Post by: WindyMan on November 09, 2007, 02:58:46 PM
http://www.nintendoworldreport.com/editorialArt.cfm?artid=14776
When EA CEO John Riccitiello said that the $60 video game won't work in the games industry of the future, it reminded me about something Nintendo President Satoru Iwata said at an investors' briefing last year:
"The real value of the software must be judged with its contents, not with the medium on which the software is stored. Our business has been based upon the fact that we are asking consumers to appreciate the value of the contents, not the material cost of the optical discs, which are much cheaper. ... Once the suggested retail price is announced, we should stick to it. Of course, we should be flexible. If the software was first introduced five or ten years ago, we don't need to stick to the original price. However, if the suggested retail price of any and all software is marked down in six months or nine months, the customers will learn the cycle and wait for the discounting, which will simply aggravate the decreasing sales of new software."
Those words made me think about the current price of console games today, and the threat that downloadable games present to their future viability at retail. Just looking at my own game buying habits, I can see that in the past year, I've spent around $100 on Virtual Console and Xbox Live Arcade titles. Five years ago, $100 was enough for only two good games. Now, I'm enjoying about a dozen games on VC and XBLA games with the same amount of money. As digital distribution of games becomes more and more common in the next few years, the worth of traditional boxed games will become jeopardized unless publishers get with the act and start charging prices that are more in line with the content of the game.
Third party games have traditionally not sold very well on Nintendo platforms when compared to Nintendo's own titles. This is understandable to a point, especially considering that Nintendo makes some of the best games around. Yet, when third parties bring their okay-but-still-not-as-good games to a platform like the Wii, they charge the same $50 that Nintendo does. If you've only got $50 spend on a video game and you want to spend that money wisely, of course you're going to buy the Nintendo game. It just makes sense.
The reason why it does is because Nintendo has equated itself with quality game releases. It's built up a reputation over the last 20-plus years that lets the consumer know that all of its games are worth the money you put in to them. When it releases games from the The Legend of Zelda, Super Mario, or Super Smash Bros. series, there is little doubt in your mind that the $50 you spend on one of them will go a very, very long way. You also know that the price of Nintendo-published games won't drop for a very, very long time, so you might as well buy that $50 game now instead of buying it next year when it's still $50.
This is the sticking point in which Iwata referred to. The quality and content level of games across the third party spectrum varies wildly, yet the prices for third party games hold steady at $50 (or $60). For heaven's sake, why? Even if there are third party games that you'd be interested in, people usually don't buy them until the publishers drop the price to a level that people would be more willing to pay ... if they still have the interest or free time to play it at that point. Why not avoid that problem altogether by making the initial retail price a price that people would be willing to pay for it in the first place?
Capcom may be the first publisher to have figured this out. Resident Evil 4 on the GameCube was well worth the $50, and in my opinion, it would have been well worth it had that been the price it charged for RE4: Wii Edition. But instead, Capcom undercut all games on the Wii at the time by only charging a consumer-friendly $30. Not only did Wii owners looking for new software snatch it up, people who had already played it on another platform bought it as well. As a result of this well-placed price point, Capcom has gone on to ship a million copies of the game on the Wii, generating significant revenue.
It's not just with remakes within already well-established franchises that a low introductory price is the smart choice. Zack & Wiki: Quest for Barbaros' Treasure is something of a risk for Capcom, since it's a new, untested, unfamiliar franchise. Yet, it's making the game instantly attractive because of how the $40 MSRP stands out from the rest of the $50 games on the shelf. I can relate to this because I'm going to be buying it before a lot of other full-priced games that are in my queue, which includes Nintendo's own Battalion Wars 2.
Instead of worrying about recouping the money invested into the game by gouging early adopters, Capcom is trying to establish a new franchise by undercutting the competition, thereby getting its new property into the hands of more people. If this tactic is a successful one, the prospect of a multi-game series will become a reality, and the franchise can turn into a big money-maker in the long run.
This has been proven with some game series. When it first came out, Katamari Damacy cost $20. After it became a surprise hit, Namco set the price of the sequel, We Love Katamari, at $30. People bought it, despite the price increase. Red Octane took a risk with the original Guitar Hero, selling the original game/guitar bundle for as little as $70. After being bought out by Activision, Red Octane is now selling Guitar Hero III bundles for as much as $100, a significant increase made even more significant when you consider how many more games and bundles GHIII will sell over the original Guitar Hero.
By taking a risk and releasing new IPs like these at a low, competitive price, publishers can use a game's initial success to get away with pricing the obligatory sequels at higher prices, prices which people have shown have no trouble paying for established franchises. Publishers can make more money by using fewer development resources in sequels, pushing profit margins higher.
