The Great Price Fixing Scam

"Is it just a hardcore few of us who are tired of seemingly being scammed?"

You are not alone.

www.cheapassgamer.com

The "Greatest Hits" titles are so priced, because they already sold over 1 million units; making sufficient profit.

Provided the console has a significant insertion rate in the market, game companies can make MUCH more money by selling the games for less. Example?- E.T. on VHS. Before E.T., VHS movies costed $80-$150!! E.T. came out for a mind staggering $19.99 and everybody and their grandmother bought one. Result- uber profits were made and the movie industry has never looked back.

Come out with a must-have game for $20 and it will revolutionize game prices, profits, market insertion, and gamer joy. win win win win win.

My average cost is about $14.

I buy used, I look for sales, I rarely buy new. I can count on one hand the number of new titles I have bought all year.

If the price of new games rise, I doubt it will affect me very much. The only problem is that I don't see a lot of gamers are going to be willing to pay more than $50 for a lot of the titles that are on the market now. Wouldn't a price hike further discourage the purchase of mediocre games? I can see Halo or Warcraft getting away with it, but what about lesser franchises? I like Timesplitters, but a $60 price point would kill it.

Right now, two games will cost you $100 plus tax. When gamers realize that a Ben Franklin won't buy two games anymore, are they really going to go for it?

Ultimately, the market will decide. I'm interested in seeing what it says.

I don't understand where this whole "rise in game prices" thing is coming from. I could be wrong, but my memory is telling me that back in the day, my parents occasionally had to fork over $60 or more for an SNES game. That wasn't all of them, but I'm almost certain that some of them cost that much. I swear I remember picking up one game for $75. Maybe I'm just going crazy. That's highly likely.

I only buy new if it's an undoubtably high tier title that caters to my tastes. Games like The Movies and Spore are on my list of games that I'll buy on opening day. Otherwise I don't have the money to buy games when they're hot. And seeing gems in the discount bin is so much fun.

Take a damn accounting class!! They have to keep it high to cover the immense fixed costs in the gaming industry. If they don't then they're screwed. The $50 price covers all of their fixed and variable costs. So say development and rent etc. cost $35 a unit at 2 million units sold. Say the variable costs (cost of CD's, boxes, packaging, shipping etc) are $10 per unit sold. That adds up to $45 so $50 seems reasonable for the first 2 million units. Once fixed costs are covered (game development, rent, etc.) then all that's left are variable (packaging, CD's etc) costs. At $10 a unit per every unit after 2 million $20 is pretty reasonable too. Hope you can follow!

lets not forget that every company loses money for every console they sell... they make their profits with the software that is sold, not the consoles. so with consoles adding a whole bunch of high end doodads and humdingers they're going to be losing even more and more money. so they need to get that back by covering some of that added cost with higher software titles.

All I have to say is thank god for trade-ins.

Games for the Atari VCS/2600 in 1977 were $20-$30. So if you adjust for inflation, video games are actually CHEAPER now and certainly are superior in most (but not all) categories.

What the post is saying is exclusively about profit for the cost of the media. No games would ever be done if they were 10$, it's the cost of manufacturing and the media.

More than that, they have to pay MS and Sony for using their system.

Most regular titles won't make any profit if they are that low. (They don't sell millions of copies of them) Great title like Halo should be cheaper, I agree.

Remember that if you pay for it, you are saying you agree to the price, the content, etc. so why stop doing it if 3 000 000 stupid parents buy a Mario title at 60$ for their kids!

For my part, the only games I buy are games I'd like to play online on Xbox Live! and games made locally (in Montreal), like Prince of Persia, Far Cry (Xbox release) and Splinter Cell. I won't pay for shitty MMORPG like FFXI which make us dumber.

It's all supply and demand. As long as there are those of us who consider $50 for hours of entertainment a fair amount and are willing to pay it, they will continue to charge that amount. Cutting edge will always cost you more in every segment of continuous improvement. Just look at plasma screens. . . Really, $50 isn't all that much money any more, considering the average age of gamers.

No...you're not going insane. I remember seeing N64 games at Target, for $73.99 during the holiday season.

The thing is, nobody else was charging $74 for a game, and nobody paid for Nintendo's inflated prices. The game industry is constantly playing a game of "how far can I go?" with the consumers. So now they're sending out these little feelers and rumors about $60, hoping we won't care so much when they are *gasp* $60.

The murmurs I'm getting back from the game industry are that the profits just aren't there at the $50 price point that they're looking for.

Yeah, the reason for this is that your games SUCK. With all the rental options, ebay, used games and such, there is absolutely NO reason to pay $50 for the latest buggy EA offering, the big new movie game, whatever disgrace Sega has just put out, or Star Wars: Invasion of Your Mom. Make something that doesn't suck, and you'll see that *GASP* people start buying your games. Consumers are getting smarter. They can tell when a game's been cranked out, and all the advertising $$$ you throw at IGN to hype your game up aren't doing the trick anymore.

Improve or die. Simple as that. Price hikes are only a faster route straight to bankruptcy.

Jack:

You are a retard.

CD/DVD Cost: Fraction of a cent.
DVD Game Case: 5-10 cents.
Packaging: (manual printing, layout/artwork, shrink wrap.): $1.
Shipping: $1.

That's $2.10. Not $10.

Apparently one of the things they didn't teach you in your accounting class was how to look up prices for services on the internet. Or maybe you weren't paying attention.

Grade for your post: F.

