on Mar 29, 2012
A recent headline caught my eye: Silicon Knights Boss Says Used Games Drive Up Prices
I would title this article “Silicon Knights Boss fails to Grasp Supply & Demand”. The thrust of the article is that they’re only making “burst” sales at the launch of a game, so they’re trying to make all their money in those first few weeks. This is in contrast to Ye Olden Days, when games would have “long tail” sales, having sales figures that slowly tapered off over time.
This is a horrible and suicidal way to do business. You’re going to spend $50 million to make a game and then hope you can make more than $50 million in a few weeks, which you can only do if it has great reviews and it flies off the shelves? What if a really big surprise hit releases next to your game? What if your game gets dinged in reviews down to (oh no!) 75%? Or what if it’s just too dang similar to a game that came out few months earlier and even if your game is better consumers just aren’t ready for ANOTHER one?
That’s way too many factors out of your control. I’ve been saying for a while now that publishers aren’t studying the industry and making wise decisions. They’re gambling. They’re playing a $50-million-a-pull slot machine. If you win you get the next Modern Warfare 2 and make billions. If you lose you close a development house, lay everyone off, and then take another pull.
I was at the retail store a couple of weeks ago, and it’s obvious why we’re only seeing “burst” sales: Prices are flat. There were old games still sitting on the shelves for $60, and the only games below $20 were absolute no-name shovelware trash. If you want “long tail” sales then you need to lower prices to go after all those people who aren’t willing to risk $60 on your game. There’s a whole spectrum of consumers out there. Some will buy at $50, some at $40, some at $30, some at $20, and some at $10. Your goal is to take money from all of them. If you keep the price high, those other customers won’t buy. It’s that simple.
Also, this idea that used game sales drive up prices is ridiculous. It means they’re either lying or they don’t understand how retail works. If you’re getting undercut by a competing product (and a used copy of your game is effectively a competing product) then raising prices is suicide. Also, this sounds a lot like the “games are expensive because of piracy” lie we used to hear in the 90’s. Then we got increasingly formidable forms of DRM, and even highly piracy-resistant games like MMOG’s, and prices… went up.
Supply and demand: If you lower the price, more people will want it. If you raise the price, less people will want it. The scale is not linear, and in fact the “curve” wiggles all over the place due to competing games, market fluctuations, and time. Publishers should be exploring this curve, moving prices around so they can get an understanding of where the soft spots are. Steam has been doing this for years, and they’re cleaning house.
Instead the plan is: All games are $60, forever, until they go out of print, and if people don’t buy then we’ll blame them for ruining the industry.
Dear games industry: You’re spending too much making these damn things and you’re not going after downmarket sales. None of this is my fault.