Supplying Demands for More Demand

By Shamus Posted Thursday Mar 29, 2012

Filed under: Rants 228 comments


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.


From The Archives:

228 thoughts on “Supplying Demands for More Demand

  1. Doktoronline says:

    I don’t understand why more gamestores don’t seem to realize this. It’s almost as if they don’t want to make a profit.

    1. Hitch says:

      Game stores have to pay their distributors so much that they make virtually zero profit from new game sales as it is. To charge less, they would have to take a loss on every game they sell. They only carry new games for the sake of putting them into circulation so they can profit down the line from buying and reselling used copies. They can’t get used games to sell without selling a few new ones, and there are just enough customers who want to play on day one to make that possible.

    2. JPH says:

      It’s not the game stores. GameStop understands this, and they’re raking massive profits off of used game sales.

      It’s the publishers, who perceive a price tag of less than $60 as a sign of weakness, who fail to understand.

      1. Soylent Dave says:

        That would be the same Gamestop that owns these chaps?

        Yeah, I reckon they’ve got their finger right on the pulse.

        1. Shep says:

          Gamestop don’t own GAME group. Not yet anyway…

          1. Alphadrop says:

            Gamestop is moving into the games market here though (Their adverts are all over Wave 105 when I accidently listen to it) so there is a good chance they’ll buy GAME or at least the stores afte they get closed down.

            On the plus side GAME and Gamestation are selling their pre-owned stock very cheaply at the moment, good time to get some deals.

        2. Soylent Dave says:

          Gamestop own EBgames, which used to own 25% of GAME group plc (and were therefore the single biggest shareholder).

          What I’d missed was that they cut a deal a few years back to separate (although Gamestop do still own an interest in GAME group plc, I can’t find out how big that interest is)

          (and I’ve replied to myself, like a tit. Awesome)

      2. rrgg says:

        I’m not even sure the Gamestop at our mall understands good hygiene. For some reason the whole shop smells like old playdough whenever I go there.

        1. The Rocketeer says:

          Not possible that that’s the customers?

          1. Chauzuvoy says:

            Based on the gamestop experience in my area, it’s likely both.

          2. rrgg says:

            I first noticed the scent around Christmas when the whole place was packed full of people but it’s still there long after everything has calmed down.

            They should at least realize that a smell hurts business and hang up some car fresheners or open up a perfume store in the back closet or something.

            1. Sumanai says:

              No. No no no. Car fresheners are poison (figuratively) and so are most perfumes. I don’t if it’s my asthma or whatever, by I hate the smell of those things and have difficulty being around with them.

    3. Ben says:

      As I understand it, when you buy a game from, say, Gamestop, for $60, they probably paid $57-$58 for it themselves. I’m betting that when you see the game on the shelf for $60 years later, it’s because it would STILL cost them $57+ to replace it. So, there’s no sense in selling it to you at a loss, unless they want to never have that game in stock again (assuming the manufacturer’s price never drops). So instead they will keep it at that price until they literally need to clear out shelf space, which could be a long time. In other words, it’s not up to the game stores, it’s up to the publishers.

      And of course anyone who says “we need to price it higher to make all our profits” obviously has no idea what he’s talking about. Does McDonalds charge $20 for a happy mean to increase profits? No, they maximize (roughly) #sales*profit per item, both of which change as you change the price.

      The nice thing about all this, of course, is that capitalism DOES reward the smart people. Eventually people will look at Valve’s fistfuls of cash and hopefully realize that this is one of the reasons why.

      There are, however, two arguments I can think of for keeping prices high.

      First, the idea that someone might say, “I’d be willing to pay $60, but this company will drop their prices really soon anyway, so I’ll wait”. This is sort of how I feel about Valve games at this point. They happen to have amazing games anyway, so I’ll usually buy them at launch regardless, but for, say, Nintendo games, if I EVER want to play one, I know their prices take forever to drop, so I don’t have that option. I think that again, comparing to Valve, it should be clear that this is a bad approach, since as you take longer to drop your price, you are missing out on even more sales, since people will instead say “Okay its only $20 now, but it’s also 3 years old and I just don’t care anymore”, or, more likely, it will have been forgotten.

      Another issue with lower prices: sequels. If they lower the price on genericshooteminthefaceVII, it means more competition for genericshooteminthefaceVIII. The solution here is to stop buying crappy sequels >_>

      1. decius says:

        The Laffer curve: You might be able to make more total money at a lower price point.

        Given that the marginal cost to make a game is ~0, compared to the cost of retailing it, I would expect to see long-tail sales in brick-and-mortar stores, not just Steam and GoG.

      2. tengokujin says:

        What’s better? Never selling the $60 game (making $0) or selling at a loss (making $20-30)? At some point, you’ve got to bite the bullet and realize an unmoved game is worse than making less than you paid for it.

        1. Ingvar says:

          As a game store, where I can (presumably, it works for non-massmarket paperbacks in the book industry…) return an unsold unit to the distributor, at no actual loss?

          So, I have the option of:

          get a single game unit and sell it at $60
          Get a single game unit, return it to the distributor and get nothing, lose a bit of shelfspace for a time
          Get a single game unit and lose on the order of $25 to sell it

          I’ve listed these in the order from “sounds brilliant” to “that will drive me into ruin”.

          1. Klay F. says:

            The problem with these options is that there is not really any way to predict which of the options you will need to take because, as Shamus said, publishers (and retailers alike) don’t know what games will be a hit and why. What if a game come out of left field to be a huge overnight success? Suddenly both retailers and publishers are effectively losing money because they didn’t bother to move enough product. Its the same situation with the reverse, where they think a game will break records but instead gamers rebel.

            1. Ingvar says:

              They’re not losing money, they’re just not making as much money as they could have done.

              My understanding is that retailers with decent knowledge of their niche are OK at predicting (as in they make the right call in 50% or more of cases) as to if a given product needs to be in the “bulk”, “medium” or “a couple, just in case” order bins.

              1. Klay F. says:

                Thats the thing though, if you aren’t making the maximum possible profit, then its a lost opportunity, and that money is forever lost. Also, you are assuming that retailers (or publishers) actually desire to learn more about “their niche” as you put it. We’ve seen in the past that publishers at least would rather not deal with niche markets, because it requires more effort. Its why there is no middle ground in game development. You are only either a AAA developer or an indie developer.

          2. tengokujin says:

            Losing that shelf space seems “alright” compared to a loss, but how much money opportunity is lost by holding on to it with an unmovable product?

      3. LintMan says:

        I think you guys are just making those numbers up. Gamestop makes a solid profit on new software sales. From their annual report dated 1/28/2012:

        New video game software (Sales) 4,048.2 (millions)
        New video game software (Profits) 839.0 (millions)

        This is a 20.7% profit, or $12.42 on a $60 game, on average. Not exactly razor-thin. Certainly enough margin in there to allow for some discounting over time.

        Also telling is the profits Gamestop makes on Used sales: 46.6%! Gamestop makes more than double the profits on used sales, so it’s far better for them to sell just enough new copies to get into them circulation and then push used sales from then on. Why discount new boxed copies when they make far more money selling used ones? THAT is why new game prices never go down at Gamestop

    4. Nick says:

      Many years ago I thought games were too expensive, so I looked into becoming an online retailer and selling at discounted prices.

      I got some price lists from some distributors and the $70-$80 RRP games were wholesaling for $60-$70. That quickly killed my idea.

      1. Sumanai says:

        In Finland certain jewelry was being sold relatively cheaply. The store got sued for it. Apparently there’s a law that basically prevents the opposite of price gouging, and they broke it by selling stuff at a slightly lower price.

  2. tengokujin says:

    Yes, this. Exactly. I was troubled by that man’s comments, how it felt like he did not grasp how people spent money.

    Most people like to buy new. If the discount that the used price grants more than offsets that preference, guess what gets bought?

  3. Moriarty says:

    I remember seeing Dark Messiah of Might and Magic at launch for 60€ thinking to myself “hmm, not worth paying full price for it, maybe check again later when it’s down to 20€.” And then finding it five years later, still sitting there with a 60€tag.

    Until it went on a sale on steam for about 4€. Something is wrong with our retailers.

    1. David A says:

      I will say, I’ve bought nearly a dozen games off Steam, all games I wouldn’t have bought at full retail, but Steam offered them at fantastic discounts.

      I think, Shamus, that the Silicon Boss thinks the way he does not because this business model is best for the industry, but rather this is the behavior of their buying public.

      If gamers were more willing to buy older games, then they’d incentivize that behavior more. For all I patron Steam, what they’re making must be a drop in the bucket compared to the MW3 and BF3 and GTA4 blockbusters.

      1. Alex says:

        What’s that you say? The guy responsible for “Too Human” doesn’t understand video games?

        Stop the presses, everybody.

      2. Alex says:

        What the heck? That was supposed to be a stand-alone comment, not a reply. That’s never happened to me on Shamus’ blog before.

        Sorry if that sounded like I was being a jerk to you, David A. I was hoping that would sound like a jerk to Denis Dyack.

  4. LexIcon says:

    Being an employee at GameStop (the enemy of all men!), I can tell you this much: Our prices on new games are pretty much entirely controlled by what we pay the makers for them. I’ve been watching the prices for the last few months, and it takes a new copy of a game at least a year to drop more than $10. We still have some 2-3 year old games at $40 new, which is insane.

    In fact, I’ve seen us be ordered to open new copies of games and re-lable them as pre-owned, just so we can drop the price and get it off our shelves, despite taking a loss on those copies.

    Meanwhile, our pre-owned prices go up and down with supply and demand, just like a reasonable business would do. Same goes for our trade-in values, it all depends on how many we have and how fast they’re selling.

    The takeaway is: if you come in and complain about the cost of old games, know that I’m right there with you. At least I get to check them out for free. :)

    1. rayen says:

      The fact that you’re labeling new games as pre-owned undercuts the silicon knights boss even more. that means them not dropping their prices to reasonable levels is driving up the the price, depending on how pervasive this is.

    2. decius says:

      Wait… GameStop doesn’t have a standard agreement with wholesalers along the lines of “unsold products will be returned or destroyed”?!

      Just drop the price, and f- the MSRP.

      1. MintSkittle says:

        You do realize that they still paid the $55+ a copy to stock that, so that by marking them as used and selling at reduced cost, they’re taking a loss to free up shelf space. The publisher isn’t going to refund Gamestop for overstock they can’t move. They have Gamestop’s money already, so why should they care if Gamestop hurts itself.

      2. Felblood says:

        You really don’t understand how much of a racket game publishers are running do you.

        Why would they ever make any kind of concession to GameStop, when they’re too busy accusing them of all the world’s evils.

        Game publishers don’t understand how to treat their partner companies any more than they understand economics.

  5. Primogenitor says:

    On a semi-related note, did you see that Game Group (probably largest UK bricks-and-mortar video game retailer) went bust? Partly this is just a general business story of over-extending in boom and not having enough to survive a few years of downturn, but its also been on a downward spiral for ages and I don’t think this comes as a surprise for anyone who has visited them for the last 10 years.

    1. Ringwraith says:

      They do, at least, lower prices after a time, much faster than other countries’ retailers seem to do, although not as fast as online retailers, which is where they lost business to.

    2. GiantRaven says:

      Serves them right for having two stores within walking distance in pretty much every UK city. Who on earth thought that was a good idea?

      1. Hitch says:

        GameStop in the US. They were getting pretty close to that a few years ago, then they bought out EB Games and re-branded all the EB stores to GameStop and made it even worse. For GameStop’s sake, I hope they’re watching the Game situation. (Although, personally it’s not a big deal.)