Anyway, you seems to care much about the price of the games but remember how you pay for the next gen system...

I got a friend who bought a PS2 at launch...

PS2 : 470 CAN$ + tx = 541 CAN$
Gamepads : 2@50$ + tx = 114 CAN $
Multitap : 50 CAN$
Memory Card : 40 CAN$
HDD Add-on (few years later for FFXI) 140$

With 1 or 2 launch games, it was about 1000 CAN$ for a system... I wait 2 years, got my Xbox for ½half the price, softmod it and who's the winner? ;-)

It's been said before, but it bears repeating:
the cost of the media is NOT the cost of the game. In fact, the cost of the media is smallest part of the cost.

The reason that the price drop occurs is that they've already sold it to the vast majority of their anticipated customers and made their money back (and hopefully a profit). However, four months out from launch, they're trying to get folks who have a lower tipping point: hence the reduced price.

This doesn't mean that, after having paid the millions necessary to create the game, develop the marketing campaign, design and ship the packaging that producing costs were always the same: they weren't. The first unit, technically, costs millions. The second and all subsequent units have the same fixed costs. But since you can charge the first customer millions, you charge a price the market will bear.

This guy make a strawman by talking about CDs for five paragraphs or so, then games for two paragraphs and then starts talking as if he actually made a case or proved something. The only thing he proved was an ignorance of industry financial issues, from what I can tell.

You can buy a used copy of Metal Gear Solid 2 for $5.....that doesn't mean that's how much it cost to make a profit.

Alkraiser...

Of course, your prices are fix, it doesn't depend on the volume. For a good titles, I think it's around what you said, but for little studios, it's much more than that. And I'm sure M$ and $ony are charging a great fix price...

Anybody has an idea how much, 10$ per game?

Alkaiser I totally agree.

Also, as the cost of developing a game rises, I think innovation begins to go away.

It's a lot less likely for an innovative fresh concept to move forward when they can release
"x" licensed game and see a guaranteed return.

This is sad, but I think it's only going to get worse Next-Gen.
Buy a portable now.
Either DS or PSP get one... cause I have a feeling that at the lower development cost, thats where all the fresh concepts are going to be.

Does anyone here actually even spend $50 for a video game?? I havn't paid more than $30 for a game in ages. I buy from Amazon under used. And most of the time the game was played ONCE (sometimes not at all) and it's in perfect condition. Heck, I got Pandora Tomorrow for the Xbox for $9 and Jade Empire WITH strategy guide for $30.

Xlash:

Those were prices for the absolute LOWEST quantity of productions.

As far as Microsoft and Sony charging a crapload of money for their royalties on publishing, they price model they stole from Nintendo, I already went off on that.

http://www.netjak.com/review.php/838

Anyone want some cheese with the whine? Get over it. Everyone acts like $50 is outrageous for a game, and that it's an unheard-of-never-before-seen-price. Lions & Tigers and & Bears- oh my!

The only difference between "nowadays" and "Back in the days" is that 1) games were equal-to and more expensive, and 2) there are a huge number of games which totally, absolutely, unequivically suck arse a la 1983 and shouldn't be priced more than $4.99.

I'm not impressed with someones skin job base on Unreal. I'm not impressed with Yet another Japanese combat/fighting/combat-srategy-non-rpg-wannabe-fighting game. I'm not impressed with games that are really movies in disguise (I'm looking at you, PS2). I'm completely unimpressed with any and all EA games since the early 1990's (hmmm about the time Trip left). I'm not impressed with great games cut in 1/2 because the publisher is trying to be both cute and think it's a smooth business move to hold off on the sequal for a year. But there are always the fanbois who purchase 3 copies of these games and keep up the illusion that THIS must be what the gaming public wants.

Hurt the game companies, cripple them- purchase used or gank 'em of the net.

Gaming nowadays is like date rape. We pay for the date, then we get raped. They should include a little ruffie in each DVD case.

I barely remember paying 54.95 + tax for Pac-Man on the Atari 2600 when it first came out because my parents made me work off the cost. Believe me you remember when new game = manual labor on the farm. However now I tend to buy a game system after the first price drop and pick up "A" list used games for less than half the price of when they first came out.

I agree, each DVD probably costs about 50cents to manufacture. This always gives the Publisher the much larger slice of the pie than the developers will get. I think it is like the Artists and Music Corporations. Soon there will be a way to completely bypass the corporations and we can buy games directly from the developers, a good example of this is Steam.

So yeah, I think games should be cheaper than they are. If all games costed 20$, people would buy more because t's a mental thing, if it costs 20$ somone may buy 6 or 7 games, that may end up costing them nearly 200$ but other wards you can only get 1 game for about 100$ and that's just ridiculous, and I think the Gaming Media is enforcing this. I also think the larger portion of the Gaming News and Magazine media is corrupt. C'mon, like a 98% for Halo 2 in the OFFICIAL Xbox magazine, and they act like we are stupid, but the funny thing is, people don't think about this and buy buy BUY anyways.

I hate how corporations play off of people's stupidity.

Unbelievable.

I can't believe how completely uneducated the majority of citizens in the United States have become. Perhaps it is time we make economics a required class in high school, because the ridiculous amounts of CRAP spewed by young people on the Internet is just staggering.

From the article:

"Quite simply, we know the video game manufacturers are artificially inflating video game prices, and that they can pull profits by selling games for less."