However, given that the games publishing business is very high risk, companies won't be able to make such drastic changes to their financial plans overnight. Introducing lower-priced games into retail is a risk in and of itself, seeing as a poor-selling game at a budget price will bring in far less revenue than a poor-selling game a premium price. The current business model is reliant on the quick cash grab (publishers wouldn't release the majority of its games at premium prices if it weren't), so the fear of losing revenue in the short-term is very high to many companies.
The very thing that threatens the boxed retail game is also the thing that might save it. Downloadable content is becoming a big-time revenue generator for many publishers. As points purchases and microtransactions become more mainstream, publishers may be able to use that extra income to offset possible short-term losses that introducing a retail game at a lower price point may incur. The establishment of new franchises becomes even more important in the age of content purchasing, as having a larger stable of established games will bring in a larger amount of income from downloadable content.
This brings us back to what John Riccitiello mentioned about how publishers currently generate their income. "People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt," he said. Nintendo has thrown the word "disrupt" around a lot lately, hasn't it? Because of how it has disrupted the status quo and changed the rules about what makes a successful game console, Nintendo is enjoying its most lucrative and profitable time since the company was founded two centuries ago. Microsoft and Sony got caught with their pants down (especially Sony, the former industry leader) and now need to consider Nintendo's successes in their next iteration of hardware.
There's nothing that doesn't say a shakeup of epic proportions couldn't happen on the software side of the industry. Although the risks are high, the rewards for breaking out of the mold and charging a lower price for games are much higher. The various mergers and bankruptcies of game companies in the past few years is already a sign that the current way of going about things may not be the best. Maybe it's about time that the software houses of the world got into a little war of their own. The race to outdo each other in quality is ongoing, but companies that deliver the best product at the best possible price will usually see the greatest sales. Competitive pricing has always favored consumers in other consumer industries, and if we're lucky, pretty soon we'll start seeing it in video games, too.
Post by: KDR_11k on November 09, 2007, 06:42:50 PM
A company that doesn't drop the price is a company that sells fewer games to me. I do wait for a budget price, even for most Nintendo games. If it never comes I'll shrug the game off and ignore it. Missed out on quite a few Nintendo games that way, especially DS ones. Sometimes I'll even ignore a game when it does hit a budget price just because the internet hype machine has already turned towards the next game and I stopped caring for the one that got cheaper. All that could have been avoided with a lower initial price.
I do think many companies would be well advised to make more realistic assessments of their game's quality and price appropriately. This includes Nintendo, asking for 40€ for Elektroplankton was doomed from the start and puzzle-like games for the DS (e.g. Sudoku, Polarium or Picross) should be 20€, not 30€. In fact the whole range of prices on the DS could use a drop of 10€, when those things are selling for 20-30$ in the US there's no excuse for the absurd prices we see here.
Also I'd like to see games that get released at budget prices in the US to be released at such in Europe too. I'm looking at you, Katamari Damacy!
Post by: pSYCO-gAMER321 on November 09, 2007, 07:31:10 PM
Post by: Kairon on November 09, 2007, 09:40:12 PM
Actually, I think we're seeing Nintendo start to embrace Iwata's intent on releasing games at sensible prices and sticking to them. Brain Age and Flash Focus are obvious examples that start at $20 on the DS. Although NOA charged an exorbitant $50 for Big Brain Academy, they're only charging $30 for blue ocean game Eternal Ocean.
Third parties may be following Nintendo's lead: Majesco's Cooking Mama on the DS cost $20 right out the gate, and Sega's launching Ghost Squad for the Wii at $30, and Konami launched MLP Power Pros at $40. But there are still significant resistance from some publishers. Ubisoft, for all their eagerness to follow Nintendo, is still charging $50 for their Word Coach non-gamer software, and ironically EA itself continues to insiust on higher prices: $60 for the ill-fgated Boogie when that came out, and $50 for Smarty pants despite the fact that competing quiz games are more heavily entrenched in the market, and are cheaper by at least $10. You can get Buzz for the PS2 for $39.99 with the four big button controllers and that's already an appealing value proposition versus the untested Smarty Pants.
Post by: Infernal Monkey on November 09, 2007, 11:24:17 PM
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Majesco's Cooking Mama on the DS cost $20 right out the gate
Haha, I imported that from 'the Americas' (/reggie) and it cost me just over $30 AUD. When the game actually launched here in Australia months later, it was $70 ($65 US). I really don't understand the game pricing situation here, at all. DVDs and music CDs cost roughly the same as what they would in America (actually DVDs are often slightly cheaper), yet we literally pay more than double for most video games. Some console games cost $115 US for crying out loud.
