So what’s to be done? For starters, game companies need to give an honest assessment and explanation for their pricing. They should explain why Intellivision and NES games cost so much back in the day. Was it because cartridges were expensive? Was it because the installed base was so small back then? Was it just arbitrary?
Here’s one scenario I came up with. I think the price at first was probably arbitrary. For a long time, there was no reason for raising the price, since development costs weren’t close to justifying it — plus there was no alternative for home gamers. As more people beyond hard-core gamers played, they chafed at the price — sensing that Super Tecmo Bowl, while awesome, didn’t need to cost $50 — so they started renting and buying used (the rise of Babbage’s, Funcoland, etc.). That started building up the rental and used game business. Then, by the Playstation 2/Xbox era, the industry was big enough and games complex enough that the $50 price was actually valid and necessary. But by this time, the rental and used game business had grown along with the rest of the industry — again, as more and more people started gaming they chafed at the high price tag, and they’d been conditioned to uniform prices — and really started to affect the game companies. But the game industry couldn’t raise prices, because that’s partly why the rental and used biz got so big in the first place. Meanwhile even if gamers accepted that $50 is a valid price in some cases, cases like incremental sports updates selling for full price kept suspicions up.
By the time Xbox 360 and PS3 come around, and development costs are really shooting up, the game companies are limited in how much they can raise prices. Meanwhile, because the industry grew so haphazardly (or maybe just because it’s so young), nobody really thought about how else to make money off of video games. So while game companies are hurt by consumers’ resistance to price increases and by the rental/used biz, they’ve developed few other revenue streams to offset that.
To sum up: Because Carnival and Popeye cost $50 back in the day, game companies and game consumers both find themselves squeezed in 2006.
Is this scenario anywhere close to reality? I don’t know. But the point is, nobody seems to know — and the game companies haven’t bothered to offer their thoughts, and journalists haven’t really delved into this. So there’s still all this widespread suspicion/unhappiness at game prices, which partly drives used game sales. Because how do we know when EA is shafting us by offering roster/fantasy mode updates for 50 bucks (though in fairness millions of people keep springing for those updates) versus charging what it really cost to make a next-gen game? With such an industry-wide track record, how do we know when a game company is crying wolf on prices?
Beyond the prices issue itself, game companies just need to come up with other ways to make money. Microsoft’s Xbox Live is very important in this regard, as are the massive multiplayer games. There’s been a lot of talk recently about in-game advertising, but game companies should think more about advertising beyond product placement. Why not sell space in instruction manuals? Why not sell space on packaging? Heck, why not sell space in loading or bootup screens? Sure, that would seem really weird in a fantasy game, but why not experiment? Would it really be so bad to see a Coke ad while you’re waiting to start playing a game in Madden?
It’s clear that I don’t have the answers to all this, and I have no idea if I’m even close to the mark. But what’s frustrating to me is I have so little to go on. One reason Chris Anderson’s long tail article was such a revelation is because it was the first major article I saw to really question some of these kinds of assumptions and business practices. What we desperately need is for people to start asking some of the same questions about video games.
— February 20, 2006
Korr Values 