        1. Soylent Dave says:

          I’m willing to bet they are watching the situation at least a little bit, because they own GAME group plc…

          (well, they’re the major shareholder, at least)

          1. Soylent Dave says:

            Consider this an edit – Gamestop were the major shareholder until 2004.

            They have ‘an interest’ in GAME group plc now.

      2. Ringwraith says:

        Considering how much traffic I often saw going in and out of a pair of them, (especially at Christmas, those queues get long, like snaking-around-the-shop-twice long), I would be surprised if they still managed to profitable in those situations.

      3. Ian says:

        And when you remember that Game owns Game Station that number can often rise to 3.

        In Coventry there are (were) two games within 100 meters of each other that were remnants of when Electronic Boutique bought Game and renamed themselves but didn’t close either store and then a Game Station as well. No single shop was especially well stocked.

        1. Alphadrop says:

          In Portsmouth there are 2 GAME stores 10 feet away from each other in the same shopping centre, just outside the centre is a Gamestation.

          Odd that Gamestation used to be owned by Blockbuster which should have gone bust years ago but now Game Group is going down the toilet and Blockbuster still holds on.

  6. zob says:

    Game developers are gooses that sometimes lay golden eggs. Publishers want more golden eggs so they force those gooses to the point of death to get those eggs. After a while we’ll have golden egg inflation so publishers now want bigger shinier golden eggs faster than before. Eventually goose dies.

    1. Dragomok says:

      Unless a goose chooses to work on its own. And has a fancy hat.
      And is partially bald.
      And Swedish.

      1. 12345 says:

        And lays cubic eggs

  7. Vlad says:

    Like you said it, the used games market is a competitor. What this guy’s saying is basically “Waaah, we’re in a free-market capitalist economy, and there’s too much competition! Waah!”

    I never buy used, but I DO wait until prices go down before purchasing. Luckily, I’m a PC gamer, and PC games are probably the only ones that do come down in price after a while. Well, you know, except Call of Duty and any Blizzard game, who people will buy even if they doubled in price.

    1. Hitch says:

      Mainly because there’s virtually no used PC game sales.

    2. Blake says:

      Not true about Blizzard games, I still see Starcraft 1 and Brood War selling for $5 each. I know I’ve bought them a few times when I’ve moved house and lost CD keys etc.

      1. DirigibleHate says:

        $5? Here in Aus they still have the Starcraft, Diablo and Warcraft 3 “Battle Chests” for the bargain price, of $40.

        1. Felblood says:

          Even in the US retailers tend to treat the Battle Chest packs like a collectors edition.

          It’s generally cheaper to pick them each up seperately, but it can be hard to find them in you local discount bin.

    3. Chauzuvoy says:

      You can actually find PC games in stores anymore? At most of our local retailers “PC Games” tend to be the entire blizzard catalogue and any big new PC releases. Around the point I bought Supreme Commander 2 and the disk literally autolaunched to a steam download, I completely gave up on buying PC games outside of steam and GoG. Do I miss some releases? Yeah, but I save a lot of hassle.

  8. Museli says:

    It’s a little different here in the UK – most titles drop drastically in price after a few months. The blockbusters won’t – a Modern Warfare game will have dropped from £50 to maybe £35 after about ten months – but many titles will go £45, 35, 30, 20 in six months or less. By playing games six months behind the release schedules you can save a ton of money.

    Of course, sensible pricing is only one part of running a successful business, and the geniuses in GAME upper management have managed to wreck the company anyway. Oh well.

  9. burningdragoon says:

    Unfortunately I’ve seen actual customers buy (hehe) into the idea that developers have failed if they can’t make a profit in a couple weeks… okay so it was just one person on some forum thread, but still. It was unsettling to see someone casually say it like it’s just the way it is.

    “if your game can’t make enough money in the first few weeks to cover the costs and generate a profit, then you failed at making a game” is what was said.

    1. Chauzuvoy says:

      I think part of the issue is that people compare AAA games to blockbuster movies when evaluating success.

      The general market wisdom is that the most important thing in movie sales is the opening weekend box office. It runs into the same kind of issues, because so much of that is beyond their control. But at least it’s justified, because it’s hard to judge how successful a movie is until it finishes it’s theater run. And even then, it’ll keep making money on DVD sales and syndication. But when you’re trying to get another project greenlit, you need a more immediate measure of previous success. I think it’s less about them being idiots, and more about higher-ups in both industries being impatient about seeing the results. Burst sales are easy to measure and quickly visible.

  10. Paul Spooner says:

    My guess is there’s something in the distribution network that makes it very difficult to lower game prices. Perhaps the distributers have to buy the games from the publisher, so they can’t lower the price without taking a loss. Perhaps the publishers have a pricing contract that is difficult to change. I could imagine this kind of system very easily gaining a lot of momentum and being difficult to change.
    Of course, all that means is that the major industry players are going to collapse and more sensible companies (like Valve) will spring up in their stead. It’s sad, but often that’s the way things change. Large organized systems get so entrenched that it becomes impossible to respond to silly things like… customers.

    1. Henson says:

      This is pretty much what I was thinking. Retailers won’t easily lower prices because they don’t want to sell games for less than what they paid. If a game doesn’t sell well in the first few weeks, retailers probably won’t order new copies even if the publisher lowers their price point.

      Digital copies, however, don’t lose money in the same manner, and this is probably part of why Steam is doing so well.

  11. Dev Null says:

    Between Steam sales, indy bundles, and, I don’t think I’ve paid more than $10 for a single game in years – maybe $15 once or twice. And I have a huge backlog of things sitting on the computer waiting for me to have time to play them. Nor have I bought a used game, for that matter; why would you, when you can get new copies so cheap, delivered to your computer, and at least have some recourse if it doesn’t work.

    Brick and mortar game stores with $60 year-old titles are basically there to troll for parents buying gifts who don’t know any better. They are shambling zombies – dead but still twitching – preying upon the slow in their last moments before fading from the world forever. Any games publisher that is counting on them for their living is doomed.

    1. Infinitron says:

      The publishers are deeply afraid of a future market dominated by consumers like you (and me). They’ll do anything to stave it off.
      They will fail.

    2. Robyrt says:

      The main audience for new game sales are multiplayer fans. Call of Duty is easily twice as much fun on the 2 weeks of release as it is 6 months later when it goes on sale, because you’re playing with people like you who are discovering the ins and outs instead of diehard level 99 masters who are counting down the days until the next map pack.

      There’s also an exception for games which are on top of a bubble and will command full price as long as they can stay in stock. The Wii, Rock Band, etc. all appeal to a less price-sensitive market.

  12. Attercap says:

    I wonder if “burst” sales counts include GOTY or “all DLC” game releases. With the advent and increase of DLC, I know quite a few gamers who wait until “the game is complete” before they make a purchase. One should assume that has also affected profit margins and how they should be viewed.

    1. Loonyyy says:

      Indeed. I waited like 2 years to buy Fallout: New Vegas, until a complete edition would come out. Fortunately, a Steam sale intervened and I got it for less by parts. I did the same with Fallout 3, Oblivion, and Dragon Age.

      What I don’t get is: with all the stupid special editions flying around, why is there not one which preorders DLC. I’d happily pay ten dollars extra to be secure in the knowledge that I’d get the standard 2 or 3 expansions for a Bethesda game on release.

      1. Sagretti says:

        Some games are introducing “season passes” that give a discount on all major DLC coming in the near future. Saints Row III had one, unfortunately the first DLC was too short and somewhat uninspired, the second was pretty good but also short, and the third just felt like a mess. So, in the end, I think I would have preferred purchasing the individual downloadable packs anyways.

  13. Alex the Too Old says:

    Actually, Dyack addresses the point about the price structure of games. Well, sorta.

    Videogames used to have a long tail, he explained, which meant that a game put on the market could maintain decent sales and generate revenues for several years. But the rise of used games effectively destroyed that aspect of the business, meaning that games must now earn the vast majority of their money within the first three months of release…

    He at least acknowledges it, but then fails to take the next baby step, which is how to compete with the used market. And I wish I could recall where I read about what I’m about to describe (it may have been here, in fact), but besides price, you compete by rewarding people who buy the game new. (NOT, let me stress, by punishing the used customers.) A used copy of the game is just a completely functional copy of the game, but new purchases come with a one-time reward:

    – An in-game treat like a pet or hat or extra currency or something. Could even be something like a bonus stage or cutscene if you really put in some effort.
    – A coupon for free or discounted merchandise for the game.
    – Even an achievement: “*I Bought New!* (supported the creation of future games by this developer by buying a new copy)”

    And since you’ve just given the player a reward, they’re likely to by in a receptive frame of mind for listening to your side of the new-vs-used issue.

    Another idea that’s kind of on the line between reward and punishment, which I don’t like as much but publishers might, is limiting a used copy’s access to DLC and to patches that aren’t strictly bug fixes.

    Then that opens up an opportunity to let GameStop et al sell activation codes to lift those restrictions…

    EDIT: Wow, the effect of my broken italics tags weren’t limited to my comment… ^^;

    1. Alex the Too Old says:

      In the original article that the Escapist editorial links back to, he said this:

      looking towards next generation people once again are saying we’re going to have development costs that are two or three times of what they were last generation. I cannot see how that economy is going to continue,” Dyack stated.

      ……WHAT?!?! So he’s just taking it as a given that game development is going to get more resource-intensive and, presumably, risk-averse? Considering his attitude toward financial management, he really missed his true calling as a Congressman…

      1. GiantRaven says:

        That’s absolute madness if true. I really hope some kind of middle-ground appears somehow between indie games and big budget games.

      2. Gamer says:

        That’s just stupid.

        “Game are pretty expensive to make. Let’s making them soul-crushingly expensive.”

        1. Klay F. says:

          It may be stupid but its very likely that its going to happen anyway. Even now, you have the likes of Cliffy B watering at the mouth, hoping for every game next generation to have visuals on par with that idiotic Samaritan tech demo.

          1. Gamer says:

            This is another big problem I have with the industry. They seem to forget that graphics are not everything.

            I’ve never heard somebody tell me “I’d buy that game, but it just isn’t pretty/realistic-looking enough.” That’s usually the very last thing people consider (at least the ones I know).

            1. Klay F. says:

              I’ve been convinced for years that the industry will eventually ride the bleed edge out of existence, simply because everyone with the power to make decisions within the industry is too stupid not to. Its obvious that CliffyB cares nothing for the overhead costs of making games. What happens if he makes a game on par with those visuals and it becomes as popular as Gears? Suddenly a game with a budget of $50 million will be seen as quaint.

            2. Stranger says:

              . . . I have heard that. Please let me quote my brother.

              “I would play Disgaea, except it looks too anime and cartoony.”
              “Why do you play so much Minecraft? It looks like garbage.”
              “So this is Terraria? Why does it look like something the Super Nintendo would run?”
              “Team Fortress 2 needs to look more like Call of Duty.”

        2. Jay says:

          Sounds like there’s an opening for a developer who makes fun games with relatively low-res (cheap) graphics, uses an appealing art style to compensate, and competes on price. Something halfway between PopCap and Borderlands, maybe.

      3. Blake says:

        That’s about true.
        Art assets are expensive, and each new generation needs a lot more, higher definition stuff. Where once a programmer could put together a room in a couple of minutes, now you could have an artist spend a day on it, and if anything is a bit off everyone will notice.

        It’s everything Shamus ever said about needing to go procedural to remain cost effective.
        I think it’ll also mean a large rise in middleware and 3d model libraries.