I mean seriously, are you that completely idiotic to make such a statement? Really? Do you really believe that if a manufacturer of a product CAN sell something for less and still make a profit, that means they are "artificially inflating" the prices? Are you so ignorant of the idea of supply and demand that you would say such a thing?

I was planning on going on a long explanation of how completely wrong the writer of this article is, but I realized it would probably be wasted effort. Seriously. One needs a lot more than a guy posting a comment in a blog to really understand the concepts they are trying to cover.

It is just staggering.

So how insecure do you have to be in your own intellect before you start accusing everyone else of ignorance?

I actually understand economics very well, which is why I am more interested in what the market will say. Supply and demand is going to be the deciding factor. It doesn't matter how much it costs to make a game if consumers are only willing to pay amount [x] dollars. If the price of games is not covering costs, then the way games are being made needs to be evaluated. For example, maybe we don't need overpaid Hollywood voice talent in our games.

http://www.joystiq.com/entry/1234000023046235/

So Mr. McGuire why don't you get back up on your soapbox and educate the ignorant? You walked away all too quickly feigning indifference.

"Take a damn accounting class!! They have to keep it high to cover the immense fixed costs in the gaming industry. If they don't then they're screwed. The $50 price covers all of their fixed and variable costs. So say development and rent etc. cost $35 a unit at 2 million units sold. Say the variable costs (cost of CD's, boxes, packaging, shipping etc) are $10 per unit sold. That adds up to $45 so $50 seems reasonable for the first 2 million units. Once fixed costs are covered (game development, rent, etc.) then all that's left are variable (packaging, CD's etc) costs. At $10 a unit per every unit after 2 million $20 is pretty reasonable too. Hope you can follow!"

Unfortunately, I think the numbers put the lie to your accounting.

Electronic Arts makes profits of $1.85 billion on revenues of $3.13 billion.

THQ clears $411 million on $756 m in revenues.

Acclaim - $64 from $142.

So the total costs, fixed and per unit, of game production are demonstrably somewhere around 50% of the actual unit price for the consumer (or at least the actual price minus whatever cut the retailer takes).

If anyone wants to verify the numbers for themselves -

http://finance.yahoo.com/q/ks?s=ERTS

http://finance.yahoo.com/q/ks?s=THQI

http://finance.yahoo.com/q/ks?s=AKLMQ.PK

I would have thrown in a Japanese company or two but fuck if I know where to find the numbers on those.

Clarification - For Acclaim, that should read $64 million from $142m. Not 62 out of 142 dollars.

Acclaim sucks but they're not doing THAT bad.

Isn't Accclaim defunct?

If games are grossly overpriced and the market is ripe for a company that focues more on volume, then they should have sprung up already. The number of people in this world who can afford the $Billion needed to launch a new console is pretty numerous. It doesn't have to be the cuttting edge of technology, just whatever is the most that can but stuffed in a box and placed on retail shelves for $200 at a set date. (You need to get a very large number of these units sold quickly to make this work.)

Then go to every game publisher around and tell them you plan to have software pricing driven by volume, with low production and royalty costs to them and low SRP to match. How can it possibly go wrong?

This huge gaping opportunity supposedly exists yet none of the dozens of companies out there that could easily take on the challenge appears interested? why do you suppose that is? Perhaps a factor missing from the analysis?

The joy of seeing your own work blogged is that all of the negative comments that used to be reserved for your email inbox are now publically available for everyone to read. Ironically, I love it - one gauge of success is how vehement your opposition is.

First off, the question isn't whether or not games were overpriced back during the 8-bit/16-bit era. It's whether or not they're overpriced now. Let's pretend, for the sake of argument, that there was a 300% markup on game prices in the late 80's and a 200% markup now. Is the lower rate of markup better now than then? Absolutely. Is the markup today still onerous and excessive? Yes.

Functionally, game prices have dropped after counting for inflation. This does not mean that prices have reached an equitable level. I believe all gamers should push for said equitable level, through any means necessary, which is the thrust of my piece.

Now, as for whether or not game companies could arise that charge more reasonable rates, well, they do. Just that they purely operate on the PC level. There are consequences to working on a console, and price points, I believe, are one of them. There are multiple ways to negotiate said price point into the software - a fee for the right to access the proper boot keys, a pressing fee (long a favorite of Big N), royalties for non-first party titles for the console manufacturer... the fact is, Nintendo, Sony, and Microsoft have many ways to ensure that they get their pound of flesh from game sales.

As for Mr. McGuire... seriously, learn some freaking logic. We're starting, as a given, that video games can be sold for less and be a profitable enterprise (which can be shown through several companies that drop many of their prices quickly, like Capcom). However, they have actively chosen to sell at a higher price point. This is the very definition of price fixing. Trust me, while I didn't major in economics, I took enough classes in American government, economics, and higher mathematics to understand the concept of trusts and price fixing.

Please, if you can come up with a solid article to refute my own, do it. Assail my assertions with solid logic and fact if you can. I'll back down if you can show all the fundamental flaws in my article.

Either way, I think I've succeeded in one of the prime goals of a writer - to make people think and to make people feel. Granted, many people seem to think I'm a moron and feel that I'm a disgusting little troll in my parents' basement, but it's a start.

