Experienced Points: The Price of Fun

By Shamus
on Mar 20, 2009
Filed under:
Column

Not content with telling developers how to do their jobs, I’m now second-guessing the publishers. Go read the whole thing to see what I’m talking about.

After I wrote the article I realized a couple of points that were likely to attract objections:

1) Digital downloads have actually been following the model I suggest in the article for a while now. Games of yesteryear – even just one or two years old – can be found dirt cheap. It’s retail prices that resist falling, and I think most of the dysfunction is found there. That’s also where most of the sales are.

2) I know the retail market is more complex than I make it out to be, particularly with places like EB Games where it’s in their best interests to keep prices on new games as high as possible. EB Games might simply keep the price high, even if (say) Activision lowered the MSRP. (It is a suggested retail price, after all.) However, I think outfits like Wal-Mart and Target – places where they don’t trade games – would likely lower the prices. This might possibly result in a rewarding scenario where gamers buy new at Target and unload used at EB Games, which could have all sorts of hilariously bad effects on EB Games.

3) I know this is mostly guesswork outside of my assigned area of game design. If I really botched my analysis, I’m sure people will… let me know. At any rate, I’d at least like to see them experiment with prices a bit, instead of trying to come up with tricks to impede second-hand sales. Gamers are not the villains in the second-hand games market, but predictably they are the first target of the publishers.

4) That last line was a good one. I should have put it in the article.

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201636 comments. Hurry up and add yours before it becomes passé.

From the Archives:

  1. Saint Rising says:

    Hey, Hey Shamus.

    I got my copy of Mass Effect for fifteen dollars from Gamestop. =D

    I haven’t even played it yet.

  2. krellen says:

    This may be your best one yet, Shamus. That was brilliant.

  3. Veylon says:

    With retailers an issue might be shelf space. Maybe it’s a lot better to have twelve feet of shelves with $50 games on them than $20 ones. Especially if the latter have already “proven” that they won’t sell.

    Another point is that large retailers (or at least Wal-Mart) have all their shelves pre-planned from corporate HQ down to almost the last inch, with little flexibility for left-over titles.

    Maybe, too, publishers don’t want to compete against their own, older titles. A potential customer might pick up Megablasters 3, dither over the $60 cost, and go with Megablasters 2 for $20. Without the older title, companies may imagine the customer has no choice but to purchase the newer one.

    A lot of mights and maybes here. I’m just guessing; I could be way off.

  4. Robyrt says:

    If I buy new at Target and sell used at EB Games, it’s good for Target but OK for EB Games, as long as I buy used at EB Games too. They are free to concentrate on their primary profit-maker (used games) without having to stock new games so aggressively. If you’re only carrying a few copies of each new title, your exposure to an unexpected bomb like Madden ’09’ is smaller.

    EB Games should be worrying about a competitor honing in on their used-games business, or about a publisher transitioning to digital downloads / extensive DLC that tanks the resale value of their games.

  5. InThane says:

    Have you seen the “experiments” that Valve has done with pricing lately on Steam, by cutting games to half or a quarter of their price for a weekend? GARGANTUAN sales uptick as people fall over themselves to buy old games. I picked up “World of Goo” at $5, which was an outright steal for the amount of fun I’ve had with it. Apparently their huge discount on Unreal Tournament 3 also gave the game a huge kick as well.

  6. Greg says:

    I have worked at Gamestop myself. Twice. During both Xbox releases. And will probably end up there again for Xbox 3.0 by some fluke in the employment system. Anyways, I’m not sure how much profit these stores make off of NEW game sales. When you trade in a game, the most you should ever expect is 25% of what a new copy would cost. And that’s only if you get store credit. I’d say they get a pretty nice profit from used game sales.

    My theory on the problem of why the games seem to be lacking in content and story is centered all around budget. It seems that 20 years ago, a new nintendo game cost around $40. If you factor in inflation and manufacturing costs of new media, this puts the games at around the same price point. But because new systems have increased in power and ability, new games have to be designed to those standards. 3D models can (required to) have higher polygon counts and detail that bumpmaping and texturizing just couldn’t do before. Games have lost a lot of content and story due to the increase of manpower it takes to create a “visually stunning” game.