        1. Alex the Too Old says:

          “if anything is a bit off everyone will notice.”

          I think it’s like gourmet food or audiophilia – people only notice if they’re told to notice and make a point of noticing.

          For instance, I’m playing the original Half-LIfe right now because I didn’t play it while it was current and it was on sale on Steam a while back. Yes, the graphics are incredibly primitive compared to what’s being produced now, and since I’m exposed to a lot of talk about the quality of games I noticed it right away, but once I got into the game I was too busy thinking about what was going on to pay it any more attention. (And became more concerned with noticing how the controls felt compared to a modern game, but that doesn’t take tens of millions of dollars to improve.)

    2. Zukhramm says:

      All those ideas are fine, but how about competing with them by lowering the prices? Seems like the best solution.

      1. Gamer says:

        Sorry, you’re implying that publishers have common sense. Please try again.

    3. John Magnum says:

      ““ An in-game treat like a pet or hat or extra currency or something. Could even be something like a bonus stage or cutscene if you really put in some effort.

      People will flip out if you include a bonus stage or cutscene as a bonus for people who buy new. RAGE did it, Arkham City did it, and in both cases people shrieked about how they were cutting out pieces of the “Complete Game” (a Platonic form which exists, in slightly different manifestations, in the head of all consumers) to give to people who buy new. (Or who buy used and pay $10 or whatever for the bonus content.)

      1. Mari says:

        But if I buy used for $20 and pay $10 for the “extra” content I’m still paying HALF PRICE. I win! Muahahahahaha!

  14. Mari says:

    The logic, it burnsssssss!

    I’ve reached a point of cynicism where I’m no longer outraged by the incredibly stupid things people say out loud to the press. It seems like stoopid is pervasive in the games industry and I’m only shocked now by the people that have some grasp of reality while sitting in seats of power. One would think the tech bubble way back when might have enlightened some of these goofballs but no, the games industry in general seems to view the world through rose-colored VR goggles.

  15. arron says:

    Excellent article Shamus.

    I’ve noticed that this “used games are evil” propaganda mantra has been cropping up a lot recently, especially to the tone of “we’re not making any money from games that are resold”. Games developers/publishers have no right to make money from second hand sales, any more than Ford have a right to a cut of someone selling their car to someone else.

    There’s this utterly weird thing that cropped up with software during Windows where a PC could not be legally sold without Windows as it stopped the PC from being a PC. One could not move that Windows off that machine onto another machine or sell it or replace it. It was a essential piece of software you owned as you bought it with the machine whether you liked it or not, but in the strange Schrà¶dinger’s universe of software licences, you were not permitted to own and sell it like any other object, despite you’d paid money to do so.

    Now games developers are claiming that you buy games, but you shouldn’t be able to move them to another console you own, or sell them to other people (without coughing up some cash for the privilege)..and there are rumours that there will be hardware measures in place to kill the resale market stone dead in the next gen of consoles. I’ve no idea how they might do this (some kind of unique ID on disk?) and whether it stops a resold game from working or you just have to pay $20 to buy a “resale” licence.

    But the fact is that people aren’t paying $60 for a new game every time is pissing off the casino dealers in the games market..

    1. Gamer says:

      I swear to god if that’s true I’m abandoning consoles. That rumor is cropping up too frequently to ignore and it’s beginning to worry me.

      I know Gamestop said there is no chance of that happening, but of course they would say that. Used games are the bulk of their profits.

      1. James says:

        Rumours of what there doing with the PS4 are going along this line.

        I believe it went along the lines of: You get a game with a unique code, put it on your account- and now no one else will ever be able to play your game.

        Also no backwards compatibility for Ps3 because shut up.

        Honestly, I’m saving these days to get a proper gaming pc. The next generation of console does not sound like my cup of tea…

        1. Piflik says:

          And don’t forget PSN requirement to play your games.

          I don’t know what Sony is thinking…have the PS3 sales not been bad enough in the beginning?

          1. Gamer says:

            It’s like game companies don’t WANT my money!

            1. Darkness says:

              Silly person. They want ALL of your money. Just send it to them. Then they can be happy. You and the rest of us, we just get screwed. Which makes them happier yet.

          2. Hitch says:

            After years of having to charge too much for minimal profits on the PS3 because of it’s complex and proprietary hardware, Sony is now faced with the problem of this generation’s consoles being too old and needing to be replaced. “How can we keep sales of the now profitable PS3 alive for a few more years? By making the PS4 so undesirable that people will continue to buy the PS3 in protest.” — My own tin-foil hat theory.

            1. Isn’t that what they did with the PS2 and PS3? They might be stupid enough to try it again…

              1. MintSkittle says:

                If Checkpoint is anything to go by:


                The PS2 is selling better than the PSVita in certain areas.

        2. Blake says:

          I’d say the no backwards compatibility would partially be because the PS3 is still doing well, but also because the cell architecture would be a bitch to emulate without including a cell processor inside the PS4 (assuming they’re going back towards a normal setup like a sane person).

          As for locking the games down it’d just be like the PC situation except with steam integrated into the system software.

      2. swimon1 says:

        which is why it seems unlikely. If a console comes with a way to kill the used games market gamestop would be very tempted to not stock the game, which would pretty much kill that console. This is the reason why steam games still sell for the ordinary price. Since downloadable games have no construction cost and steam doesn’t really lose any shelf space by stocking the game a downloadable title could sell for way less and make the same amount of money. This would probably drive up sales quite a bit and earn them quite a lot of money but if they did gamestop would stop carrying the game and it would pretty much die off.

        Gamestop and walmart have enormous influence over how the games industry operates and anything that screws with their bottom-line will be at a severe disadvantage. That said a lot of the console-maker higher ups seem to have a lot of breathing room in their head so I don’t think the rumor is impossible, just very unlikely. And if it’s true then some console maker is about to lose a lot of money.

        1. psivamp says:

          Steam pricing is probably under some limiting contracts and also has to deal with perceived value. Also, Steam’s prices tend to follow market trends much better than retail. Unfortunately, I can’t partake of this joy as much as I would like because my PC is anemic and I’m kinda broke with this whole college thing.

          E-books right now cost about half as much as a hardcover book at release and tail off to the same price as a mass market paperback — generally. This is partly because one of the distributors got in on the ground floor with a bunch of publishers and pretty much locked in prices in the contract. There is a clause stating that the price on Barnes & Nobles nook service cannot be discounted below the price on the Apple store or some such. At least, that’s what I heard when I was at B&N. It’s probably more likely that the publisher doesn’t want to put itself out of business and doesn’t see the value in selling copies of ancient books for less when they have little to no overhead on the property.

        2. Moon O'Riley says:

          If Gamestop refused to stock games for a particular console (say the PS4) the publishers would likely tell them that if they want to sell their games on the other consoles they have to take them for the PS4.

          1. Jay says:

            They already had this fight with the PSP Go, and retailers pretty much won.

            Remember, Blockbuster and some other major retailers sell used games these days, too, and won’t be inclined to stock a product that pisses in their pool.

        3. They do VERY early on. Over time, games on Steam get cheaper, period.

  16. Fishminer says:

    This problem isn’t unique to the games industry. We were actually talking about it in my macro economics class yesterday, it’s called price stick. When a company knows that they can charge more for the product they are usually reluctant to lower the price until they absolutely have to.

    The best example of this in the games industry is Australia. Prices should have been lowered a long time ago, but they never were and since people still buy games companies don’t really feel inclined to care. Considering how ingrained most gamer’s buying habits are I actually really wonder how much price changes would really alter the amount of games bought per year. I mean as long as you have to work with distributors they can still low-ball you to get the more thrifty markets and depending on the title the release week launches probably aren’t as variable as we would like to think either. I agree that experimentation would be nice, but it’s a really hard thing to play with and there are so many variables in the entertainment medium that it’s hard to tell how much testing is enough to get worthwhile results.

    Of course the solution to everything is ultimately things like steam and the app store, but those still have some ways to go before the more hard core can be won over to the idea of online shopping methinks. The biggest problem is when those stores are intentionally alienating. Take the x-box live store, why the hell do they use a points system? The added conversion does nothing, but confuse and scare off potential users that might otherwise be very interested in the convenience of buying games from home that don’t all cost $60. Speaking from personal experience, once you get into the habit of using the system it can be wonderful, but making that first digital purpose is always a very reluctant first step.

    1. Blake says:

      Yeah down here in Aus we used to get told we paid twice as much for games as our dollar was worth half what a US dollar was, then our dollar caught up and overtook the USD and prices…. stayed the same.

      Steam, Xbox LIVE, even sell their games to match what local retail is doing rather than match the US store.

      All this is driving pretty much everyone I know to import our games instead (save somewhere between 40 and 80% doing so), which means a large portion of our local retailers are either getting out of games or closing down.

      Businesses that sell imported games are doing fine though.

      1. DirigibleHate says:

        Steam prices are primarily set by the publisher. There are a lot of smart people who listen to Valve’s recommendations, but when Arkham City was for sale on preorder, the price matched the US store until about two weeks before release, at which point they doubled the price. It’s not as if it was the preorder bonus either, since they still had the 20% off preorder bonus, just calculated from the new cost of $100.

        Also, Skyrim is still $90.

    2. Austin Middleton says:

      Price stickiness is slightly different than you say. It suggests there are costs to changing prices themselves, and though you may have a non-optimal price, the loss you take from that non-optimality is less than the cost of changing the price.

      For example: it costs a restaurant money to print menus, let’s say $100. Their current prices are lower than optimum (let’s blame inflation), and the restaurant loses $5/week in revenue. Do they pay the $100 to reprint the menus? Price stickiness suggests the restauranteers will not change their prices immediately; they will do so when it becomes clear the present discounted value of $5 loss/week is greater than the cost of reprinting.

      However, price stickiness has everything to do with the short-term; in the long run you would still expect prices to tend towards the optimum. If you say prices in Australia should have been lowered a long time ago, you’re dealing with the long run. There are other economic forces at work, but it isn’t price stickiness.

  17. Jon Ericson says:

    I can’t figure out when games had a longer tail then they do now. When the original Deus Ex came out, I was busy being poor and didn’t buy it. I wasn’t buying other games either. But last week, it went on sale on Steam for $5. At that price, how could I not try it out? And since Invisible Wars was also $5, I bought it too. I hear lots of negative things about the second game, but it doesn’t have to entertain me much in order to be worth paying that amount. I’m wishing I’d bought Human Revolution while it was on sale too. I’ll probably end up spending another $30.

    Not too long ago, if I wanted to buy a game that was a few years old, my only options would be to buy it used or pirate it. Now a publisher can get a few bucks in almost pure profit selling classic games years after the development costs have been spent. If they manage things well, they might also be able to sell me a new game that properly exploits the IP just as Disney, Marvel, and Lucasfilm can.

    For the console game market, used games actually prop up prices. That’s because buyers have the option to sell back games they no longer play. This is exactly the same reason popular movies on DVD and Blu-ray don’t get discounted very quickly. PC games have no secondary market and so they get discounted over time or sales will drop to zero.

    1. Peter H. Coffin says:

      Video games have never had as long a tail as they do now, for games worth playing, that don’t stale quickly. Blizzard sold me battlechest versions of Warcraft and Starcraft just last year, and most of that material is a decade old. The games that don’t tail? Endless revisions. MLB or Madden 2008 more or less has no reason to exist once MLB/Madden 2009 hits shelves.