It disturbs me that they want to make games more accessible, more mainstream, and yet they think they can pull off a price hike. I think a lot more people would get into games if the price was more reasonable. Game development costs are high, sure, but they're nothing compared to a blockbuster movie, and it's rare that you can't get a movie for less than $20. True, movies have a box office release before video sales, but it still seems ridiculous to expect games to take off with the existing pricing structure. Games are a lot bigger business than they've ever been, but if the industry really wants to move forward and capture the attention of the bulk of the population, there will have to be a lot more variety, and titles will have to cost a lot less. If there's anything that's going to ensure that only the hardcore gamers will follow, it's a higher price.

See, the thing of it is, what you call price-fixing isn't illegal. Colluding to fix the price *is* illegal, but there's nothing illegal about everyone in an industry deciding one day that they're going to all sell at the same price AS LONG AS THEY DON'T COLLUDE TO DO IT. Take a look at the pricing schemes of books sometime if you don't believe me.

See, the thing of it is, what you call price-fixing isn't illegal. Colluding to fix the price *is* illegal, but there's nothing illegal about everyone in an industry deciding one day that they're going to all sell at the same price AS LONG AS THEY DON'T COLLUDE TO DO IT. Take a look at the pricing schemes of books sometime if you don't believe me.

Ian, you're completely right. And if you read the last paragraph of my article, you'll see that I pointed that out all along. I never certainly say that they are colluding, although I do admit I suspect that's the case. I never question the legality of their actions if they are not colluding; I only question the fairness.

Keep in mind, for all my discussion of a lawsuit, that I don't ever discuss bringing video game companies up on criminal charges. If a class action suit would ever happen, it would most certainly be a civil matter. My "J'accuse" hasn't been uttered yet; it's merely at the ready.

You're dodging the issue. There is nothing preventing a CONSOLE company from gaining ground appealing on price to both publishers and consumers, yet no one appears willing to take the risk.

The fact is, PC game prices are as regular as console game prices. The cost of getting you title on store shelves is much less due to the lack of a platform company controlling media production and extracting royalties but the sales volumes on average are a fraction of console sales and the customer service issues vastly higher, even before the product is in stores thanks to the massively greater difficulty of adequately testing a PC game.

Console games frequently appear for lower prices if the publisher believes the cost and appeal of the game are better suited to that price point. The oft demonized EA published both Ty the Tasmanian Tiger titles for a mere $20 SRP, and it was a great bargain for platformer fans accustomed to paying twice that amount or more. Yet most titles do not enter the market at that price, even though they should be able to substitute sales volume for high margins to reach their point of profitability quickly. Why? Because they can.

The essential fallacy at the heart of this argument is the belief that there is an appropriate level of profits for a business, especially a business dealing in luxury goods. We aren't talking about people dying in a heat wave because electricty prices prevent them from running their air conditioner. We're talking about games. The only limit here is where charging too much causes you to lose more from those who forego the purchase than you're gaining from the high margin.

Experimenting with price points to find the balance between margins and volume is to be encouraged but the industry believes they've found that balance when weigh against development costs. There is some question whether they're engaging in self-fulfilling prophecy when choosing a price for a game's predicted volume but that is between them and the stock holders. No public company is going to want to explain to stock holders that they lowered prices solely for good will. There has to be an increase in volume sufficient to improve net revenues.

As a consumer you're fully entitled to an opinion regarding a company's profit levels and can choose not to do business with the company. But so long as the company continues to be rewarded with strong sales they will have little motive to change. Until tens of millions of console owners who buy several full priced games every year decline to continue, nothing will change.

That nobody is willing to take the risk with the launch of a new console says more about the past history of new consoles than the economic viability of the idea. Even working on the model that Nintendo pioneered in the 8-bit era, quite a few have crashed and burned, and several more struggled mightily. The past success rate of console introduction is a much stronger factor than a particular economic model for game pricing.

One one hand, I do know what you're talking about, as I've seen plenty of fresh PC games come out at the $50 level on their release date. But every time I go into a place that carries a decent amount of video games (GameStop, Best Buy, Circuit City), I see large rows of PC games that are selling for noticably less. These aren't just old titles or expansion packs, either.

I don't believe that there is a level of profits for a business. Profits are where you can get them - as a case in point, Konami has gotten me to spend over $200 on a single machine (a DDR Extreme machine in a local arcade), and I'll probably spend a few hundred more before heat death hits the universe. What I do believe, though, is that consumers should not just blindly or subconsciously let companies set their profit margins. We should take a much more active hand.

Video game companies look after themselves and their profit margin. Part of my job as a critic is to look after the consumers and point out what is best in the consumer's interests. Nobody can deny that a lower price for video games is in all of our best interests.

And to be perfectly fair, I've demonized EA mostly for their personnel practices. Though I have used the "they expect people to pay $50 for the same game every year?" argument only somewhat facetiously.

Interesting thought on the economic side, trying to justify cost by the cost of producing the game.

It reminds me of an article justifying why the price of gasoline has gone up to $2 a gallon. It went through great lengths to talk about the cost of engineers, refining, etc. etc. The logical fallacy though, was that if the production costs forced gasoline to be $2 a gallon, why hasn't it always been that price?

A similar logic applies here. If you must charge $50 a game to cover your costs, then why do games drop in price? Doesn't that mean the entire greatest hits line is selling at a huge loss? No wait, it makes even LESS sense in regards to videogames because the cost of production is actually lessened by selling more copies. The irony is that the bad games are the ones that need the $60 price point, but no one wants to buy them. Good games like Halo 2 could probably charge $10 and still make crazy money. The whole thing is back asswards.