    I always made fun of my friend’s younger brother because when the PS2 came out, he was all about “how pretty the games looked.” I told him that if there was some game where all you do is walk down a very detailed hallway with no objective, no story, and no content, but it was the most realistic and beautiful thing ever, he would buy it for $50. It really comes down to people liking eye candy more than intellectual things such as story and puzzles. Also why most adventure games are a thing of the past. They tried to jump on the 3D bandwagon and fell off because they just weren’t as good. At least they got the hint and just stopped making them (for the most part) rather than saturating the market with a bunch of crap.

    *Whew* Sorry about that long-winded comment.

  7. JT says:

    Absolutely brilliant, Shamus – spot on in every respect. As a budget-focused and heavy P2P used-game buyer/seller (haven’t set foot in a EB/GameStop in years, have bought and kept exactly 2 new games in the past 3+ years: Battlefield 2142 and Mass Effect) I wholeheartedly support the declining-price retail model. Every other non-consumable product line I can think of does this – why not games? It would certainly make me think hard about buying used for $25 if I could buy new for just $5 more. This is absolutely the kind of thing they should be trying, if they want to reduce the secondhand market, instead of the “treat our customers like criminals” nonsense we see today.

    I’d at least like to see them experiment with prices a bit, instead of trying to come up with tricks to impede second-hand sales. Gamers are not the villains in the second-hand games market, but predictably they are the first target of the publishers.

    4) That last line was a good one. I should have put it in the article.

    Just wanted to repeat that ’cause it was all made of pure awesome.

    @ Veylon:
    shelf space is certainly an issue for the retailers, but e-tailers (which I can’t imagine accounts for less than a third of sales these days, which is to say “not the majority, but a significant portion of”) don’t have that problem, and they probably don’t have much of a problem with originals cannibalizing sequels, especially in cases where, as a buyer is looking at the page for Megablasters 3, Megablasters 2 is actively marketed with a “you might also be interested in” link. E-tailers are already ahead of the game, as I’m starting to see new games available on Newegg or Amazon for $3 or $4 less than retail, with free shipping (and no sales tax unless you live in certain states!).

  8. It really seems to me that publishers don’t know what point on the supply/demand curve is optimal for their product. They’re just following one another…

    I seriously have had game publishers tell me that they have to raise prices to “make up for” revenue “lost” to pirates/used game sales. A cursory look at Econ 101 will explain why this is idiocy…

  9. Magnus says:

    Justifies my choice of the PC as my main gaming platform. Especially these days with Good Old Games, joining the other download services as well as online retailers of boxed copies, e.g. amazon etc.

    Although the PC section in the brick and mortar shops is dwindling, online sales are solid, and prices are always better than console equivalents.

  10. AGrey says:

    I think the problem here is that people will go up the the shelf, see some sweet box art, and think “this might be pretty good. I’ll come back in a few months when it costs less”

    the way things are now, that conversation could have been either “this looks pretty good. I’ll get it” or “this looks pretty good, but i just don’t have the cash”

    in the first scenario, the publisher has just lost money, but if it’s the second, they might get some more (if the customer really does come back, after hearing reviews, or seeing something else shinier)

    you’re losing money with option one, and you might make a little bit of money with option two.

  11. Kalil says:

    I’d like to add one point, make of it what you will:
    Starcraft /still/ sells.

  12. Brandon says:

    I’m not an Escapist member so I’ll leave my comment here. I read your article. While I do like the idea of falling prices, there’s a problem with that that makes it very difficult to implement.

    Stores buy the game wholesale at a set price and then mark it up a little for sale. If a store thinks a title will be a hit they’ll buy lots of copies, even after a pre-order storm. If they think it won’t do well they won’t buy many copies. If stores know the wholesale price will fall after an indeterminate amount of time they will be forced to buy wholesale copies more conservatively, even for the guaranteed blockbuster titles, because they won’t want to be stuck with copies of a game they paid $55 wholesale for originally (to sell for $60) that manufacturers are now selling for $35 wholesale and insist should now carry a shelf price $40.

