't actually involve people showing up at Gamestop wearing peg legs and eye patches and plundering all of their games to sell on the internet. Although I think that happened once...:?

 

[cyberjim2000]

Is $130 the sweet spot for the PSP? If it isn't, what is?
What about the 3DS? What about the Wii, Xbox 360, and PS3? How about an awesome gaming PC?

In my perfect world the PSP and the DS would be like prizes you get from a cereal. Like you pour cereal into your bowl and a PSP drops out but realistically:

$130 USD is a very sweet spot for the PSP. It's the same price as a new DS Lite and relatively cheaper than a new DSi and DSiXL. For the 3DS, the price do seem a bit pricey for a handheld but the PSP was $200 USD when it was first released so that seems fair. Although, I'd probably will wait until there's more games out before buying one. I don't know about the consoles, I'm out of touch in that area. Like most PC gamers, I'd usually assemble the PC myself so it's a little cheaper than buying it whole from whomever.

What about games themselves?

I think the PSP and DS games are reasonably priced. Some rarely go up above $40 USD. For console games, I think they're a bit pricey.

Put yourself in the shoes of the publishers, developers, and retailer-middle-men. How much should our hobby cost? What's an appropriate pricing structure for the gaming landscape?

Obviously, you'd want to price the thing so that you'll make a profit or if you can't at least cover the cost of making it. The video game business is just like any other business out there. So you also would have to look at how many people are willing to buy the console for that price, the cost of making it, how many you could make without making too many, etc.

 

[MattAY]

Being a Brit, NEW games have always been around £40. I've never had a problem with it really. I buy a game a month roughly so I've always been able to afford it.

As for consoles, well when the current gens came out I bought the Wii initially, and its low price was a reason why (the others being motion control and Zelda...woooow).

I later bought the 360 60gig when it was about £160, simply because it had better games and graphics...I guess it all balances out - you get what you pay for:

Wii = low price, low graphics.
360 = medium price, high-medium graphics.
PS3 = high price, high graphics.

The Wii always had the new motion-control gimmick. I cant remember who said it, but someone said, "The Wii is the ONLY next gen console due to its motion control".
And look where 360 and PS3 have ended up...Kinect and Move being released and charging even more for it!
Wii is certainly the best VALUE for money in my opiion.

But it came to the point where I wanted to play DMC4...but couldnt on the Wii. I wanted to play Fable 2...but I couldn't on the Wii. So I did what I did. I regret nothing really since I still use both.

 

[Rinnon]

How so? If supply is low, demand rises and price increases. Is supply is high, demand is lower and so does the price.

For example, Gold. Gold has low supply, and people demand. The less gold there is, the more it will cost.

Demand and Supply are not linked in that way. They're not attached like a see saw, with one going up and the other going down. They operate separate of each other. You're right that generally speaking low supply + high demand = High Prices, but a drop in supply does not mean a rise in demand. It just means a drop in supply. You can have a drop in supply and a drop in demand simultaneously, or a rise in supply and demand simultaneously. The most noticeable price changes just happen to occur when a rise in demand and s drop in supply occur.

That being said, I don't think you're wrong about piracy affecting prices, but it's not because of supply and demand. Publishers are under the impression that a Pirated copy is the equivalent of lost revenue. This is of course not accurate at all. A pirated copy is only a pirated copy. We don't know if that person would have ever made a purchase or not. But Publishers look at those numbers and think "Look at all this lost revenue! We'll have to compensate by keeping prices high." That isn't to say that they'd drop prices if Piracy was a non-issue, but it's a possibility.

 

[UghRochester]

ow

The most noticeable price changes just happen to occur when a rise in demand and s drop in supply occur..

That's exactly what I was saying.

 

[Green_Lantern]

Re: ow

The most noticeable price changes just happen to occur when a rise in demand and s drop in supply occur..

That's exactly what I was saying.

But still...Piracy - and theft, even though theft isn't an issue really - does absolutely nothing to change supply.

 

[MattAY]

This isn't an Economics class! Back on topic goons! Do you agree with the damn prices or not!?

 

[LinksOcarina]

Economics is needed for this though....

Supply and demand notwithstanding, general rule of thumb is that price drops are either done, from what I have seen, as either to compete in the market, or to usher in a new product. I think it's safe to say why Sony is dropping the price of the PSP finally....for starters the DS is killing them in sales last I checked, so the lower price will help in ushering some new sale.

My guess though is the reason is to bring in the new, more expensive system. As for the price itself, I have no interest anyway since I bought a first generation PSP for $60.00 over a year ago. So I personally think it's too little, too late because either everyone in the core audience has a PSP already, or that the lack of games actually coming out for it will deter new customers for the system. Plus most of the games coming out now are pretty much niche titles, like Tactics Ogre.