Yet in reality, they need to charge $50 for Halo so the companies can cover the cost of producing so many crappy games. In essence, by purchasing Halo 2 you are subsidizing games like Metal Dungeon or XIII. Isn't that great?

There is a lot of suck ass reasoning going on in these comments but most of revolves around the concept of a “fair” price. There is no such thing. There is only the price that you are willing to pay and the price the company is willing to sell. When they meet up, that’s the “fair” price. A very few number of people seem perfectly happy to spring $150 or more for Neo-Geo carts not too long ago. Capcom sold some, but not tons of its $200 game/game controller set Steel Battalion for the Xbox, which actually cost more than a new Xbox. And I’m surprised no one has mentioned Midway’s recent release of NARC with a $20 launch price, since this should fit in with Netjak’s overall agenda. But since I bought it, I can say that NARC at $20 it was overpriced by $30….Midway will have to pay me to buy one of their games in the future. But then again NAMCO put out KATAMARI DAMACY at $20 it sold much better than they expected but they had very low expectations and it promptly sold out at most retailers for the first few months.

As for main piece,:
1) You’re right about the royalty rate structure on Nintendo’s cart s back in the day (although I would say it was less about “guaranteed maximum profit” and more like “very, very profitable and zero risk for Nintendo”) but I have serious doubt that’s in play nowadays. The reason: Platform Competition…Do you think that Nintendo put the screws to Capcom on royalties and then asked nicely to make Resident Evil 4 a Gamecube exclusive for a year. Or Sony fucked over Rockstar on royalties and sent a fruit basket asking to make GTA games a PS2 exclusive for a period of time? They hardware guys fiddle with the royalty rates based a few different factors and I seriously doubt that “units manufactured” is the dominate one anymore. (ie, the royalty rate is lower on Greatest Hits level games because it suits the Hardware guys to have constant stable of older $20 games available for prices sensitive buyers).

2) Your piece would have been actually more constructive if you looked at games sold (and the average price sold) and costs rather than just arbitrarily coming up with some costs estimates based on what you think is fair….ie, if you showed that the average number of games sold by each manufacture went up and that prices also went up, you might have something to carp about…but as the gaming base expands from the hard core to the casual market, the average number of dollars spent on games by a given user DECLINES. And now that the media accessibility problem is resolved (ie, lots of DVD plants around the world vs. Only Nintendo’s cart plants), there are more developers/product than ever before. So more customers, but they spend less than they used to on average and now you have more competition (which results in higher marketing costs and shorter “shelf lives” for games) and also a more robust used game marketplace competiting against new games. Now that doesn’t mean there isn’t money to be made but if you think the current market structure is a sure fire, 100% lock to makes bags and bags of cash, you’re a fool.

3)You also overlook the global nature of the industry. A-level titles in Japan cost 6800 yen, or about $64…And it’s even worse in Europe. Sure EA made tons of money, but maybe they made a bunch of that ripping off the French buying FIFA 2004.…..You completely ignore this facet of the industry. By global standards, US prices are already low.

4)If you plan to be an ongoing writer, you might want to not lead off with terms like “price fixing” when it is clear in your writing that you don’t know what that term means.

Also, as a point of reference, it is actually the retailers who set the price for these type items, not the manufactures…But the manufacturers do have recommended selling prices and retailers who constantly ignore them will have their co-op advertising funds yanked and re-supply priority lowered…but the retailers are free to sell at any price they want, unless they engage in predatory pricing (ie, trying to drive your rivals out of business) …some of you may remember the legal trouble Best Buy got for selling music CDs for less than “cost” a few years back.

Kuang:

1) The number of units produced is still the dominant factor. Just look at how few devs are actually exclusive to a console nowadays. Every once in a great while in cases like Capcom or a Tecmo, or Rockstar, there may be some special deals that get cut, but for the most part everyone gets shafted equally by the "pressing fee".

2) The distinction you're pointing out is a fairly useless one. The fact that games have been selling more than ever is easily provable.

"Retail sales of video games tallied just over $9.9 billion in 2004, according to figures released today by industry research firm the NPD Group. That figure, which includes all portable and console hardware, software, and accessories, represents a decline of less than 1 percent when compared with $10 billion in 2003. While dollar sales were down, overall, unit sales were up 4 percent, said the research group."

To me, the dollars dropping slightly, but sales increasing indicates that we've hit the point of diminishing returns...at $50, not $60.

To furhter reinforce the greed point, though:

"The biggest trend of note was that portable software sales broke the $1 billion mark for the first time ever...Total software sales "also continued to set new records, with sales exceeding $6.2 billion, an increase of 8 percent in overall sales when compared with $5.8 billion in 2003," NPD said.

And yet, what do we see? The PSP lanches with the highest priced handheld games ever made at $40 per. That's $10 more than the GBA games were.

Also, look at the top 10 selling PC games of all time. They've all come out within the last 6-8 years. (And most of them are named "The Sims Something Something" or "SomethingCraft".) The Playstation 2 is the best selling video game system of all time. I'm not sure what's second, but the PS2 is the best selling console of all time, and it's been that way since well over 20 million console sales ago. There is more money than ever being made, and prices are still going up.

3) You're overlooking the COLA in England. That's a damned expensive place to live! Of course prices are higher there. If I had an international writer from England, I would have asked for their input, but the last one we had anywhere nearby was in Switzerland, and he has since moved back to New York. Anyway, the last time I was in England, a comparable PC was selling for twice the cost of an American one, and everything else I was buying there was way expensive (seriously...5 pounds for a McDonald's meal?! That food is crap here. It's even worse in England, and I have to pay MORE for it?!) I see no reason that games would be the same. Regardless, I feel bad for my European comrdes.