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The very thing that threatens the boxed retail game is also the thing that might save it. Downloadable content is becoming a big-time revenue generator for many publishers.
Download content is the biggest joke to happen to console gaming yet.
Post by: NWR_insanolord on November 09, 2007, 11:56:08 PM
As I look at my list of games I'd like to buy I see quite a few at lower than normal prices. Some, like the $20 for Namco Museum DS, turn a probable purchase into a definite one. Most of the Wii games, though, drop from $50 to $40, which usually isn't going to do much to sway my purchasing decision. Somebody needs to tell these people that while $40 may be a budget price on the PS3 or the 360, if you want to get people's attention on the Wii you need to go $30 or lower.
Also, I'd like to say that I'm enjoying these editorials we've been seeing lately. It has been mentioned that it is sometimes hard to come up with Community Hot Topic subjects, and I think that since these editorials usually spark good conversations with a lot of people expressing their opinions on the matter, it might be a good idea to, when one of these is written, use it also as the Hot Topic.
Post by: Klapaucius on November 10, 2007, 01:10:30 AM
Post by: Ceric on November 10, 2007, 01:21:01 AM
I own a PS3 and the only games I own for it is PS2 games and downloadable content. Not because there aren't games I want, (Rachet and Clank, Folklore...), all of those I would pick-up at a $40 price point with little hesitation. I may be able to justify picking up 1 of them for $50 but $60 thats 2 really nice meals or 3 work weeks of lunches. It's just to much especially when I have the Wii, PS2, and DS. Not to mention I've already got my money worth because of everything else the system does.
I'll stop before I get into economic things.
Post by: peacefulwar on November 10, 2007, 01:26:59 AM
Post by: Plugabugz on November 10, 2007, 02:03:11 AM
For a supposed budget title, RE4 is £25 which still makes it the american RRP at $50. While i agree one of 2 things will happen.
1 - Publishers will divide their titles into tiers. Top quality ranges, budget titles and non-gamer oriented.
2 - The prices worldwide will drop except in europe/australia to recoup any losses in more "popular regions".
Post by: ShyGuy on November 10, 2007, 04:20:29 AM
Post by: NeoThunder on November 10, 2007, 05:33:56 AM
I could be wrong, however the real issue here is quality.
It's a crime to ask people to spend 50 and especily 60 bucks on a game and people think they are getting a grade "A" game since it's that price. Only to turn around and see the game is utter crap.
Let it be said that it should have been a crime to sell the Far Cry Wii game for 50 bucks
Post by: Djunknown on November 10, 2007, 06:12:27 AM
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Let it be said that it should have been a crime to sell the Far Cry Wii game for 50 bucks
Shhh! Kairon will hear you!
I want to focus on downloadable content for minute. I'm still skittish of online transactions because of ownership issues. Its particularly bad with the 360. If you buy a lot of content and get the red ring of death, sure its under a long, long warranty, but once you get your new or refurbished one, you have to be actively connected to Xbox live, and under you own account from what I've been told.
With the VC, if you read the Terms of Service, you don't really 'own' the titles, you just bought a 'license' to use it, which Nintendo can revoke at will, for any reason. Which is why I'm not going on a buying spree...
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We may change, suspend, or discontinue the Wii Network Service, or any feature or aspect of the Wii Network Service, at any time, with or without notice to you and without liability to Nintendo. This includes, but is not limited to the availability of the Wii Network Service, Content, Products, Points, and the number of Points required to redeem a particular Product.
Has anyone had any issues with their Wii dying, and transferring their VC titles to their new one while under warranty? I'd really like to know...
Having bought the Orange Box, Steam seems to be the way to go. Granted its not 100 percent perfect (I can't play Half Life Episode 2 offline for example for some reason as of this writing), but Valve's approach makes me feel at ease with buying content online.
Post by: KDR_11k on November 10, 2007, 08:27:24 AM
Post by: shammack on November 10, 2007, 10:08:20 AM
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Originally posted by: Djunknown
Has anyone had any issues with their Wii dying, and transferring their VC titles to their new one while under warranty? I'd really like to know...
I sent my Wii in for repairs and they ended up just sending me a new one. It was very easy to replace everything I had downloaded. I just went to the shop channel, opened up the "titles you've downloaded" thing, and went down the list. Nothing cost any Wii points (including the Internet channel, which had been free when I first downloaded it but isn't now). No "issues."
Post by: Kairon on November 10, 2007, 10:09:35 AM
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Originally posted by: DjunknownQuote
Let it be said that it should have been a crime to sell the Far Cry Wii game for 50 bucks
Shhh! Kairon will hear you!
MMMRRRROOOOAAAARRRRR!!!!!