      Further back in the heyday of video games that these knights are mourning, entire platforms would blossom, flower, go to seed and rot in 3-5 years. Commodore Pet debuted in 1977, replaced by Vic-20 in 1980, C64 in 1982, and Commodore’s attention shits to Amiga for 1985 release. All of those were all but incompatible with each other, and similar circumstances existed in the Apple machines. Atari released five incompatible systems in the decade starting in 1977, and the PC world didn’t really get any stability until the late 1980s. Which means three years or less from learning to write for a platform, companies can’t GIVE new titles away, for the large part, and have to abandon and start all over.

      In comparison, Windows is running games from the end of the 1990s just fine mostly, and Xbox 360 and PS3 have been contending machines since 2005 and have some level of compatibility with prior systems back to the 90s as well. Which means all the major current game-playing platforms have absolutely HUGE libraries of titles and it’s hard for anything that doesn’t have “contemporary” buzz to fight against the best of the best of 15 years of gaming competing for attention.

      1. Jon Ericson says:

        This is an astute observation. One of the reasons I bought a Wii was so that I could catch up on all the Nintendo titles I missed out on a kid.

        Sports games don’t need to have long tails as there is a real reason (updated rosters) to buy a new copy each year. Sports fans (I’ve been one myself at times) will gladly pay for the right to see their favorite players on their favorite teams with updated statistics and ratings.

        And you make a great point: the long tail of modern gaming hardware is the problem, not the solution, when it comes to selling middle-of-the-road games. I might buy a cookie cutter copy of the flavor of the month today, but in ten years when that style of game is out of fashion, I’ll only consider buying the very best. I’ll gladly buy Super Mario Bros. 3 from the Virtual Console, but you won’t catch me buying any of the copy-cat platformers from that era.

  18. rrgg says:

    Hah, my sister got Oblivion from Hastings a couple of weeks ago for 20 dollars. See? The prices do go down, it just takes 6 or 7 years.

    Although one interesting i noticed is that they were still selling the fallout 3 goty expansion pack which gives you all of the add-ons, but they didn’t actually have fallout 3 for the PC.

    1. Dasick says:

      Fallout New Vegas (Complete Edition) is sold brand new for $40 at my nearest game retailer. It will be my last Steamworks game.

  19. MichaelG says:

    This sound exactly like the movie industry, and is why we get nothing but remakes and summer special effect movies.

    Games need to be easier to write, so the market becomes more like the market for novels, instead of movies.

    1. MatthewH says:

      I was just thinking it sounds like the movie industry and the biotech industry combined.

      Your developers are small houses which come up with ideas, pitch them to the big publishers (pharmacuetical companies, in the analogy) who throw $50,000,000 at it, hope to get something workable, which they then patent. In the Pharma case, though, they can milk that patent for -what is it now, 20 years? Videogame developers go the Hollywood route: big opening weekend and then… Well, they don’t exactly have DVD sales, or second run theaters.

      Though I doubt that eliminating the secondary market would do much for them. Studies on eliminating the secondary market on textbooks and heavy capital equipment show that it can work -but only barely. The publisher reaps a small monopoly rent -but it’s based on the lack of competition. Assassin’s Creed isn’t so good that people won’t buy another game if the price goes up and they can’t get it used.

      Besides, the ability to resell is priced into the retail pricetag (I’ll not rehash the argument). Add in friction, and eliminating the secondary market will cause game prices to drop and publishers to make less money (because they sell fewer units and a lower price, and friction prevents a break-even equilibrium).

      Come to think of it, it sounds like the game publishers are trying to act like a cartel without actually being a cartel. That never works well.

      1. Stebbi says:

        Pharma companies can milk it for around 10 years. The patent lasts for 20 years but it takes 8-12 years after it’s been patented to fully research it.

    2. Taellosse says:

      I was going to post to say this very thing. I don’t know why, but the games industry (at least the AAA games industry) has adopted the business model of Hollywood–spend tons of money for years making a hugely expensive, flashy bit of entertainment, spend gobs more marketing it to make it seem like the Second Coming, release it everywhere for a brief window, and hope to God that it does really well. The handful that actually DO perform well fund all the ones that do poorly. But the only reasonable way to increase profit margins in such a model is to make it formulaic–hence why Hollywood releases tons of remakes, and movies based on popular novels, comics, and games (and now, for some reason, amusement park rides and board games). Of course, this is also why there are a eleventy billion FPS games set in Derivative Sci-Fi Land and World War II.

      To some extent, maybe, that’s the nature of the industry. Gone are the days when you could make a high-end video game with half a dozen people in a couple years. Movies are expensive (even rom-coms, which lack pricey special effects or stunts, are expensive) in large part because of all the people and equipment you need to make them, and how long they take to produce. Games are now the same way–a AAA title takes years with dozens if not hundreds of people, and the costs add up.

      But, as Shamus says, there’s no reason why they should feel obliged to keep a game that’s been out for a while at full price, or pull it off the shelves. The game is made. You’ve made your brand-new-release money. Mark the new copy down. Hell, peg it to the the average used-copy and add $5. Given the choice between buying used and new, if the difference is slight like that, I’ll pick new every time, and I bet a lot of others will too–a new game is FAR more likely to work properly and have everything included than a used one. Hell, even the film industry recoups money from people that missed their product during its brief theater run. That’s what the home video market is for, and it’s half that industry’s income now.

  20. rrgg says:

    And on the subject of Steam, I’d like to point out that there is no reason that hard copies can’t compete with online downloads when it comes to games at the moment. Not only is there the clearer sense of ownership but, believe it or not, on most internet connections it does not take longer to go to the store then it takes to download.

    1. Dev Null says:

      Ah but its not the _time_ to go to the store, its the _effort_. I can seriously rock the lazy when I put my mind to it, and shopping malls are flourescent-lit hellish pits of crappy ambience music and despair.

      1. GiantRaven says:

        This. The less I have to leave the house to do anything other than go to work and see friends, the better.

        1. Gamer says:

          “This. The less I have to leave the house to do anything other than go to work and see friends, the barter.”

          Fixed that for you.

      2. rrgg says:

        I have trouble relaxing when some download has slowing my internet to a crawl for the next 12 hours. :p

        In either case different niches to exploit.

        1. Heron says:

          Trick is to start the download just before you go to bed, or just before you leave for work, or class, or whatever, so it doesn’t bother you.

  21. Sydney says:

    Orbis, the Playstation 4, apparently won’t support used games. And won’t be backwards-compatible.

    And you need a constant PSN connection to boot anything up.

    1. burningdragoon says:

      Eh, the lack of used game support is dumb and bad enough on it’s own. But having to log in to PSN to play anything would be the worst idea ever. Almost like they forgot about that time when PSN went down for several weeks. I want to believe they couldn’t be that stupid, but I dunno.

    2. SolkaTruesilver says:

      1st comment on this webpage has it right:

      “Users might not circumvent these limitations, but hackers will”

    3. rayen says:

      i’m sorry but i don’t see how this is going to work… What if i break my PS4 and have to buy a new one. Theoretically this is the same as buying a used game as it’s being used on a new console. Do i have to buy a new copy as well?

      1. Blake says:

        They’d likely be tied to a signed in user not a console.

        1. Sumanai says:

          They would be hopefully tied to an account not a console.

          I feel the need to note that all games bought on the Wii’s online store are tied to the console itself. Sure, there are no accounts, but I’m too pessimistic to just assume Sony won’t do something stupid like that.

          1. Stranger says:

            . . . and yet if your Wii breaks and you send it to Nintendo, they might transfer all your data for you unless it’s something they can’t copy. (Discovering their Pokemon: Battle Revolution absolutely *could not* be copied or it would not work, for instance.) I wound up asking the nice people on the phone when I thought a power outage fried it to a brick.

            Would they actually do it though? Wouldn’t know and don’t want to test the theory of “yes, because they want me to keep buying their stuff”.

            1. Sumanai says:

              Does that cover the actual online information so if I don’t have something installed I can install it from there without buying it again?

    4. Cody211282 says:

      Why does Sony think people are going to put up with this? Hell they already have handhelds that aren’t selling very well this could very much drag them into a pit they can’t climb out of.

      1. Sumanai says:

        It could be the publishers pressuring them. Someone from Sony admitted to some functionality never coming out for the PS3 because there was one company who’s games didn’t work well with them, and therefore would’ve “seriously reconsidered supporting PS3 in the future” since it would’ve cast their games in a bad light.

        Still, not exactly enticing. But what will people do if the Wii-U isn’t what they want and the next X-box will do the same thing as PS4?

  22. Piflik says:

    Game prices didn’t really go up, they went down, once you factor in inflation.

    Here in Germany prices for old games go down. You can get new games for 10€ or less, depending on how old they are (~5 years). Also there are multiple ‘budget’ re-releases (similar to Sony’s Platinum Games)

    1. LunaticFringe says:

      Depends on the country though and the period you’re looking at. Here in Canada import fees twist things around a bit (despite NAFTA) and Canadian inflation from, say, 2000-2010 is less then the game price increase, but that’s probably because we’re so dependent on the American market.

      But that article is looking at the SEGA Genesis/N64 era of console gaming. Looking at more recent markets (2000 onward) shows an increase in the cost of games inconsistent with inflation.

      Of course this is purely based on my experience with PC games in the past ten years so my inflation calculations might be off.

      1. Tse says:

        Yeah, that’s true. Here a new game costs about half the minimal monthly wage. And it usually costs the same for months. It may get to a third (or fourth) of the minimal wage in a year…. If we were lumped with the Russian market, games would be affordable for more people, but we’re lumped with the European market.

    2. Shamus says:

      Inflation-adjusted, prices didn’t go up or down, at least in the US. In 1990, games were $40, and today they’re $60, which is right with inflation.

      However, the point of my article is that prices aren’t falling post-launch the way they should. They’ve gone “up” in the sense that in 2000, games would wind up in the $20 or $15 bargain bin, and now they sit at $60 or $50, then vanish.

      1. MechaCrash says:

        I was at Target the other day and saw Metroid: Other M. This game came out a year and a half ago, and was so poorly received that I’ve heard murmurings that it may have permanently damaged the Metroid IP in general and Samus Aran in particular.

        They wanted fifty dollars for it, just like they did when it first came out. I wouldn’t be surprised if the specific copy I saw was exactly the same one I saw the last two times I was there.

        1. Jeffrey says:

          Online retailers are more responsive sometimes, I think. I’ve seen Other M on Amazon as low as $10.

        2. Kronopath says:

          There is no salvation for Metroid: Other M.

          There was a chain of music stores around my city that used to sell games until recently. When they decided not to sell games anymore, they had a massive clearance sale, with games and accessories up to 75% off. I got wind of the sale about a week after it had started, and went there looking for Wii games. Unfortunately there were no good Wii games left.

          What was left, however, was shelves and shelves full of Metroid: Other M. At 75% off. Sitting among the piles of shitty minigame-based shovelware. And nobody wanted it.

    3. Cineris says:

      However, median salaries in the US have not gone up for the past 20 years or more.

      At least in America, the government-sponsored indicators of inflation exclude essential goods such as food and gasoline. So essentially, government sponsored measures of inflation are substantially understating the real inflation that Americans have experienced.

      In other words, inflation may have been going up, but salaries definitely haven’t been going up, and Americans are finding more and more of their incomes eaten up by essential needs. In that respect, game prices have gone up.

  23. wumpus says:

    When I read the headline (“Silicon Knights Boss Says Used Games Drive Up Prices”), I immediately thought, “Uhhh… Greater supply should drive down prices.” But then I though that maybe he was going to make a subtle point about used games sustaining a segment of the market that can’t afford new games and thus increasing demand. But no, he’s just an idiot.