As for Japan, those numbers don't count, as copies are NEVER sold at the full retail price. Take Namco X Capcom, for example. I have a copy of the game. Had a friend in Akihabara buy it for me the day it came out. The website says, 6800 yen, standalone. This is what the sales numbers will quote as the "sold price. My friend bought it for 6200 yen, as a bundle that included the soundtrack for the game. I guarantee you that:

A: Within a week, there were 4 PRISTINE used copies in the Game Trader store a half block up the street from where my friend bought it new, and they were selling for 5400 yen.

B: Somewhere in one of the stores somewhere, someone was selling the game for 980 yen.

I'm guessing you've never been to Japan, and I can't explain why this happens either, but for some stupid reason, I'll walk around in game stores or department stores, and every one of them will have a different game, no more than 2 weeks old, for 980 yen. It's like they WAY overanticipated demand and bought a whole bunch of the wrong game.

The HUGE difference between here and Japan's retail market apparently is that in Japan, you can't ship the unsold product back to the manufacturer. In the US, that's standard procedure for the large chains.

The other interesting thing about Japan is that there really isn't a rental market in Japan, because until recently, it was illegal to rent games. For instance, I've got a copy of Rockman X7 that has the text on the back, "Commercial Use and Rental Prohibited". If you'll recall, back in the 80's Nintendo tried to shut down game rentals in the US. They lost in the courts. They reason they tried to fight it? That's the way they were used to it being in Japan. Nowadays, rentals are starting to happen in Japan (my copy of Namco x Capcom doesn't have that text on it.) but they haven't taken hold yet.

4) Rick's article refers to mine, in which I referred to the two price fixing lawsuits Nintendo lost in the 90s, 1 in the US, 1 in Europe. That's why he brings it up, I'm guessing.

Only buy games that are good and that you'll like. If it's good it should be worth the price or you can wait for price drops. Live with it, you're lucky enough to get all this amazing entertainment we have today, and be happy for that fact.

Alkaiser
[quote]
While dollar sales were down, overall, unit sales were up 4 percent, said the research group."

To me, the dollars dropping slightly, but sales increasing indicates that we've hit the point of diminishing returns...at $50, not $60.[quote]

This is what I was getting about as a “fair” price. This means that prices are getting lower/units are selling at a lower average price. So while the list price might be $50 for the first 2 months, they sell much more at $40 than they do at $50.
I actually agree with you main point of “don’t buy $50-60 games”. With the exception of Halo 2, I haven’t paid more than $30 for a game in 3 years. However, if fools want to pay $50 for a game that will $30 in four months, I’m not going to blame the games companies for going for $50….I’d blame the consumer for being impatient and wasteful. Hell, I've got PS1 and Dreamcast games I haven't finished yet, so I can wait for price drops on Xbox and PS2 games.

As for the European market, The fact that things are “more expensive” in England has nothing to do with my overall point about the size of the international market on the profits of the EAs of the world. Things are expensive in the UK, in part, because of the Value Added Taxes built into retail selling prices but also UK folks are just getting ripped off. While localization issues may be an added expense, as the recent voice actors piece showed, these types of things are a very small part of the overall expense of the game. Given the thesis of the piece was that the actual production cost of the media is relatively low, (nor are local manufacturing costs 3000% higher) and even taking slightly higher transportation costs, it is quite possible foreign markets may be a significant part of the profit pie and thus not automatic proof that US folks are getting ripped off. While localization issues may be an added expense, as the recent voice actors piece showed, these types of things are a very small part of the overall expense of the game.

I don’t see what you are getting at with your comments on the Japan market. I’ve been there quite a few times and I’ve actually made good coin importing games I bought there and selling them here in the US. Yes, there are often some wiggle room on the upper level prices of games (esp. in Akihabara) and items often have premiums (CDS, toys, demo disks, etc) attached to pre orders/launch day sales (just like EB does on many games in the US). And there are also point cards bonuses that can factor into the mix. And the fact that a Game Trader in Tokyo has 4 copies of a used game a few days after launch in the metro area with 20 million people in it is not indicative of anything. But I could probably walk into any Gamestop or EB today and get a pristine copy GTA:SA for Xbox that was probably shoplifted and traded in/cashed out, even though the game came out only a few days ago. And while prices might be somewhat flexible in Akihabara or Den Den town in Osaka, it’s not like the entire country shops in those two places. But none of this changes the fact, that on average, games costs 20-30% more there than in the US. And unlike the US, games rarely fall in price overtime until they are being cleared out…so no drop from $50 to $40 to $30 to $20…Its more like $60 for 6 months to a year and then its $20-25 bucks with some ending up as attention grabbers at $9.50. While I’ve seen many games at 980 yen,(esp at Sofmap) those games were at least 6-18 months old (for the Japan market) and were being cleared out of the retail stream. I’ve never seen a game newer than 6 months old selling for 980 yen (and at six months, that would only be a game that just tanked hard…like auto modellista). Give the J developers and J retailers some credit…you’d never see a legitimate, non pirate game with a MRSP of $50 selling for $10 in the US a few weeks after launch….Why would it be any different in Japan? The J market is actually seems much more orderly than the US due to the few number of stores, more pathological consumer behavior, and much tighter pricing controls. They blow it occasionally ( I think ASCII made a million too many Trance Vibrator attachments for PS2 game Rez) but you rarely see retail train wrecks like Bloodrayne 2 over in Japan.