Post by: UncleBob on November 10, 2007, 11:50:18 AM
Post by: Kairon on November 10, 2007, 01:23:18 PM
Post by: Louieturkey on November 10, 2007, 01:56:43 PM
So really, lower prices aren't feasible at this current time.
Post by: Shift Key on November 10, 2007, 02:39:12 PM
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Originally posted by: Louieturkey
my post is a train wreck
Ahahahaha someone's been in cahoots with GP
Post by: Rize on November 10, 2007, 03:25:46 PM
Post by: Kairon on November 10, 2007, 07:59:34 PM
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Originally posted by: Louieturkey
So really, lower prices aren't feasible at this current time.
They're feasible, it's just that the industry is locked in a mindset that makes them undertake certain steps that inflate costs and cause them to think they need higher budgets and higher prices to go along with them. Just look at the PS3 and XBox 360, gaming initiatives so much more expensive than they need to be. And companies like Atari are in danger this fall because their next-gen projects have gotten so expensive, are up against so much competition, and are competing for so little gamer dollar...
Companies should learn to push down production prices by re-scoping their goals and audiences, reducing risk, increasing focus, and enabling them to pursue wider, more price-sensitive audiences.
Post by: KDR_11k on November 10, 2007, 08:18:13 PM
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Originally posted by: Rize
While I generally agree with Nintendo's stance, I'm not paying 50 dollars for ExciteTruck. And by the time Nintendo lowers the price, I'm not even going to be interested in playing it for 20. In fact, I think it's already too late. Of course, ExciteTruck isn't made for me, it's made for the average Joe I suppose. And they're probably still willing to pay 50 bucks for it.
I got ET for 30€ because a store marked it down to get rid of it.
Post by: Kairon on November 10, 2007, 08:32:23 PM
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Originally posted by: KDR_11k
I don't think license fees and production costs are so high that you absolutely have to sell at 50-60$, this is not the cart era anymore. The price is solely determined by what the company thinks the market will bear.
Really? With Ubisoft's CEO saying PS2/X360 games need to sell 1.3 million copies (and at the raised $60 price) in order to make a profit?!?!? With Lost Planet reportedly costing Capcom $20 million to make, then ANOTHER $20 million to market? Seriously, a $40 million budget for a videogame?!?!?
The games industry wouldn't need these higher prices if they were making choices that didn't lead to bloated development budgets, if they didn't concentrate that are conceptualized in order to brag about tech specs, ... and they definitely wouldn't need such high prices if they developed on the Wii. &P
Post by: Infernal Monkey on November 10, 2007, 10:19:52 PM
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Originally posted by: Rize
While I generally agree with Nintendo's stance, I'm not paying 50 dollars for ExciteTruck. And by the time Nintendo lowers the price, I'm not even going to be interested in playing it for 20. In fact, I think it's already too late. Of course, ExciteTruck isn't made for me, it's made for the average Joe I suppose. And they're probably still willing to pay 50 bucks for it.
I paid $90 US for it and the sheer amount of EXCITE was worth every bloated cent.
Post by: KDR_11k on November 11, 2007, 12:48:51 AM
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Originally posted by: KaironQuote
Originally posted by: KDR_11k
I don't think license fees and production costs are so high that you absolutely have to sell at 50-60$, this is not the cart era anymore. The price is solely determined by what the company thinks the market will bear.
Really? With Ubisoft's CEO saying PS2/X360 games need to sell 1.3 million copies (and at the raised $60 price) in order to make a profit?!?!? With Lost Planet reportedly costing Capcom $20 million to make, then ANOTHER $20 million to market? Seriously, a $40 million budget for a videogame?!?!?
The games industry wouldn't need these higher prices if they were making choices that didn't lead to bloated development budgets, if they didn't concentrate that are conceptualized in order to brag about tech specs, ... and they definitely wouldn't need such high prices if they developed on the Wii. &P
Kairon, development costs are paid once and subtracted from the total revenue. They are not per-copy. Whether your game cost 1$ or 100000000$ to make, the optimum price remains unaffected. The optimum price is the price at which (price per unit - cost per unit) * sales is maximal. Higher price does not necessarily mean more profit as sales decrease and at some point the loss from reduced sales is worse than the profit from the higher price. All of that is more or less independent of the cost you paid to develop the blueprint for the units (of course the resulting quality can result in more sales at higher prices but not necessarily). The only cost that affects the optimum price is the per-unit cost since you pay more of that as sales increase.
In other words, the next-gen games are more expensive because companies think the next-gennyness will make people willing to pay that much. If few people paid more than 30$ for a game then all games would cost 30$ and if people were willing to pay 100$ games would cost 100$.
Post by: Kairon on November 11, 2007, 07:02:37 AM