    Stores already have trouble anticipating game sales on a per title basis and Gamestop is notorious for ordering conservatively and selectively. And frankly, most current price drops on games, particularly drastic ones, are on the part of the store to get rid of unsold inventory. They reason you don’t see reduced price copies of some of the games you want on the shelves may have as much to do with stores not ordering too many copies as publishers stopping production.

    I’ve found stores like the local Half-Price Books (sell used and new books, DVDs, CD, etc…) often snag volumes of unsold inventory on games and sell them at very reduced prices. Big Lots also does the same. Once a title is past prime major retailers won’t order that title. Publishers are left with inventory and will basically sell it to whomever offers a good price, and that’s usually discount stores.

  13. TehShrike says:

    Great article!

    This is actually something my coworkers and I have discussed in-depth when we should have been working.

    Like InThane, Steam’s habit of ridiculous sales has gotten sales from me. Just today I found out about their deal on the Oddworld games – normally $10 apiece for each of the two games.

    I’d never even considered buying them, but this weekend they are 75% off – $2.50 each. And they’re in a pack together for only 3.75!

    On the chance that I could get several hours of good platformy enjoyment from the games, how can I pass that up?

    Even for games I’m willing to pay MSRP for, buying from retailers has left a bad taste in my mouth. Piracy and Steam (and Stardock) for me.

  14. Andrew says:

    I’m a little confused by your discussion of making old games cheaper. Are you referring to something different from what the budget labels like Sold Out, Take Advantage and Virgin White Label do, at least in the UK? or are such budget labels less common in the US?

  15. Zel says:

    Errr… if second-hand buying prices drop, I lose!! My strategy (and that of quite a few people I think) for cheap yet recent gaming is to buy games as they get released and then sell them a few weeks later at nearly full price on the second-hand market (directly through Ebay).

    It helps to have the UK nearby, thanks to a generous GBP/Euro exchange rate which allows me to play games practically free : PC games cost about 45€ here, 25£ in the UK, which usually translates to 35€ with shipping, which is what I usually get off Ebay once fees and shipping are paid. Still, even when buying games in France, the whole operation usually cost me about 10/15€ for a few weeks worth of ownership (largely enough to finish a majority of games, at least the single-player content).

    If I really liked a game, I’ll keep it or sell it and pick it back up in a year or two, for a fraction of the initial price. Of course, it doesn’t work for MMOs or long term multiplayer games, but I don’t play these games anyway. I hate DRMs, and especially limited activations, because it’s obviously trying to kill (along with piracy, but which is the first target ?) this perfectly legal way for people to have a hobby without spending lots of money on it.

  16. MadTinkerer says:

    Mass Effect is only $20 on Steam, and apparently Squaresoft has retroactively taken your advice because the starting price for The Last Remnant on Steam is just $40.

    I plan to get both as soon as the current semester ends and I have time to play them.

    Left 4 Dead I got on a Weekend Deal, and “TGIF” has taken on a whole new meaning for me for the last year.

    On the other hand, Spore, and too many others, still follow the archaic pricing method. I’d like to buy it, but it is quite out of my current price range. I’ll consider it when, say, the cost of both the main game and the current expansions are around $50.

    EDIT: Oh wait, you just said “Digital downloads have actually been following the model I suggest in the article for a while now.” Anyway, the lower starting price for TLR on Steam certainly pleased me.

  17. Zel says:

    Oh, I forgot to ask (and can’t edit, awaiting moderation): can you sell steam-based games second-hand ?

    As I understand it, games are tied to your account and cannot be transferred. If this is true, I’ll never even touch a steam-based game, good old “playing at a friend’s” will suffice (worked for DoW2).

  18. Ysabel says:

    Unless they’ve changed their policies, you can transfer Steam games under some circumstances. I’ve certainly done so before and I have an extra copy of HL2 sitting in my account waiting to be gifted to someone right now.