My point is, it;s neither illegal nor immoral (unless making a profit is immoral - in which case, I'm sorry you feel that way). If you don't want to pay US$50 for a A-grade title, don't. But plenty of other people seem to want to...

Hey 32 footsteps,

You wrote: "What I do believe, though, is that consumers should not just blindly or subconsciously let companies set their profit margins. We should take a much more active hand."

Consumers don't just take an active hand in setting a company's profit margin, they take the ONLY hand in setting profits. You buy a product at the price they set or you don't. If enough people don't buy at that price the price will come down. Adam Smith called it the invisible hand.
And I don't see how it being subconcsious has any thing to do with it. Would you be happier if the product displayed it's production cost above the retail so that you knew the amount of profit the game maker was making? That would be an unfair standard wouldn't it?
Just because games are too expensive for you does not constitute a conspiracy.
Maybe you should think about taking up a less expensive hobby. I hear stamp collecting can be quite economical.

I've heard of armchair psychologists before, but not armchair economists.

Seriously, do you even understand the concept of the Invisible Hand? The idea is that a consumer in a capitalist economy, by acting in his own self-interest, will also contribute to the good of his community. I seriously do not see how current game prices, as opposed to lower ones, contribute to the good of the video game community.

If anything, my editorial is an example of the Invisible Hand as described by Adam Smith. Sure, I can afford video games at their current prices, but I'd be able to afford more at better prices. Is it in my self-interest to promote lower video game prices? Of course. But I think it's in the best interest of all video gamers, and quite possibly the industry as well (as lower prices will translate into more volume, which in theory could translate into more profits overall).

When I state that gamers should take an active hand in game pricing, this is specifically a call for gamers to actively wait for prices to drop on games until they are affordable, and to appropriately award video game companies for pricing games below the expected sticker value (which is generally around $50).

There are quite a few games that looked great that I held off on, until I could find them at a reasonable price. Disgaea, Baten Kaitos, SoulCalibur II, Guilty Gear X2... all great games that I waited on so that I could get a better deal.

Ian, as far as I can tell, you're trying to argue a point that isn't actually before us. I have stated all along that while I suspect things aren't totally legal, I can't prove it and won't assert it. And I never bring in the morality of the companies. I only bring up what's fair for us. I make no claims at either law or morality on my side.

Some of you seem to be forgetting that people are, above all else, stupid. I don't mean any of you; the fact that you can get this damn interweb thing to work and found your way to a blog about computer games is a test enough to prove that you are not the same as 80% of the target audience for games.

Most games are sold, not to the "hardcore" gamer, but to Joe "Suburbs" Smith. He doesn't read IGN/Joystiq/PC Gamer magazine, he just likes it if there is a gun on the game cover, of if his mate (who also doesn't read game reviews) says it's cool. He won't really notice a $10 increase in price, or will forget it happened after a month or so.

Me, I'll go to eBay when Joe Smith gets his nerdy mate to sell the game he's bored of "on those internet auction things". Happy gaming guys!

Dear 32,

I'm failing to see you're point. In fact, I'm starting to think you don't have one. You write:

" ...that gamers should take an active hand in game pricing, this is specifically a call for gamers to actively wait for prices to drop on games until they are affordable..."

Sweet Lord! This is what happens every day. And not just in video games. I would like a hi-def TV, but guess what? The prices are too high! So I'm patiently waiting for the prices to get closer to my range. There aren't any conspiracies involved. The companies that make HDTV’s are just going to have to wait to get my money until the price is reasonable (reasonable being a relative term - $4000 for a plasma TV is very reasonable for a millionaire).

This same principle plays itself out on millions of items every year. Why should video games be different? Apparently you think that since games are exceedingly cheap to produce (a point that needs to be proven, not just asserted) it would behoove the companies involved to price them cheap and sell more of them. What makes you think that they would sell so many more that their profits would be the same as they are now? Who's playing armchair economics?

Prices are set by the market. We are the market. Do some people overpay for crappy products thus inflating the price for more discerning customers? Yes, it has always been so. There is nothing new here. What’s your point?

Kuang:

I think you and I actually have the same basic point. I just want Joe Consumer to wake up and say, "Hey! I'm being taken! Maybe I should do something about this...like buy the games later."

As far as Europe goes, I honestly think you've got WAY too high of an estimation for the size of the game market there. Last E3, one of the booths had signage "boasting" that the UK was the 3rd largest game market in the world. Some of the people working the booths next to them were laughing at it and sarcastically asking, "Who's 4th, then?" If you want to see how small the game market is in Europe, all you need to do is check the quality of the European versions of the game. You think if there was actual money involved they would have released FFVII in Spain and Germany with text that was cut off by the text boxes? It's starting to get better, but it's not to the point where if France were to say something like, "Microsoft cannot sell Xbox games in France." Microsoft would freak out and demand public outcry. It's quite sad, though. Think about it. The console gamers there get the absolute lowest quality game thanks to PAL (you think people spend a whole lotta time trying to rework the code so a game runs in PAL? These guys can't even IMPORT!) and the fact that they're getting all the ports. Then its priced higher, and they get everything last. It's almost like they're in jail.

