Price-point of next-gen titles...

Not sure how many of you are aware of or subscribe to the [url="http://www.gamesindustry.biz"]gamesindustry.biz[/url] weekly updates, but this weeks is one that has been on my mind for a long while. And that is the price-hike for next-gen titles ? current-gen new release: $95, next-gen release: $120.

I've included the email editor editorial below, and think it is something that Sony for one should consider and perhaps take heed of, as I think many gamers would be willing to pay the once of high-cost for the new tech, but are kind of put off by the BS of increasing the title costs themselves.

Anyway, here it is for those that haven't seen it or something like it ? perhaps it will get some thinking:

Daily Update
07/09/2006

A few years ago - not long after we launched GamesIndustry.biz, in fact - there was a small, but vocal and determined, campaign in the UK aimed at bringing down the price point of new videogames. Describing itself as a grassroots campaign by gamers, it won a number of headlines (and even some mainstream press coverage) but very few friends or allies, thanks to a combative approach which culminated in an abortive attempt to orchestrate a widespread boycott of game purchases over a crucial pre-Christmas weekend.

At the time, the campaign was doomed to failure not only due to its own aggressive tactics, but because the economics were all wrong. The PS2 generation of hardware was at the mid-point of its lifespan, game sales were soaring, and full price games were still emerging at between 30 and 35 pounds for the most part. Moreover, the following months and years would see the mass market being attracted to games as never before thanks to products like Singstar and Eye Toy - an expansion of the industry's demographic base which seemed to confirm that the price points were right, as long as the products were right.

To trot out a tired old chronological cliche; that was then, and this is now. GamesIndustry.biz strongly criticised the price campaign at the time - as editor at that point, I felt that the economical arguments were weak, boiling down to a fairly over- simplified "if you drop the price X per cent, you sell X per cent more units." Moreover, the approach taken by the campaigners was wrong; the aggressive nature of their comments encouraged an industry seeing rapidly growing revenues not only to dismiss the arguments of the campaign, but to entrench behind its original viewpoint.

Now, with the transition to the next generation of home consoles well underway, it's worth re-evaluating where the industry stands on price - because a lot has changed in the last few years. Most notably, the upper end of the price spectrum has jumped significantly - with publishers and platform holders alike taking the move to next-gen consoles as an opportunity to raise the launch price of software to 50 pounds.

This price point is a step too far. Twenty pounds, the level software hits on budget re-release, is often cited as the "impulse purchase" level for UK consumers - and a similar pricing level applies in other territories around Europe and North America. Thirty pounds, even thirty-five at a stretch, is a price an affluent consumer will pay for a game which they spot on the shelves while idly browsing. Beyond that level, you're into the realms of purchases which are serious money, even to young professionals with a lot of disposable income - and once you hit fifty pounds, consumers are going to be asking very tough questions about the actual value of the entertainment experience they're buying.

Those are questions for which the videogames industry currently has absolutely no answers. The ten to fifteen pound premium being levied for next-generation software has no justification for the average consumer - and even the old argument about the length of time spent enjoying games by comparison to DVD movies falls down at this price point, since entire DVD box-sets of high budget television shows can be purchased for less than 50 pounds on the UK high street. At that point, next-gen games start looking like astonishingly poor value.

The justification wheeled out by the industry, of course, is that next-gen games offer a significantly better experience than current- gen titles, and that they cost far more to develop than their current- gen equivalents. In some cases, this almost rings true - but in the vast majority of Xbox 360 games currently lining shelves at retail, these arguments are hollow and blatantly false. Many publishers in the last nine months have released games simultaneously on Xbox 360, PlayStation 2, PC and other platforms, with the Xbox 360 version costing significantly more than its peers - and it has been blatantly apparent to even the least technical of gamers that the Xbox 360 version is a tarted-up port of the PS2 version. By no means does the gameplay experience or the development cost justify the price premium.

Even for next-gen exclusive titles, the concept that a premium should be paid for the software is faintly ludicrous. From a consumer perspective, it assumes that consumers are prepared to accept paying above the odds for games on next-gen consoles, having already paid hundreds of pounds to buy the console itself. The argument is simple; the consumer has paid for the console hardware in order to increase the fidelity of their gaming experience. They should not then have to pay extra for the software on the same grounds, any more than they would expect to pay above the odds for a widescreen version of a DVD having just bought a widescreen television.

Ultimately, this is a foolish and short-sighted move by the industry which stands to seriously damage the early growth of the next-gen console market. Pricing next-gen software at 50 pounds will not lead to increased revenue; it will dissuade consumers from buying into next-gen hardware early in the cycle, will depress the attach rate of the consoles, and worst of all, will accelerate the damaging trend of knocking prices down early in the lifespan of a software product. This cycle is already frighteningly fast, with full price games hitting ten pounds within a matter of mere months, whereas products such as DVDs and audio CDs can hold their value, or a significant part of it, for well over a year. Pricing at 50 pounds will simply increase consumer resistance to buying at full price, forcing games to drop more of their value even faster than before - and increasing the consumer expectation that software will be available more cheaply months after launch, which feeds the vicious circle of devaluation.

The company with the keys to fixing this problem, of course, is Microsoft. They alone will have a next-gen console with a significant installed base this Christmas - and they alone are forcing prices to sit at a 50 pound level at present. If Microsoft is serious about pressing home the advantage they have been handed by Sony's botched launch plans, it needs to drop the headline price of next-gen software to the same levels that consumers are used to paying for current-gen software - because if it doesn't it isn't PS3 that it has to fear in the marketplace. It's the huge installed base of PS2 owners, who will shrug their shoulders and opt to stick with the current gen until the next gen becomes affordable; perhaps more importantly, it's the Wii, whose software will be priced at current gen levels and will make Microsoft's offering seem even more expensive.