  19. Zel says:

    Nevermind, I found my answer here : you can’t. They don’t accept CD-Key transfers with receipts from auction sites or used software vendors. Even worse policy than 2K with Bioshock’s 3 activations : you have ONE activation, no resell possible.

    Way to kill the second-hand market Valve…

  20. Sheer_FALACY says:

    They want to kill the second hand market. The second hand market is equivalent to piracy as far as they’re concerned: someone gets to play the game and they get no money for it.

    And it’s not the same as Bioshock. Bioshock’s activation issue was if YOU changed computers or hardware or whatever. Steam has no issues with you doing that.

  21. Zel says:

    Actually, they do get money in my case : I wouldn’t buy as many games if I could not resell them, and many second-hand buyers turn to such markets because … they can’t afford full price anyway.

    In my opinion, Steam’s policy is worse. You could cancel any Bioshock activation with a simple tool, I know because I revoked mine before selling it. If Steam’s knowledge base is correct, and I would think it is : you can’t revoke you cd-key. You also can’t sell accounts of course.

    When I sold Bioshock more than a year ago, the many interrogations raised by buyers led me to my current motto : never activate online, never register, use cracks and bypasses if needed. Since I always offer a full refund if the game fails registration, and you need this guarantee for PC games to sell at a decent price, I’m not taking any risk. Guess I was right not to activate Silent Hill 5 or Saints Row 2…

  22. Felblood says:

    The shelf space issue is a serious problem, for target and Wal-Mart. Keeping games on the shelf until they sold no matter how much you had to mark them down, is one of the ways that K-mart’s entertainment departments failed to compete with Wal-Mart.

    However, Wal-Mart has clearance and warehouse bins that serve precisely this purpose for movies, and when the DS launched, I saw many of them pressed into service to hold GBA titles. The technology to do what you propose profitably exists.

    It consists of two big buckets, a sign that says $35, and a sign that says $20. Online distribution could also get the job done, but the DRM necessarily involved robs the system of the elegance of simplicity.

    Just as there are movies, like Aliens, that you will never find in the discount bin, some games will stand the test of time, and retain their value for years, or even decades. Like old VHS titles being sold on DVD and Blu-Ray, these titles will get ported to new platforms, because they will still be valued when the hardware that supported them is obsolete.

    Most games will not retain their value like that, and trying to pretend that they do (as the industry does now) is foolish.

    Dear publishers,

    If you’re not sure that this game really is the next great, timeless game, it probably isn’t. Stop treating it, like it is.

    Just milk it for all it’s worth before the hype wears off, (That is, sell it to everyone, even paupers like me, over the course of a few months) and then let it die. If it really is that great, you can afford to think long term on this thing: You can sell it to both me and the rich guys at full price, when you put out the collectors edition, five years from now.

  23. Luvian says:

    My local video games store does sell Mass Effect for 19.99$. I almost impulse bought it the other day but in the end didn’t because I already have in on the 360, and because of draconian copy protection.

  24. Riesz says:

    Interesting thought, but I see one potential problem. If an economic system experiences deflation, where prices go down, this is actually even worse for the economy in the long term than if prices go up. This is because people put off buying things because they hope it will be better tomorrow than today. Although this is good for the individual consumer, it’s bad for the economy as a whole.

    I think a similar problem could rear its head here. If there’s a fairly set system of devaluing games, anyone but the most hardcore player will wait with their investment until the price drops, potentially ruining the profit-potential of a game. If you want to set up a system like this, you’d have to have a long, hard think on how this curve should look like. Some marketing research on how many people would buy the full priced game and how many would wait till it drops to, say, half the price would be necessary. In the end, producers and distributors don’t want to be shooting themselves in the foot; at worst, they stop investing in any games that aren’t guaranteed to sell like hotcakes on the day of release.

    That being said, I’m someone who almost never pays the top price for a game. I’m always having fun going through the bargain bins, checking up old games on Amazon and using digital download platforms to get some interesting stuff. I think €/$60 (or more!) is a ridiculous price to pay for a game, but I also think that you’d have to have a very solid plan, well-researched, before you attempt such a down-valuing curve.