  24. rrgg says:

    Some people might disagree with me, But I’m kind of hopeful that this leads to a greater discrepency between “toy” games and “story” games. There wouldn’t really be much of a used market for the likes of minecraft, 3E games, multiplayers, simulators etc. (I assume) so maybe we’ll see more games that focus on these core elements while games that focus on telling a story are forced to tighten up and trim the fat (non teenagers have been complaining about unreasonable play times anyways haven’t they?).

    1. Sumanai says:

      Considering that when the piracy scare was at its highest Stardock came out saying that one of the reasons they made strategy games was that they had smaller piracy rates. They also suggested that other companies seek out similar genres and, if I remember correctly, gave a list.

      They also said shooters, especially first person shooters, have the highest piracy rates.

      So, yeah.

  25. Wraith says:

    DRM: It’s not just for piracy, it’s to kill the used gaming market. I bet the greatest wish of Activision and EA right now is to develop a viable DRM system for consoles.

    The video game industry is becoming more and more “cinematic” every year, and almost none of it is in a good way. Films make the money to pay back their budget within the first few weeks on the box office; that’s exactly what this “burst sales” strategy is. The larger gaming corporations are starting to attract executive staff members from film and television (ie Bobby Kotick, former 4Kids marketing guru), and they seem to (or in Kotick’s case, definitely) assume that consumers of video games have the minds of those neanderthals who feast on the bile that is the monthly rom-com/action schlock or trash reality show line-up. Hence why I haven’t been to the ten-dollar theatre in years and watch a couple-three shows on AMC/HBO/Starz; where a few years back I might buy a game a month, nowadays with prices so high and the markets so clogged with the same cover-based/regenerating health GoW/CoD clone it’s rare if I buy a game outside of Steam sales throughout a year.

    Because, as well all know, the money is in shoveling sequel after sequel out the door on an expensive advertising budget, milking the cash cow until it runs dry, not taking risks on such things as “gameplay innovation” or “deep storytelling.” If a game hasn’t had millions spent on its advertising budget, it’s going to fail. If a game doesn’t charge its players ten bucks for a single map pack DLC, it’s futile to pay the upkeep costs. And god forbid, it’s a death sentence to sell a game FOR FREE.

    Oh, wait.

    1. Ringwraith says:

      Although, in movies’ defence, that’s because they only get a few weeks of screening of time before becoming almost completely unavailable until they get some sort of physical (or now digital) release. In fact, they’re almost a service more than an actual product in that sense (until the aforementioned DVD releases).
      Games don’t have that same sort of system they have to go through, a game can still be sold weeks after its released by simply being on a shelf. Much like DVDs.

      1. Wraith says:

        Well, yeah, the film market is the way it is (even though it’s still inefficient, considering how a box office hit usually has to be a big-budget franchise of some kind these days) because films are a “static” product compared to the “constant” product that games are. You can see a film once and it will never change, but video have the potential to become entirely new experiences every time if made properly. That’s why it’s so foolish to copy a business model that is intended for a very different product.

        Valve created the brilliant business model of the future with Steam – cheap games, frequent sales, uncomplicated/very limited DRM, easy installation, and possibly the most important things: free DLC and an entirely optional system of micro-transactions. TF2 is now free-to-play precisely because Valve has made boatloads of cash off its item store.

        Despite the business model for films having been so suitable for decades, if budgets and ticket prices keep inflating at the rate they are then a bubble is going to burst for Hollywood in a similar way it did for the auto industry and financial system: they are gambling too much on films that are becoming too similar over time. Where in the game industry everything wants to be the next Modern Warfare or World of Warcraft, everything in the film industry wants to be the next Avatar, Titanic, or Dark Knight.

        1. Sumanai says:

          There are movies that have changed over time. I’d name one good example, but its name would cause physical pain to some people.

          1. Cody211282 says:

            Blade Runner?

            1. krellen says:

              He probably meant Star Wars.

              1. Sumanai says:

                Changed due to fan outcry, I think three versions have been made. You can’t get it on DVD in the original version and it’s quite different from the original. Though not enough to make it good.

                1. Wraith says:

                  Lol, it makes me so glad that my family has a taped version of the ORIGINAL original trilogy, and not the crap Lucasfilm shovels out every five years to make more money.

                  1. Sumanai says:

                    VHS isn’t that durable, so if you intend to actually watch it often, you should make copies and use those.

            2. Sumanai says:

              Well, it compared itself to Blade Runner in a box blurb.

              1. Stranger says:

                . . . is this one the Spoony One reviewed?

                1. Sumanai says:

                  Yes. So you understand why I don’t want to mention it by name.

  26. Even says:

    I agree with most of your points, but I just don’t know if it’s that simple to regulate the prices at retail when compared to Steam where there’s no physical product involved. They’d at least have to reconsider how they handle distribution, because ultimately it’s the retailer who puts the price tag on the game. Brick’n’Mortar stores with limited stock and storage would need to change how they handle the business and their limited shelf-space. There’s also the world of online stores. I mostly buy my games from e-stores as hard copies and they’ve got the advantage of limitless shelf space. My go-to store’s been going with the trend of keeping most of the stock up (you can still find games from early 2000 on sale for like 5-10€), sometimes only until they run out and thus they just play around with the prices whatever way they want. I’ve seen a lot of occasional deals for games that go for considerably less compared to the current average, and most of the new titles drop their price after six to twelve months, though it’s not always guaranteed.

    My point is, given that they’re free from the limitations of B&M retailers, they seem to run a pretty much a private show in regards to the pricing.

    1. Mephane says:

      As has been mentioned in this thread – the retailes have almost no say on the final price. They’re getting the boxes for only a few bucks less than what you will see on the shelf, with only a tiny profit margin.

      It *is* the publishers who are responsible.

      1. Even says:

        “It *is* the publishers who are responsible.”

        About what exactly? For the rest of your post, you’re kind of pointing out the obvious.

        I simply pointed out that it might not be so easy for publishers to do the price regulation, even if they wanted to. They’d need to set up a system to control the amount of supply and/or negotiate with retailer stores about getting shelf-space for their older games at regular intervals, if they’d insist on first selling at 60$ and then going gradually down. The stores still reserve to right to send back unsold copies to recoup their losses. If they don’t, they just get thrown into the bargain bin just so they can get rid of them (which both translate into that they’re not really interested in ordering more copies to sell).

        And that’s just for the brick’n’mortar retailers. There’s no reason to assume an online retailer’s business model would work even close to that. With no need for physical shelf-space, most of the time the only limit for availability is storage space and customer demand. Ideally it would probably be easier for publishers to even make any deals, but given my example, I’m not entirely convinced it’s all going to be on the publishers. If you want to question their business model, be my guest, but go argue about it with someone else. I’m just a customer.

  27. DCSnotty says:

    I think there’s an element of truth in what he says about used games keeping the prices high. Let’s game it out.

    We can all agree that the bulk of a game’s sales is going to happen in the first month or so. So let’s say Publisher A sells 50k copies of a new console game through all retailers, which sell the game at a price of $60 each. All are sold. For the short-term, the game will continue to be supplied (at some publisher price) and sold through retailers for $60.

    During this time, a percentage will be sold back to Gamestop (let’s say for $40) and then relabeled as used at $55. So now we have a NEW product for $60 and a used product for $55 on the shelf. In this model, as long as there’s inventory on the shelf, Gamestop will never lower the price below $40, even if the publisher is willing to drop

    In other words, the long-tail is impacted since the supply on the shelves is always partially renewed AND that at some point the sales back to Gamestop will outweigh the sales of the actual game. Gamestop now will hold all the pricing power, and the publishers are wishing that they could see a long-tail. As Gamestop has some units on the shelf at their cost of $40, they aren’t likely to drop the price AND are not likely to buy anymore from the publisher.

    So the results:
    a) Publisher needs the burst. Long-tail mostly goes to Gamestop.
    b) Gamestop controls the pricing of the long-tail, and is unwilling to drop prices on their existing inventory.
    c) Even if the publisher wants to drop prices of their new units, Gamestop will not buy any more until their current inventory of new and used units are off the shelf (which were purchased at a high price)

    This model really only applies for retail today, and doesn’t of course account for big box stores (like Best Buy) or other outlets that don’t buy used games. I don’t have specific knowledge on how the big box stores price, but it could be that they look to other outlets and come to consensus pricing (i.e. why should Gamestop have higher price?). If the publisher lowers their price and its not passed on to the customer then the retailer pockets the higher margin.

    The conclusion is that after the burst, the retailers that sell used games now have tremendous power and realize the bulk of the long-tail value. All the efforts to have exclusive 1st-time buyer codes, etc… are a way to shift the value and power back to the developers and publishers.

    With online sales, I believe it effectively operates on a consignment inventory basis (as opposed to the more standard owned inventory basis). In other words, Steam only pays the publisher once it sells a unit of a game (after it takes its cut). So Steam has no incentive to keep price high; rather they have no base cost for inventory and prefers to pass on the savings when publishers lower prices. I believe the success of the long-tail in these markets (v. B&M retail) is partially predicated on this structure.

    1. Jon Ericson says:

      The used market doesn’t quite work the way you suggest. GameStop drops their prices on used games all the time. For one thing, they often do “buy 2 get 1” sales, but only on used items. From what I can tell, they do this in advance of major new releases to free up shelf space.

      For another, they do drop prices on unpopular used games. Good and/or popular games hold their value on the used market just like anything else, so if you are looking to buy a highly rated game on the cheap, you might not find the deal you are hoping for.

      One of the previous commentators above said that GameStop goes so far as “converting” new games to old games at a loss in order to get non-selling games of the shelves.

      I have a hard time generating any outrage over used games when publishers are so eager to get in bed with GameStop in the form of pre-order bonuses and advertising agreements. If used games were really a problem, publishers wouldn’t do deals with retailers who sell them.

    2. Abnaxis says:

      Ehhhh…from what I know about Wal-Mart, if a publisher sells them a game for $39 they’ll turn around and sell it to consumers for $40, regardless of whatever nonsense Gamestop tries to cook up. That’s how the Wal-Mart business model works–use their size to undercut competition with lower prices, and Wal-Mart’s big enough Gamstop would lose a massive number sales, both used and new, if they tried to charge extra.

  28. X2Eliah says:

    What’s the point of long-tail sales if most of the dev team is fired two-three weeks / months after the game is released anyway? I am not sure I love publishers that much, to suggest they should reap the lion’s share on long-term sales…

    Then again, comparing and contrasting it to GAME, who sold used games at 5 pounds cheaper than new and kept every last bit of the cash for themselves.. and actively forced/encouraged customers to buy used insterad of new… Yeah, publishers got nothing on those monsters.

    1. krellen says:

      I am actually quite incensed that my breaking of my Steam boycott for Obsidian did not, in fact, benefit Obsidian in any way, because they did not receive any share of sales. It’s making me completely reconsider how I buy games – or if I buy them at all.

      1. decius says:

        Consider “pre-ordering” from the developer, Bryan Fargo.

        Not a cent goes into a greedy producer’s pocket. Plus, it starts at $15; $50 for the “collector’s edition” swag.

        1. krellen says:

          I’m already bouncing between the $250 and $500 levels there. But I’m not sure Fargo’s delivering what I’m buying yet.

        2. Infinitron says:

          You’re not paying attention. Krellen’s already a notorious figure on the Wasteland 2 official forums. ;)

          1. krellen says:

            Grognards gonna grog.

        3. krellen says:

          At 2.1 million, Obsidian will come on board to help with story aspects. This thing just got awesome.

          1. Irridium says:

            What? Are you serious? You can’t be serious.