As far as my description of the Japanese markets, I've yet to ever see any game store in any part of the country selling the game at full retail. I've been all over Japan. (save for Hokkaido and Okinawa.) The only place where I've haven't found a new game that didn't have pack-ins and wasn't 1,000 yen cheaper than retail was when I was Okayama and the only game shop "in town" we had to drive 30 minutes to get to. Even when I was tooling around in Sendai, there were tons of 980 yen games that were recent.

I don't just mean 6 months ago, either, or just at Softmap, or I would have just said so. I went to Yokohama on my last trip because I hadn't been there yet. I was seeing ads for the new Nobunaga's Ambition on TV for the Xbox. I went into a Bic Camera there, and I found 15-20 copies of the game there at 980 yen. My friend had just picked up a Japanese Xbox, and I was able to get him 4 games while I was there, for less than 10,000 yen total.

I know the entire nation doesn't get the good deals, and in the less trendy parts of Japan, you're right about the rigidity of the prices (game selection in Fukuoka/Kokura is AWFUL.) given the fact that the Japanese mail carriers put the American ones to absolute shame, there's no reason they can't or aren't just buying the stuff from cheaper parts of the country and having it shipped to them.

And yes, they did make about a million too many trance vibrators. Everyone that walks in and sees one is always like, "I bet this would go for a fortune on Ebay! It's still wrapped!" and there are like 30 of them already there going for only $15.

I find it funny, after I dismantle most of your argument, that you focus on one line of my response, Mac. And then you claim I don't have a point. It's no so much that I don't have a point as you seem to be intentionally ignoring it.

As for who's playing armchair ecopnomics, I'd say it's the person who couldn't even bother reading, or rereading, Smith's "The Wealth of Nations" before trying to preach about the Invisible Hand. It's a pretty quick read and available online for free, so it's not like you have an excuse.

Okay, since you're pushy about it, I looked up approximate game prices. According to this article on MSNBC, your average game, including marketing and whatnot, runs about $5 million to produce. The big budget titles (which I assume mean ones like GTA San Andreas, Halo 2, and Metroid Prime) cost about $8 million.

http://www.msnbc.msn.com/id/8045685/

So, at the current pricing scale, it takes approximately 100,000-160,000 sales to break even, and sales on top of that are pure profit. We're talking about an industry where a half a million units sold is not that unusual. It wouldn't surprise me to learn that most of the big budget games are running on pure profit by their second month. According to Microsoft, they sold five million copies of Halo 2 in the game's first six months of release. That's an awful lot of pure profit. Let's also keep in mind that Halo 2 has not yet entered the Platinum Collection, even though it's quite obviously able to do so - Halo 2 regular is still $50, and Halo 2 Limited Edition is still $55.

Also, you seem to not grasp what I mean by an active hand. Simply buying or not buying based on personal preferences, as is usually done now, is passive as it is not actively trying to create any goal other than "support games I like." However, I am suggesting people actively wait until prices are brought down to drive home the point that prices shouldn't be so high in the first place. If you can't understand the difference between mental activity and passivity, then you're not going to get the education you sorely need here.

Finally, since you seem to be unable to get a point unless you are bludgeoned bloodily with it, the point of my piece is to get people to be more discerning customers. Because just waiting around for companies to give us good deals obviously isn't working.

32,

Allright, I'll make one last run at this and then I'm done. I'm sure you have better things to do as well.

What you describe as a problem I see as a perfectly fine representation of market forces. $50 dollar games are too much for you and I, agreed? Surely you would also agree that others might consider $50 a reasonable price? It's all relative. So really, if you pay full price for a game you aren't just paying for the game, you are paying the premium price in order to play the game immediatly after launch. You and I think $50 is too much so we wait for the price to go down. So our price for the game is $30 + 9 months of waiting (or whatever the case may be). I see nothing wrong with this arrangement. If you intend to organize a boycott until the launch prices are lowered, good luck to you, but I think the market does a pretty good job all on it's own. People don't need you or I to tell them how to spend their money.

Surely your argument works the other way: Think about Halo 2. If they had charged $70 for that title at launch they almost certainly would have still sold out. Are we to commend them for giving us a price under market value?

And so what if they make a lot of profit! Good! That means they can make even more games. It also means that they can hire more programmers, markerters, accountants, etc. (hmm...providing high paying jobs, that's good for society right, Mr. Smith?)

Finally, I'm sure you would agree that video games do not encompass the same set of rules that hard goods like tables or chairs do. Video games are what they call intellectual property. Try to think about other forms of intellectual property like music or movies. Is it outrageous that MCA repackages some Beatles greatest hits songs every couple of years and charges full price? Surely they've made a profit after all these decades. What about movies, how many copies of "It's a Wonderful Life" have been purchased over the years? Think they made a profit with that movie? Should they just give it away for free now? Do you think they'll still be selling Halo 60 years from now? I Doubt it, video games have a shorter shelf life than other forms of intellectual property, thus the need to get their's while they can.

If every game was priced the same and never lowered ever, you might have a pretty good argument that the powers that be are colluding to fix prices, but they don't. Some titles launch at different prices and even the most expensive titles lower after a few months.

Not sure if we got anywhere, but it was fun arguing with you...

Oh come on, it's not just games. What did you pay for your DVD recorder when you bought it 2 years ago? What does it sell for now? Every area of business does it, or at least tries to. We're not hardcore gamers who are being cheated, we're what business economists call 'Early Adopters'.

Besides, for every game that becomes a hit, ten times that many never even break even. That loss needs to be made up as well.