  25. K says:

    Take a look at the Blizzard online shop. You can still buy their older games there. And they cost 20 bucks. Addon included. Until some time ago, they still sold the Warcraft 2 Battle chest, but I suppose they took that off the shelves because it stopped working on modern machines.

    It is by pure chance that the by far most successful company in game development does exactly what you proposed. Totally random. No correlation whatsoever. Lalala.

  26. StingRay says:

    I’m a little confused by this article, largely because all of what you propose is (by and large) happening already. It’s not consistent, and it’s not true for every title, but games do fall in price and they do usually end up in the $20 bin.

    I work for Walmart, as an overnight Electronics associate, and one of my responsibilities is maintaining the video game cases. Someone mentioned that shelf layout is strictly controlled by the home office, which is partly true, but there are large chunks of my cases devoted to flex space, areas where I can put whatever I want. Plus we have a sizable cube of shelving in the main aisle devoted to nothing but sub-$20 games.

    Mass Effect, for instance, is currently on the $20 rack. It’s taken a little while to get there, as it’s a popular game, but it’s slowly and surely dropped in price since release. Popularity is really the key to game pricing. Oblivion: Game of the Year Edition, is still $30, and I still sell out of it weekly. Other games, like Last Remnant, have had serious issues since release, and have dropped in price accordingly. Last Remnant’s not twenty bucks yet, but I figure it will be in another three or four months.

    By and large these price drops come down from the publishers. Our standard markup is around 20% on games, and I rarely see games that we’re losing money on. Because I’m so heavily entrenched in maintaining the games at my store, I’m also really good at spotting price discrepancies, and I rarely notice stores failing to stick to those price drops.

    Maybe I missed something, but what you’re talking about is already happening. The only downside to all this is in the fickle world of multiplayer. By the time a game is $20, the only people still playing online are the extreme hardcore. That gets a little annoying after a while.

  27. Yar Kramer says:

    Ah yes, Steam comes up again. Yeah, I have a bunch of games which I got there which I seriously wish I could sell, now.

  28. Neil says:

    I definitely see what you are saying, Shamus, and it’s absolutely true that game publishers and game retailers need to be a little more experimental. However, I’m not sure that anyone can really speak on the macro level as to the net effect of various pricing schemes without hard data on the subject. I’m coming at this as a student of economics, and I know from experience that you can never really predict the effects of this sort of thing without having collected a lot of data about pricing and volume sold, and then crunching the numbers. I would really like to see someone take this topic up as a subject of serious scholarly research.
    And, yes, what the hell is up with Australia?

  29. wererogue says:

    At the moment, Steam and GOG.com are getting all of my gaming money. Good Old Games have a sale every weekend, and I usually end up buying 2 or 3 games for an average of about (0.66[2,3]*$5.99). Steam have just gotten me to pre-order a new indie game I’d barely heard of this weekend (preorders? I almost *never* do preorders now, unless I know a whole lot about a game!) called Zeno Clash, by dropping the price, for 1 day, to something around £8. Now I’m likely to play the game, which from its screenshots looks beautiful, in my office, and recommend it to coworkers.

  30. Daimbert says:

    I just want to note two things here:

    1) The price of books NEVER drops (it’s printed on the books!) and they have a thriving second-hand market. Why is EB Games’ model of selling new and old worse than that?

    2) Even at EB, at least in Canada, the price of games DOES drop over time, either as the wholesale price drops or as they have extra copies to get rid of and so are willing to accept the hit to get them out of the store. Which applies to other areas as well (see demonstration models for cars, for example). I’ve gotten some PS2 and PC games that I didn’t buy at the peak of the hype pretty cheap, even recently.

  31. Justin says:

    Thanks to the Australian Dollar losing almost 40% of its value in the second half of last year, at the moment it’s actually slightly cheaper to buy locally than to import from overseas. This assumes that you go to JB HiFi rather than EB Games – new PS3 games are usually $A90 (~ $US60) at JB, but can be $A120 at EB.

