Thursday, September 08, 2011

What happens if people stop buying $60 games

I am cheating a bit here because the bulk of this post is a copy of a comment I left on Andrew Anderson's blog Systematic Babble. Andrew's post reflects a growing trend in gaming which suggests that the days of the $60+ game could be numbered.

Like Andrew I am generally not willing to spend $60 on a game and nowadays there is so much gaming entertainment to be had for so much less that that price point has become almost silly. However I must admit to a certain hypocrisy here. Even though  am miserly in my spending I still really enjoy AAA games with Hollywood level budgets.  I would hate to see a future in which the demise of the $60 game meant that only free to play and Iphone games survived.  Anyway here are my thoughts as expressed in that comment:

I agree that the $60 price point is rapidly becoming unsustainable but I don’t think my gaming hunger can ever be fully sated by $1 Iphone games.I still want to play AAA games with cinematic production values. As an adult with limited time available I am very comfortable with the trend towards short but intense single player campaigns. I am not however prepared to pay $60 for less than 10 hours of gaming. 

As a PC gamer my current compromise is to wait a few months and buy the AAA game in an online sale. Reviewing my game purchases for last year my average spend per game was less than €10 and I still got to play all the games I wanted albeit a little bit behind the crowd. To be honest it feels a bit like cheating to get so many great games for so little money and I don’t know if this situation is sustainable long term. Game developers probably need those $60 dollar sales to pay the massive costs of developing AAA games. 

I am no futurologist but here are some possible scenarios following a collapse of the $60 game market:

1. AAA developers stick with their current strategy of $60 up front and then charge for lots of expensive DLC. Only a few big franchises manage to sustain this price level and even they start hemorrhaging sales once the public tires of them. A video games market crash not seen since the 1980′s ensues. 

or

2. AAA game developers move to a free to pay plus micro transaction model to try and bolster revenues. This does generate a lot of extra revenue for game developers but has negative impacts on game design as titles are modified to coerce users into spending as much money as possible in the item shop.

or 


3. AAA game developers reduce their prices substantially and the market responds positively greatly increasing sales. The increase in sales more than offsets the reduction in unit price and a new boom in game development ensues.

or 

 ???




6 comments:

Cap'n John said...

Easiest way to send a message to the games companies is not by not buying their games, but by buying them at a discounted price.

"Guys, we like your games enough to pay for them, but not enough to pay $60 for them."

mbp said...

That's pretty much what I do already Capn John.

Mind then you get game publishers complaining about players being able to get their games cheaply through grey markets and second hand sales and introducing drm measures to try and stamp this out. What they seem not to understand is that simply preventing someone from buying a game at a discount isn't magically going to make that person willing to spend $60. More often than not yo will just lose that sale altogether.

Stabs said...

Actually from a marketing perspective the businesses are probably pretty happy with your complaints.

Price segmentation is the practice of selling the same product to different people at different prices. It is widely believed to generate more profit than a single fixed price would.

Tobold recently linked to a post that explains it beautifully.
http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

In short if they priced it at $20 you guys would buy it on release but they'd lost $40 for everyone who was prepared to pay $60. And they don't need to sell to you guys on release, they can still collect $20 off you at a later stage.

If they priced it at $40 most of us bargain hunters would still wait for a $20 bargain so they wouldn't get much more money.

mbp said...

I have read that rubberduckies article and it is brilliant.

You are right of course - online sales are a form of market segmentation. Customers who want a game on day of release pay $60, customers who can wait a few months pay $40 while customers who wait a year pay $20.

I still think this model is in trouble though. Using time delays to provide market segmentation only works if you are confident that the bulk of your customers will come in early at the high price. In the past that was the case and most of a AAA games revenue was earned in the first few weeks after release.

If, as I believe is happening now, the overall demand curve falls then using time to segment your market is a big problem firstly because you have to wait for the bulk of your revenue causing problems with shareholders etc and also because in a competitive market place you will lose the limelight and many folks who would have bought the game at day of release for $40 may have lost interest by the time it is discounted six months later.

Stabs said...

If you're right then an additional hazard is the virality of games.

A lot of the people who buy at $40 or $20 do so because the people who bought it at $60 say it's good. Without early adopters there may well be many less late adopters.

Jayedub said...

Console games are sixty bucks because of the licensing fees that Microsoft and Sony charge so companies need to make money by charging that much. Honestly for PC, there is no reason to charge sixty bucks for a game and it frustrates me that companies are doing that and people are willing to defend them for it.