Microsoft of course has only one blunt instrument at its disposal on this front - the license fee which it charges on each unit of software sold by a third-party publisher. If it wants the retail price of games to drop, it must also drop the license fee - which will hurt its bottom line. That will be a difficult and painful decision to make.

Tough luck. If Microsoft is serious about competing in an industry in which, despite its strong start in the last nine months, it is still very much an underdog, then it has to be prepared to make some difficult decisions - and let's not forget that unlike every other platform holder, Microsoft is also currently raking in a monthly fee from every Xbox Live Gold subscriber on its system, a fee which few if any publishers see any kick-back from. In for a penny, in for a pound; Microsoft is already four billion dollars out of pocket, at least, on its foray into the videogames market. By making the bold move of dropping its software prices before Christmas, and dropping the license fee to take the sting out of the move for publishers, the firm stands to turn Xbox 360 into a genuinely mass-market proposition before PS3 even has a chance to get its foot in the door.

The alternative is that Microsoft's console could still be trapped in its current hardcore niche by the time Sony - the proven masters of the mass-market - arrives in force. The outcome of that scenario is as familiar as it is easy to predict. Microsoft has been handed an opportunity to capitalise on Sony's misfortune and build a genuinely solid lead on its rival - but first there needs to be an acceptance in Redmond that this lead will not be built by releasing hardcore games at hardcore price points.

Caroo's picture

this all is best summed up by a daffy duck quote my friend.

"MONEY! MONEY! MONEY! MINE! MINE! MINE! MWHAHAHAHAHAHA!!!!"

And just like daffy. Those who are greedy will be punished in the long run. maybe not in australia.. but other countires it wont be tolerated to long.

Grover's picture

Much agree with that, development costs are growing very fast, and something needs to be done to alleviate it or we will all be paying more than ever for console games.

But looking at IT development more broadly, I think the problem becomes alot more obvious - and its software development itself. Even an average application (in any IT field) can take months to years for development, and still end up being released with bugs and problems.

Added to that the difficulties in producing resources for applications - like art, audio, gameplay, animation, movies, physics and collision controls, and particle and effects systems (shaders, materials etc) you have a system that simply costs a huge amount of money to produce, with little guarantee of success, or profits.

The industry is at a pretty crucial point, not just the game industry but software development as a whole. Even OS's and simple applications are becoming far too costly to produce. So what choice do developers and publishers have? They arent going to continue to foot the bill until they are broke (they have shareholders to cater for).. and most recognise that product increases will directly impact their bottom line.

Who ever solves this catch-22 problem (software development) will take over this industry. By this I mean by solving the process to create software by whatever means possible - whether it is through abstraction and moving up API layers and development layers (middle ware?), or whether its a new technology in hardware to reduce the required codebase and assets needed to complete the same job (say large common libraries)... in any case.. something has to change. You couple this with increases in CPU complexity (AMD, Intel and IBM multicore chips) the development pipeline looks to be in the midst of growing by a few factors - 4 yrs for a game? 10 yrs for an OS? 10 years for an Office Suite? and what about reliability? How do you reduce bugs with increased complexity?

Solve this one.. and you'll be the next Bill :) In the meantime.. I really think higher product costs are going to be a fact of life. I really dont see many ways past it.

CynicalFan's picture

I am not that convinced.

Perhaps I am not the norm, but, I rarely paid full price for current-gen titles. The few instances I did, I did because I felt I needed to for work purposes. And every time I have resented it.

I usually wait until prices are 50% or less than their starting point. My reason for this is that most games just aren't worth the full price tag that they start off with. Perhaps if they (publishers, platforms) focused on quality instead of quantity, then there would be more games worth paying full price for. Instead of the crap they try and pass off as quality.

Passing on this cost to consumers, so that they can recoup their losses on the crap they have tried to pass off as quality, just seems unfair to me, and I don't see it making things any better, nor do I see how it will make Sony (or MS / Nintendo) richer in the long-term ? people will continue to wait for discounts or buy second-hand titles.

It may only serve to alienate people, especially when they see a game coming out on XBOX and X360, the same game that is, but one is $10-20 more than the other because apparently it is next-gen.

And from Sony's perspective being the market leader. I see no competitive advantage that setting title price points as high as X360 or even higher, will get them ? especially if the Wii has a much lower one. Microsoft may have to set theirs higher because they are not the market leader with the XBOX, in fact they have a much smaller market share. So as to recoup development costs for the X360 and also recoup the losses of the XBOX, they have to set their price point higher. Sony do not with the PS3, they can stay where they are, and become more competitive in that respect, and retain much more of their market lead.

Not that I am convinced that they will lose much to the X360 and Wii anyway. As I think the Wii will be a secondary console to either X360 or PS3 owners, they will most likely retain much of the GCUBE market share, and will probably increase their size further by not attracting consumers away from the other consoles but by rather doing what the DS has done, attracting new consumers in the way of female gamers (Nintendog type games) and older gamers staving off dementia (Brain Age type games).

My guess is that at best, they will probably sell more units than X360, but not PS3 ? though, just my opinion and it is still early days.

PeterDavis's picture

speak for yourself, my wii will be my primary console, and my only (non handheld) that ive actually owned (snes being the last one, owned not by me specifically)

CynicalFan's picture

Yeah... I was talking about the next-gen console market in general. Not about any particular fan-boy and their preference, as that is kind of what the thread is about - more specifically the price-point of next-gen titles.