  32. Craig says:

    Microsoft kind of does this with their “platinum hits” which usually sell for 20 bucks and are previously successful games. Unfortunately I haven’t seen a huge selection but I was able to pick up Assassin’s Creed in this way and I’ve seen one or two other games I’d pick up. I think they need to just do this with more games and quicker.

  33. Namfoodle says:

    Daimbert:

    Have you never seen a sale at Borders or Barnes and Noble? Have you never seen the book prices at Costco? New hardcover books go on sale all the time. Paperbacks not so much, but Borders passes out discount coupons like crazy (on every receipt and in emails) so it’s easy to get “books on sale.”

    The book publishing business is a mature industry run by people who may be more rational than game company executives.

    Book publishers have no love for the used book market, but they’ve accepted it. The production costs for books are a bit different from computer games, there’s usually less up front cost. I don’t think many authors get huge amounts up front – they’re compensated based on sales. The book publishing industry is reasonably good at using the “first sale” of books to get back their initial investment on the author advances, overhead and printing costs. Normal sized paperbacks are usually less than $10 and hardbacks hover around $25. The secondary market doesn’t put their panties in a bunch because each individual sale only represents a few dollars of profit, so the sales “lost” to used book stores, libraries, loaners, and re-gifters don’t sting that bad. The initial costs are covered with the first few thousands(?) of sales. After that, as long as the price covers the cost of paper, ink, etc. of the books they print, they’re doing okay.

    Development Costs for video games are much more front-loaded, and the price point is higher. I think game publishers are hoping for a higher amount of profit per unit sold than book publishers. It doesn’t cost a lot to put the bits on a disc, but it usually costs a lot to create the bits. So game publishers seem more sensitive to the idea of “lost sales” from piracy, re-gifting, and the used game market.

    Book publishers are “over it” because I don’t think they have to pay as much for the words – they probably pay more for paper and ink in the long run. They may be in the business of selling IP, but their business model is more like a manufacturer.

  34. Daimbert says:

    Namfoodle,

    My point was directed more at comments about how the software chains — in this case, EB Games — needed to be pushed into or forced to lower prices, and how EB Games didn’t seem to want to do that because of their used games business (which was presented as being somewhat illegitimate for THEM to be doing). For books, the same thing applies, and yet there’s no claim against the book stores about how they — generally — don’t lower prices on books, ever. Yes, there are sales and the like, but that applies to games as well.

    So my comments weren’t about the publishers at all, but about the stores.

    That being said, you are correct that there’s a much larger development cost in games than in books, which may influence how things are handled by both publishers and stores.

  35. Namfoodle says:

    Daimbert:

    I think overall, the price of a hardback is much more likely to be lowered than a paperback. When I see “sale racks” at Borders, it seems like it’s mostly hardbacks. I believe this is because when a bookstore has an overstock of hardbacks, the most cost-effective way to get rid of the excess bulky inventory is to mark down the price. Paperbacks start out less bulky and can be shipped away more cheaply. Publishers still do that thing where bookstores can rip off the cover return the paperbacks. I guess the publishers recycle the paper?

    Anyway, I see your point about the “sketchiness” label being applied to used game sales. In my opinion, the idea that there is anything wrong with EB games selling used games is mostly Game Publisher Propaganda. I suppose that a used game seller wouldn’t like the new games to have dropping prices because it would lower the value of their used stock, but they could deal with it if they made adjustments.

    But according to StingRay the Wal Mart guy, they drop the prices on games all the time. I suppose that not all publishers drop their wholesale prices, and not all stores bother to leave titles with a discounted retail price on the shelves. If you want to buy cheaper games, you just have to look in the right stores at the right time.

    The video game publishers Do Not want to be like the book publishers, who sell IP but are mostly manufacturers living off the first sale of a physical good. They’re too wrapped up in the coolness of their ideas and feel they should be to be able to charge every person who enjoys their IP, regardless of how they came into possesion of the bits.

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