            This makes me very, very happy.

  29. danman says:

    Hey, remember back when they tried to sell us the idea that “Games are a service, not a product?” If that’s true, why are they relying on burst sales?

    The thing that annoys me so much about the industry is the fact that they are not internally consistent. If they were always wrong in the same way all the time, I would at least accept that this is the way things are. The problem is that they keep inventing new ways to be wrong

  30. Raygereio says:

    Between such marvels of genius like actively screwing over your own customers to not comprehending the basics of competition, it just baffles me how these people can be so incredibly bad at business.

    Huh, people aren’t buying my 50,- product. I’d bet they will sell like crazy if I charge 80,- for it instead

    Don’t these executive CEO, whatchamacallits, go to school to learn about how to run a business? What sort of insane troll-logic do they teach there?!

    1. Zukhramm says:


      1. Austin Middleton says:

        Don’t sully my profession’s name with idiotic *Marketing* decisions like this!

        We have enough economists sullying it without any help from the MBA crowd!

        1. krellen says:

          Are there any professions that respect MBAs?
          (Aside from other MBAs.)

          1. Sumanai says:

            Well, some non-MBAs in management like to hire MBAs, so I presume they respect them on some level.

  31. Thomas says:

    The three things here is
    1) I don’t think he was recommending this as a good strategy, he was lamenting it.

    2) Used games cost shops less and always will because people accept stupidly small prices for their hands ins. So in a price war the new games will always lose, but we’d benefit from cheaper used games.

    3) There’s a price limit before shops stop putting games on display. Even when full priced and recently released lots of shops don’t bother displaying anything but the most famous releases, there is a huge lack of PS3 shovelware when I go into my local game for instance. If they were making less margin off them, they’d probably just reserve the shelf-space for advertising CoD. It’s not even in a shops interests to stock old games and make tail sales when they have a strong used game market.

    But that’s all I’ve got to add. I don’t feel strongly about it either way but I thought it’s good to keep shelf space and difference in profit margins in mind

    EDIT: Also I forgot, as the Escapist pointed out games have generally gone down in price rather than risen, so the silicon dude was entirely wrong on premise anyway

  32. Jeff R. says:

    I’m not sure that the “New Games don’t go down in price these days” premise holds water. I mean, Take Deus Ex:HR. While not as cheap as steam, you can get it for consoles for $20 now. Skyrim can be found for $40 already. (Some of this is sales rather than permanent price drops, but if you’re not following those you’re leaving money on the table.)

    As far as I can see, everything other than things with extremely small print runs (Niche import games, mostly) has been long tailing out just fine. (Mind you, I don’t follow the grey WWII online FPS genre, so it might not be happening there.)

    1. Thomas says:

      They definitely go down online. Not hugely low, Valkyria Chronicles sells for £13 down from £50 ish (although actually it’s always tends to actually start at £40/35/30 ish) Heavy Rain is £20 though, Modern Warfare 2 £15-20

      So it’s not fast, but then apart from really bad games, the used games tend to be £10-15

      1. Jeffrey says:

        Some will go down in physical stores also. I got Dragon Age: Origins (‘ultimate edition’ with all DLC) and Dragon Age II for $20 each. They’re some of the best deals I’ve had in gaming in years (even if I feel silly spending more on DA2 DLC than the original game).

  33. Abnaxis says:

    Videogames used to have a long tail, he explained, which meant that a game put on the market could maintain decent sales and generate revenues for several years. But the rise of used games effectively destroyed that aspect of the business, meaning that games must now earn the vast majority of their money within the first three months of release, and publishers who might otherwise thrive on relatively flat but steady “recurring revenue” suffer as a result

    “Rise of used games” what? I bought Atari2600 games used. Since when are secondhand sales a new phenomenon?

    That’s a load of crap. Games never had a “long tail.” They just used to drop in price so people would actually, you know, buy them when they could afford them.

  34. Nordicus says:

    The Silicon Knights boss might want to check at Witcher 1 sales in 2011. Where did those 400’000 sales of a 4-year-old game come from hmmmmm…..

    No long tail my ***

    Edit: I know Witcher 2 boosted the sales but 400k is no small number!

    1. Abnaxis says:

      Actually supporting the game and updating the graphics without charging a premium for it doesn’t hurt either.

      1. Irridium says:

        And putting it up on GoG where it’s easy to find and buy for just $10.

  35. Kdansky says:

    I’d really put an indie game at 29$ “official price” (can’t go much higher without people crying foul because for some reason, Indie games must be cheap), then launch with a 20% discount right off the bat (so people think they make a good deal). Then go back to “normal”, and stay there for just a month, teasing all potential customers. After that, drop the price down to 25$, and again, start off with a sale (temporary 19$), and then increase it again to 25$ for a two months. Repeat until price is stable in 10$ range after about a year, and have a 20% sale every four months for a few days, to catch the penny-pinchers too.

    + You trick people into “OMG ITS A SALE” impulse-buying.
    + Due to that, your game peaks on sales charts, but it’s at a higher price point then.
    + You fully expect to never sell a single copy at full price.

    I bought about 50% of my steam collection during sales, or even more. I feel clever about that, but in reality, I’m the one who spent twice as much on games as he planned to do. So yeah.

  36. Daemian Lucifer says:

    What really pisses me off is the euro-dollar conversion,especially for online games.So if a game costs 60,it will cost 60 dollars,or 60 euros,depending on where you live.Thats just greedy,stupid and lazy.

    1. ehlijen says:

      Try Australia. Despire the Aussie dollar being worth more as of as I’m writing this, games cost 80-100 bucks here. Even in the case of purely digital products bought from purely digital platforms.

    2. X2Eliah says:

      But think of how much it costs to ship all the bits across the ocean on massive supertankers!

    3. Bubble181 says:

      Yet another reason to Stop Worrying and Love the Gog. Equal price-points, around the world [except for certain games and certain regions, where they’ve been forced to use geocaching to add extra taxes and crap. Seriously Australia, what the heck?).

      A $5 game on Steam is €5. A $5 game on GoG is €3.99.

      What *I* really hate about that, is that back when the conversion was closer to equal or the other way around, we didn’t suddenly get cheaper games – we simply got higher prices in euros. When it’s to their advantage, suddenly 6.99 is just as acceptable as 4.99. Ahhh, eeconomics.

    4. Sumanai says:

      On some site there were people explaining that technically it’s not that simple and yadda yadda yadda. Apparently you’re supposed to use some other system to determine whether the price is right.

      But if someone, like me, can order a game from the US and it ends up cheaper with the postage than buying local something somewhere is wrong.

      Of course, because this is true, 3DS apparently has region lock.

      1. Omobono says:

        This is why the first thing to do when buying such a device is to research jailbreaks and similia (and decide wether said device is still worth it in absence of them).

        Interestingly, sony region-locked the vita in a really devious way: physical game cards are not locked, but for digital releases you need (obivously) a memory card. An horribly overpriced 40€ for 16 gigabyte (30€ for 8, ~17 for 4) proprietary format (current amazon europe prices), not a micro-sd. Hint for potential buyers: add the price of a mem-card to the one of the Vita itself; it’s practically mandatory.

        A single card can contain digital content from only one psn account at a time, with the only way to switch a total format of the card iirc; did I mention that the various regions of psn are technically different accounts?
        The region lock ends up being enforced by being an hassle instead of a simple lockout: either you pay sony $ludicrous cash for two memory cards or every time you want to switch to your importe digital game you have to hook your vita to a pc/ps3, backup the content of the card, format it, restore the import from backup; when you’re done, do the same procedure in reverse.

        End result: digital games are still de facto region locked despite formally not being so (or you fork over more cash to Sony for the privilege of an hassle-free switch).

        1. Daemian Lucifer says:

          Wow,thats stupid.The whole idea of region locking is stupid.I get that you want to treat digital stuff the same way you do with physical releases,but you simply cant.Digital data is universal,and trying to make it into something that its not is just adding extra effort.

        2. Sumanai says:

          That is almost impressively stupid. And sounds like a mixture of design stupidity (“Hey, let’s make the cards account based, so no-one can play games from another account. DRM!”) and trying to sell overpriced memory cards.

          What will be impressively stupid is that there are people who will defend this. Assuming someone hasn’t already.

          Considering that the cards themselves are part of the reason why I wasn’t planning on buying the Vita, this both explains why they made them and ensures I will be staying away.

  37. Ravens Cry says:

    I buy all my games used.

    Why? Because I don’t buy modern games. My budget can not afford the constant turn over of systems, so I am always at least a few generations behind.

    The most modern game I own is probably Psychonauts.

    I own games like Wing Commander II and The Secret of Monkey Island, Tomb Raider, Space Quest V, Warcraft II, and Eric the Unready, Red Alert, all in physical format. These games are generally still fun to this day.

    Sure, they have their bugs and certain features have made great improvements.

    But a lot are fun even if you strip out the nostalgia factor.
    Lara Croft may be a polygonal mess with pixelation of almost Minecraft proportions, but the Kinaesthetics of jumping and just catching that ledge, of figuring out the obstacles and the best way to overcome them is deeply rewarding without feeling like you are being forced to a single solution, though you probably are.
    Building up a wave of Red Army tanks to go and crush your enemies base as the Soviets in Red Alert?
    Still fun.
    Sweating bullets while waiting for a torpedo to lock on to a capital ship in Wing Commander II?
    Still fun.
    Figuring out the insane twist of logic of Monkey Island or Space Quest or Eric the Unready, while laughing at the goofy humour?
    Still (mostly) fun.

    Thanks to programs like DOSBox, I got the best of both worlds, games that run fast and well, with none of the insane loading times of today or yore.

    Now, I wasn’t into video games when these games came out.
    Heck, my family only got our first computer in 2000.
    But I played these games because this was what we could afford and I found them fun.

    Don’t blame me if a 20 year old space sim is just as enjoyable as anything put out nowadays.

    1. X2Eliah says:

      Two things.
      1)What if I, for example, have played all the old games and can find freshness (well, whatever there may be) in new ones simly due to them being new?
      2)If you haven’t played any new games at all, how are you qualified to say that a 20 year old space sim is “just as enjoyable”? Sure, say that you enjoy it a lot. Say that it is sufficient. But on what basis do you make a comparison?

      And if I’m coming across as aggressive, then it is because I’ve had to deal with people who were adamant in their beliefs that only old games were good and anything new was crap by default, going so far as to ridicule and dismiss anyone who even dared to admit liking any new game. I didn’t see that in your post, thankfully, but I’m afraid I’ve seen that mentality far too often among the “I play 20-year old games only, look at me!” crowd.

      1. Darkness says:

        Because he can look at the demos, the previews and the video reviews. Then he can read the user comments, the wiki and wait for Shamus and Yahtze to review as well. Then he can truthfully say, “I like it better where I am”.

        1. Ravens Cry says:

          Precisely. I also have friends who do have more modern systems and consoles, and so I have played more modern games to a very small extent.
          While modern games have merit and can certainly do things the older games couldn’t, and not just graphically, if a game from 20 years ago still gives me entertainment, than why not play it?
          And played all the old games? Well, if you’ve honestly done that, I guess you’d have a point, but I still have a lot left to discover.
          I still don’t own Monkey Island 2: LeChucks Revenge or the Fate of Atlantis and those are supposed to be classics.
          What undiscovered gems await to be found in some dusty corner of a thrift store or in a ziplock bag at a flea market.
          Time will tell.

      2. TMTVL says:

        I think the reason some people like 20 year old games (like Realms of Arkania, which is awesome fun) is because in those days 12 people could make a game over the course of a year or two at quite low cost and it could be pretty much anything because the publishers didn’t lose that much per copy. Because of the (comparatively) low cost the developers had more freedom, and this allowed for games like Kirby to be made. ‘Course, if you’re a fan of one or more of the types of game that dominate the current market, you’re far more likely to think that recent games are great then if you like, say… Wizardry type games (what’s it with me and Sirtech? I thought I was a Troika fanboy).

        And before anyone brings it up, though the indie scene does make some great games, there’s just not enough resources for them to make really extensive games.

  38. swenson says:

    This is very true, and it’s why I tend to play one game for a long period of time rather than play many games each for a short period of time–I just don’t have the disposable cash to buy a new $60 game every month. That’s $720 a year that I could be spending on gas or food. So I buy one or two games at full price a year and fill in the rest of the time with free games, games I already own, or stuff I get off Steam when it’s five bucks.

  39. decius says:

    So… when I traded my Atari carts on the secondary market, I killed the Atari?

    When I sold and bought used NES carts, I was taking sales away from Nintendo?

    If I get so desperate as to sell my dice, would I be taking a sale away from Chessex?

    1. Bubble181 says:

      Do’nt even think about ever selling your car second-hand, or you’re stealing from GM.
      Oh, selling your house is now wrong, too. You should tear it down and sell the plot. No, wait, that’s not good either….Hmm….

  40. Jokerman says:

    How come you didnt use this for the escapist i read through he whole thing expect a link back to there site :D

  41. Austin Middleton says:

    I don’t disagree with your (Shamus’) argument in any particular, and your example of Steam cleaning house is proof enough. But I did want to address this:

    “Supply and demand: If you lower the price, more people will want it. If you raise the price, less people will want it.”

    A firm’s purpose is not to maximize demand, but profit. So while lowering their price may increase total sales, it’s possible that raising the price may increase total profit. The relevant term is Price Elasticity of Demand. If a good is elastic, buyers will buy a lot more if there is a small reduction in price (and buy a lot less with a small increase); a good is inelastic if buyers hardly change the amount they buy with a large swing in price. Unitary elasticity means a 1:1 % change in price to quantity purchased. Necessities tend to be inelastic, while luxuries tend to be elastic.

    It’s worth noting that it is possible for a demand curve to be elastic in one section, inelastic in another, and of unitary elasticity elsewhere.

    These publishers may have models suggesting that $60 for a game dwells on the point of unitary elasticity. Any lowering of price would move towards the inelastic part of the demand curve where lowering the price would reduce profit. I confess that this seems unlikely to me, but I haven’t seen their numbers. They may be making stupid decisions, but it doesn’t mean they’re unfounded decisions.

    At any rate, it’s more complicated than lowering price to increase demand.

    1. X2Eliah says:

      And yet the steam sales would seem to suggest that lowering prices does, in fact, lead to massive boost in net income on account of humongously increased buyer quantity.

      1. Austin Middleton says:

        I agree, it does.


        Steam sales increase profit because of the relative elasticity of the demand curve, not because “Demand has increased”.

        1. X2Eliah says:

          True, perhaps. However, it would seem to indicate that there is such a thing as that elasticity, and how come only steam is the one taking frequent use of it? The elastic properties are not limited to one distribution channel, I suspect.

          1. Austin Middleton says:

            They’re not hiring the right kind of economists. ;)

            And elasticity is inherent to demand curves: [%change quantity demanded]/[%change price]. There is no demand curve without an elasticity. Measuring it is the tricky part.

            Truthfully, I don’t know why companies haven’t responded to the apparent profit margins. Corporate culture can be intractable sometimes, and the real decision makers may see a change of convention as a real threat. Enterprising MBA’s a little further down the ladder may be yelling and screaming about profit opportunities and elasticities while the VPs tut-tut them, and propose simply laying off developers who don’t produce profitable games. Who’s to say?

            Happily, companies like Valve are sawing away at corporate profits from $60 games. Given time, you’d expect the Valve model to be copied (actually, properly copied, not the Frankensteinian constructs we have in the present attempts), and replicated to become the new base model.

            “The elastic properties are not limited to one distribution channel, I suspect.”

            Except that the demand curves for downloadable games and physical media games are different. Related, but different. As substitutes, changes in the price of one will have effects in the demand for another. Their elasticities of demand will also likely vary given a particular price point.

            But if Steam is able to extract so much surplus from the market I suspect physical media would be able to do something similar.

            1. Darkness says:

              Check out the price curves for games on Amazon. They have figured it out.

        2. Abnaxis says:

          The elasticity curve is just an abstraction for the relationship between price and the number of people and purchase a product–it’s math’s way of sticking an equation to “as you decrease the price, you get more demand.” Even if Shamus didn’t go into mind numbing detail about finding the unity point on the elasticity curve (though he does say the curve wiggles some, and takes exploration to find the right compromise of price vs. demand, directly addressing your point above), I think “demand has increased” suffices fine for his argument.

          You don’t have to use economist jargon to be right. All the ideas you talk about are right there in the article, they’re just written in plain English and not drawn out for 1,000 more words than they need to be for the purpose of discussion.

          1. Austin Middleton says:

            “it's math's way of sticking an equation to “as you decrease the price, you get more demand.””

            Almost: it’s math’s way of sticking an equation to “as you decrease the price you get *proportionately* more demand.” A one-word change, not 1000, and the implications are important.

            As much as he might be right if you interpret his words a certain way, which is the first thing I say in my post, the literal meaning of his words is wrong.

            To think that simply lowering prices increases profit is utter ignorance. Ignorance of elasticity, specifically.

            Do I think that *in this case* lowering prices will increase profit? Steam’s example suggests it will. But not because “demand has increased”; rather that demand has increased proportionately more than price has fallen.

            It is a vital difference for the purpose of conversation because we are talking about the profit-maximizing decisions of firms. Ignorance of the jargon is certainly excusable – I know more than I care to – but rejecting the jargon because, “Eh, we knew that all along, didn’t we fellas?” risks rejecting the concept the jargon represents. And if you reject the concept that lowering prices might not increase profit, even unintentionally, then folks involved in pricing decisions would rightly stop paying attention to your policy prescriptions.

            No, you don’t have to use economic jargon to be right. But if you use plain English you had better well be precise. Considering that none of the comments upthread talk about the change of demand proportional to the change in price, it seems there was a lack of precision suitable for the discussion – there was no discussion of it in the first place!

        3. SougoXIII says:

          In the case of games, I am pretty sure that that they’re demand elastic in the first place since they’re not necessity but luxury goods. Since time is a factor of elasticity, it’s still pretty baffling that some games are still £30.00-£40.00 years after release.

          I agree with your point that publisher are not going to lower price just to maximise sale, as they have to charge at a certain threshold to break even.

  42. Kalil says:

    “No shit, people will buy games for prices they want to pay!” he says, as he shells out $3 for rain-slick precipice of darkness on Steam.

  43. George says:

    Dear Shamus, you forgot to cater to the $90 price range Australins start at (about $95-100 USD).

    Steam and brick and morter stores start at this price, whereas g2play, playasia etc start at about $40-60 depending on the game (Blizzard games are only at $80, most AAA titles like Darkness 2 are $90 on Steam), like DEHR which was $45 for pre-order, that’s insanely low.

    All I know is there are some terribly greedy American customers as well as there are Australians (it’s just we show it more because companies feel they have a right to rip us off in a global conspiracy), paying .05c for the humble bundle for shame (heck even $2 1 of them got down to, and it still wasn’t bloody low enough for some people when they’re costing devs money at that point).

    Regards, George.

    1. Austin Middleton says:

      Price Elasticity of Demand strikes again!

      It is possible to lower your price so much that demand decreases. If price is a signal of quality, for example, $2 for bundled games may suggest there really isn’t much in there, and it would take more time than it’s worth to find the good stuff. It’s not necessarily greed that drives folks away from super-low priced goods.

  44. Darkness says:

    I not longer buy first day. I mostly only buy at Amazon. They discount all the time. Even pre-order sales is commonly $10 off. I figure out what I am willing to pay for the game (based on reviews and such) then wait. It will get there sooner or later. Amazon sales or Steam, either work for me.

    I am never going to buy at Origin. Everything is still full price. No matter how long it has been around. That might have changed but I have quite looking.

    None of the game people understand the actual concept of the long tail. As mentioned above, start high and start discounting. Eventually everyone that wants the game can afford it. Guess what? Fewer people have to buy it at used prices either cause they know the game will be coming to them anyway.

    They build games that are chest high walls in corridors with cut scenes at each door. Then wonder why we don’t buy into their retirement fund.

  45. Rack says:

    This makes sense on this side of the “pond”, I can pick up Mass Effect 3 for £23 on Amazon at the moment, I think it was around £37 at launch. That’s definitely sales that used games are cannibalising. There’s definitely a muddy area of cause and effect (If it launched at £23 would I be so keen to sell it for £12 before it dropped in price?) but I can see why they are incentivised to make as best advantage of the spike as possible, before the market gets flooded.

    1. Bubble181 says:

      I’ve seen ME3 on sale at €26.99 (delivery included) (standard price €31.49) already – it started out at €49.99. That’s ap retty big price reduction this fast. I’ve actually got a feeling that ME3 is doing far from as good as they expected it to, despite all the hype.
      Either that, or they figure they’ve captured all of the people willing to pay the top price already on the first few days, and are already aiming for the lower price market.

      Either way, I’ll be curious to see the numbers on ME3 sales in Europe.

  46. Abnaxis says:

    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

    I was suddenly struck by a question while reading this: how much do reviews really matter for first day sales? With gaming “journalism” in the state it is in today, people buying a game on release day are buying it based solely on hype and marketing, with virtually zero information on the actual product itself.

    This got me thinking, that publishers are creating a “short tail” on purpose, because it releases them from the need to create product with any quality. They’re basing their business model on how much publicity and hype they can drum up for people who aren’t patient enough to wait and see whether the game is actually good or not before buying it.

    Thinking of it this way, of course they don’t like used games. It is absolutely the only recourse for one of the first day buyers who got suckered into buying an inferior piece of software thanks to a clever marketing ploy that in no way represented that actual, final product. Their entire business model is based on their unaccountability–they want to push garbage out the door, secured by the fact that all sales are final and no journalist can write any preview about AAA games without licking publishers’ boots first.

    This isn’t about supply and demand, it’s about market control and accountability. Used games are the only thing that hurts the companies’ bottom lines when they spend $50 million on a steaming pile of crap.

    1. Sumanai says:

      I noticed something from your comment:

      Who makes decisions or suggestions on how to sell products better? Marketing. What happens when the products are sold almost solely with hype? Marketing becomes invaluable. Which means that marketers’ jobs are basically ensured. Programmers, writers and designers? Not so much.

      Valve, and some others, have complained that advertisement companies rarely listen to input from the companies that are hiring them. They usually just listen to the thematic stuff like “zombies”, “military/war” and so on.

      And why wouldn’t they? If they make a great advertisement that doesn’t depict the product well, the product might not sell but they’ve already been paid and they’ll be known for making a great ad. Which will draw in other companies who just remember the advertisement, but not that it misrepresented the product.

      When companies are complaining about the actions of their clients, it’s almost always about market control and/or accountability in some shape or form.

      1. Shamus says:

        “When companies are complaining about the actions of their clients, it's almost always about market control and/or accountability in some shape or form.”

        That’s really interesting.

        1. Sumanai says:

          When I read your comment yesterday my first thought was “is he being sarcastic?” which quickly devolved into “he is being sarcastic”. Not really helped that I had started second-guessing my own comment an hour before. So I might have some mental problems.

          Anyway, after some thinking I’ve come to the conclusion that I should’ve said “most of the time” since “almost always” needs some backing. Either with statistics or just going through news archives with a cynical eye. Although, truth be told, I can’t come up with a single news story where a company attacked their clients that couldn’t easily be interpreted as an attempt to shift blame or to try and control the market through manipulation.

          I also remembered the old reveal by Microsoft that the wireless connection (IIRC) for controllers on the 360 was proprietary and that third parties would have to license it. The reason given was that MS had gotten complaints about third party peripherals for the original X-box from clients who thought all of the controllers were MS made, so the license was supposed to contain quality control.

          This was a pretty good, though sleazy, move by Microsoft. In one deft move the consumers got the blame (accountability) and they could block third party controllers (market control).

      2. Rack says:

        It might not seem like it, but marketing get judged on results. If they make a classy obvious ad that doesn’t sell the game then that’s no good for them. The only thing they can do is missell a product to the wrong audience and bring down the long-term value of the company’s brand.

        1. Sumanai says:

          If the marketing company considers you, their current client, as less important than drawing in new clients with a fancy ad, they could very well go for it. It just depends how scrupulous they are. Note that it’s not their brand, it’s the client’s. Which they’re willing to sacrifice so they can use the money they were given to market themselves, instead of the product.

          Actually, I think I need to emphasise that I’m no talking internal marketing teams creating ads, but external. If they get new clients, there’s no need for them to care about the old ones. I understand internal marketing teams ignore the creators as well, but I can attribute that to “they won’t be blamed if it fails anyway” or “they’re overconfident”.

  47. Zaghadka says:

    Hey, I’m old enough that I remember when you used to be able to return games, no questions asked, if they sucked. Economics does not apply to the game industry, because it is not playing by the same set of rules the rest of retail does. They are convinced, and have data to back it up, that games that sell more cheaply are viewed by gamers as inferior to games that are full price. This, of course, is self-sustaining, as you observed that “the only games below $20 were absolute no-name shovelware trash.”

    Essentially, it’s not the economics theory, it’s the distorted way the entire retail environment has grown due to lack of basic consumer rights like return.

    Valve has it right, but Valve is not stocking published product, only copying it to other people’s hard disks. The low prices of their sales compensate for the lack of return and the limited nature of account-tied games. The retail store-based market can’t function properly until consumers have all rights returned to them. You’ll notice the same thing happened to record stores, too.

    1. Shamus says:

      For the record, I called that stuff “shovelware trash” because it was OBVIOUSLY terrible. You CAN look at the back of a box and look for warning signs: Horrible screenshots*, buzz word soup, obvious attempts to mimic a more successful game, etc. It would be pretty insane to go to the bargain bin looking for cheap games, and then refuse to buy them because they’re cheap and therefore must suck?

      The point is, in the late 90’s, early 0’s, I used to find AAA stuff in the bargain bin. This no longer holds true.

      * Horrible screenshots: Primitive graphics aren’t a problem. (Sometimes they’re even a plus.) But bad ART is a big red flashing warning light. If the stuff that made it onto the box is artless hackery, then the res of the game could be even worse.

  48. MaxDZ8 says:

    100% agreed. Thanks to Steam offers, I think I have not bought anything over 20 EUR in the last few years.
    And this is awesome since it means I can just buy low-end machines as well. It’s a win-win scenario.
    Written using a 60 EUR CPU.

  49. Daemian Lucifer says:

    You know,after a bit of thought,that comment about games needing to sell well at the very start sounds to me like it was said by some wannabe businessman who knows nothing about business,but still thinks his idea will get him rich overnight.How did we get to the point were such an obvious failure can actually get to such a high position?Thats something youd expect to see in a comedy show about business,like only fools and horses,not in the real world.

    1. Sumanai says:

      There’s a lot of reasons to be promoted and business sense is only one of them. Maybe he’s a good project manager? Marketing is supposed to handle PR and business decisions, or at least suggest a direction, so maybe no-one thought it was important to train him in the field.

      A bad idea, as it’s really important to have a basic grasp of marketing in order to be able to properly talk with marketing, but that doesn’t mean it can’t happen. At least that’s the impression I got back when I was in a university for a type of BBA.

      The big question is, how long will it take until gaming companies realise that opening your mouth on these sort of subjects can come with a price?

  50. Alex says:

    Is it unfair to blame the higher pricing model somewhat on the consoles? It seems to me that, before the Xbox 360 generation, there were no such things as $60 games, unless you counted special editions. All games were $50 and less. With the advent of the newer consoles, the increase in the adoption of the medium led to a shake-up. After the dust settled a bit, publishers realized that people were willing to spend that much money on new games, and even more on heavily-adopted franchises. This raised the price because people who had previously not been that interested in gaming were flooding the market with cash and at prices that games had historically never seen. They didn’t know what their dollar was worth.

    However, this happened at the exact same time when costs were being reduced from the publisher, because digital distribution was coming into vogue. Although, I guess publishers were feeling the effects of losing overpriced sales to Steam and blaming it on piracy during this time, so maybe they missed the boat, entirely.

    I don’t know. I seem to blame consoles for a lot of the deterioration of the business aspects of gaming. Perhaps it’s just the growing pains of gaming becoming a widely-accepted entertainment medium. We are in the crucible.

  51. Kayle says:

    The headline is actually correct, though the following reasoning highlighted by the post (haven’t read the original article) is wrong. A secondary (second sale, e.g. used) market supports prices in the primary market, since the original buyer can reduce his/her effective paid price by reselling. This results in higher demand (as people who won’t buy at the original price might buy if their effective price is lowered by a sufficient amount) hence shifts the price-demand curve out, resulting in more sales and a higher market-clearing price.

    The ringer is that the marginal cost of producing more copies of the game is so low, that the price-supply curve is practically flat once you cover the development and publication costs… (at this point, you might want to read Information Rules by Varian and Shapiro, but… the Kindle edition costs $20! I guess the publisher hasn’t read and understood it!) This leads to one of the underlying causes of blockbusteritis and exploding production budgets, a topic which deserves a series of blog posts on its own…

    1. I think the point here is that, insofar as the statement is even true, it actually points to a value-add for consumers. It might hurt producers, but that’s pretty self-serving.

  52. WWWebb says:

    In general, I agree. But I think there are a few other market dynamics going on.

    First, for the market with lots of time but limited money:

    If I bought Mass Effect 3 for $60 and sell it back today for $40, it didn’t really cost me $60 did it? I got a new release for $20 and didn’t have to wait 18 months. All I gave up was the privilege of keeping the box on a shelf as a trophy or playing it later. There are a LOT of games out there that I can play through in a couple weeks. As Kayle just pointed out, this is actually beneficial for new release sales, but it absolutely MURDERS sales after 2-3 weeks.

    No matter how aggressively the publishers cut prices, the used copy will always be $5 less. Aggressively cutting prices $5-$10 a month might push things down fast enough to force GameStop to sell used games at a loss, but driving the retailers out of business isn’t necessarily a smart move for publishers.

    For the market with plenty of money but limited time:

    There are a LOT of games out there. If I don’t buy a game at the apex of its hype (around the release date if publishers are doing their jobs), I’m likely to forget about it. Yahtzee has a WEEKLY show that’s almost always covering a “AAA” release.

    If I don’t buy a game when it’s released, it mentally goes into the “later when it’s cheaper” category. Who knows when or if I’ll have the fortuitous confluence of attention (I see it advertized somewhere), price (probably cause it’s on sale), and free time (not too often)? My “later when it’s cheaper” queue still has a lot of two year old games in it, and an entertainment company really should not be banking on sales of two year old properties.

    And then of course, there’s GameFly. It’s not quite the amusement park model of “if you’re going to go twice, you might as well get the season pass”, but for $16 a month, it’s a bargain for anyone who has time to play more than 4 games a year. I’m sure GameStop executives are busy reading case studies of Blockbuster Video and wondering how they can avoid the same problems.

    1. Sumanai says:

      You’re not getting that much money for a used game. From what I remember the number is around 10 or 15 dollars if it’s a new release. But assuming 10 dollars cash back, the effective price is 10 dollars less. So it’s more likely to be bought.

      The trick is, if it’s good you’re more likely to hold on to it if it didn’t cost that much to begin with. Assuming you’ve got space, of course. Especially since you’ll get less money for it. A game costs 50 dollars new, you get 10 and the used copy is sold next to it for 45? That’s 35 for the store. A game costs 30 dollars new, you get 10 and a used copy is on the shelve for 25? That’s only 15, no way they’re offering that much for it.

  53. Kevin says:

    I see absolutely nothing wrong with “Project $10” personally. Sure, it’s not the same thing as piracy, but the publishers and devs are getting a pretty s*** deal out of used game sales (which is to say they get nothing at all), so through this practice there is a way you can still support the devs. I mean, do you expect to get the factory warranty from buying a used car?

    Where things get outrageous, however, is the whole pre-order DLC bulls*** a la Mass Effect, or the rumoured PS4 that will not be able to play used games (a claim I find to be rather dubious myself, since Gamestop is going to win that business game of chicken with Sony).

    1. MechaCrash says:

      Why should they get a cut of used game sales? No other industry gets a piece of the action from second hand sales of their product.

  54. Aldowyn says:

    “the only games below $20 were absolute no-name shovelware trash”

    Since we’re talking about publishers, we’re talking about new games, right? I think I have a very relative anecdote. A month or so ago, a friend and I were wandering around a Gamestop (Yes, Gamestop), and we found, in the bargain bin, several good games – including Borderlands, which he picked up. (We were at a competition the past few days and got to level 21 in… 7 hours and 55 minutes. Fun night.) I’m not sure if it was used, but 95% of the games in the bin had their own case, including that one, so there’s a good chance they were new.

    You have a point though. It’s even worse with Wii games – they NEVER seem to go below the original $50, because their just isn’t enough good Wii games. I took a picture once of SMG1 and SMG2 next to each other on a shelf at a Wal-mart – for the exact same price.

    1. Sumanai says:

      I suspect that Gamestop is less reliable sign of publisher pricing action, as I’ve heard that they unwrap new boxes and sell them as used just to get rid of them after they’ve been around for too long. Heard it online, so grain of salt.

      Out of curiosity I made a quick search in two Finnish online stores that I’ve used in the past, and surprisingly in one of them Super Mario Galaxy 1 was for 20 euros. Things have changed, since three years ago it was almost impossible to find any game marked down in any Finnish stores.

      Local markets still have high prices for everything. Don’t have a local game store that I know of, so can’t say about those.

  55. Blue_Pie_Ninja says:

    I happen to be someone who won’t always buy the next big game at the initial price. I wait until there are sales and I can pick it up from roughly $40-$20 so I get more value for money. Also I tend to buy older games that were good when they were released anyway so there’s that as well.

Thanks for joining the discussion. Be nice, don't post angry, and enjoy yourself. This is supposed to be fun. Your email address will not be published. Required fields are marked*

You can enclose spoilers in <strike> tags like so:
<strike>Darth Vader is Luke's father!</strike>

You can make things italics like this:
Can you imagine having Darth Vader as your <i>father</i>?

You can make things bold like this:
I'm <b>very</b> glad Darth Vader isn't my father.

You can make links like this:
I'm reading about <a href="">Darth Vader</a> on Wikipedia!

You can quote someone like this:
Darth Vader said <blockquote>Luke, I am your father.</blockquote>

Leave a Reply

Your email address will not be published. Required fields are marked *