Why game prices shouldn't be increased in the next generation

Today, Wedbush Securities analyst Michael Pachter suggests Next Gen videogames will be priced at $70. For the sake of the core industry I so dearly love I hope that isn't the case. The world economy has yet to recover from 4.5 years ago, much less the US economy, on which much of the Games industry's future is dependant.

Adding 10 bucks to the price of video games will completely destroy all but the most top-tier franchises, potentially kill off non-indie innovation and experimentation and push more and more people away from traditional games (those which will cost 70$) and towards free to play model games, mobile and flash-esque games.

If anything, the industry needs to make a huge correction, price-wise. Make games an affordable hobby so that people don't feel fiscally pressured to avoid gaming or at least avoid paying for what they're playing (legitimately or otherwise). Instead of microtransactions or DLC being used to squeeze money out of already paying customers, a slightly reduced profit margin per sold game could very well result in a significant growth in non-used game sales, which will increase the profit margin on the title as a whole, as well as provide a larger mind-share when sequels are to be made.

Another option would be to create a more flexible pricing model, in which people bring out games in $5-20 for the basic indie titles, $25-40 for A or AA games, and $45-60 for AAA games. There are games that simply won't make their money back on initial release due to an uncertain buyer's market and the confounding "$60 for everything" standard in today's industry.

What's happening nowadays is the industry cannibalizing itself. This results in lesser products being put out on shelves, and more people being put out on the street.

The games industry can't live on with this pricing model, which doesn't allow for varying qualities of game to coexist in the market. A more flexible industry that will allow a more flexible pricing model will be crucial if the pay-to-play portion of our industry wants to grow instead of shrink in the next generation of consoles.

If game prices were raised $10, I wouldent ever buy a new game again, plain and simple.

I don't think developers even HAD to charge that, they just went with it. The AAA games showed people were willing to pay $60 so everyone else slowly but surely started following suit. So if they DID increase the price another $10, the big budget games would have to be the first. If people still bought them then the rest will follow. If people stopped buying them because of the price I'm sure they'll concede and just bring the price down.

People will get used to it. Rising ticket prices never stopped anyone from going to movies. Or rising gas prices hasn't stopped anyone from getting gas. People will accept it, a few people will scream and cry and life will go on.

Pachter is wrong about this. No normal retail game will have a MSRP of higher than $60 this generation. We will still see tons of collectors editions, etc that go for more, but for basic games? Not gonna happen.

I wouldn't bet on that happening.

things get more expensive. it just happens, and it's surprising it hasn't happened already. if publishers raise prices, it's probably because they need to. i'm not saying they wouldn't take any opportunity to squeeze more cash out of the consumer- but pricing is a delicate science. if they go too high, they risk losing the remains of the mindshare already lost to apple, mobile, pc, and f2p. but with rising development costs, they can't go much lower.

i dunno- if it keeps microtransactions out of game design, games continue to increase their fidelity, and the game is of excellent quality, i'm happy to pay an additional $10.

@jdh5153: The problem with your argument is that of the industries you put forth, one is and has been for a while in financial limbo (a lot of money being put into projects, and many times not being recouped).

The other is an institutional monopoly with no competitors. At the end of the day, one gas company has no reason to lower their price significantly, because ALL of their direct competition is at around the same price. Although you should note that the rising price of gasoline has resulted in increased sales of Hybrid and fully-electric vehicles, as well as an increase in car pooling and Mass Transit use among people with a standard daily route.

Traditional games, however, are in direct competition against iPhone, Android, and F2P games, at least insofar as the casual market is concerned. True, you and I, as people who frequent gaming sites, are likely to see the Traditional game experience as important enough that we'll assent to paying $10 more per game, but many people will just shrug and go play LoL, or buy one less game per year, or only buy used games, or won't buy DLC, or at the furthest edge simply pirate all of their games.

All said and done, the point is that there is no real good long-term consideration which makes increasing game prices a viable strategy for the industry as a whole, and console manufacturers in specific. Whether we as core consumers are willing to pick up the tab is eventually irrelevant. We're not where the big money is, and making the cost of entry higher only shrinks the potential market.

@mellotronrules: Well, from everything I've been reading about the next generation, Unreal Engine 4 stuff in particular, the focus of many developers is creating a cheaper pipeline and methodology to manufacturing content, so as to reduce production costs versus this generation.

Also consider that a more uniform development environment (unless Microsoft does something crazy and doesn't come out with a near-PC-standard architecture) will result in much-decreased financial efforts being necessary to make multiplatform games and doubling or tripling your target market.

This next generation will rise and fall on smart business modelling and intelligent engineering system design much more than pricing models and the like.

Don't understand why the video game industry is so resistant to increased prices. Everything else becomes more expensive and the cost of developing games surely won't go down next generation.

totally- but PRICE is an essential component of anyone's business model. i mean, ultimately businesses will do whatever they think "they can get away with." if the market can bear $70 games, it will. if NO ONE buys them, they'll slash the prices. i mean look at games that under-perform- routinely games will release at $60, and then be down to $30 or lower on amazon within a couple of months.

you're right, there's plenty of things going into this generation that could and should save the industry money. but more than anything, businesses want to survive- and if we see $70 games, it's probably because they feel it's necessary for survival. especially since we're talking about the upfront, brand new retail price- where all your money is made in the first week or two.

I agree completely. I think another route they could take is having to just straight up cut down on feature sets to keep in line with what people are willing to pay. Which might actually fix the "multiplayer in every game" problem that's been cropping up. Sure in theory it's a nice idea of have that option, but we're in a post counter-strike world where the flow of new games never stop so there's no need for the after thought multiplayer.

@mellotronrules: True, pricing is part of the business model, which is why I suggested an alternative of a price "spectrum" if you will. With that there is even room for 80 or 90 dollar games to try their luck. The key to making a good market is competition not only in creating a better product, but at creating a proper value proposition for the product. I would buy Asura's wrath at 30-35 Dollars. Not at $60, though.

Allowing the market to lower the price of a game post release by half of it's initial recommended value is a problematic methodology to make your standard, because that's psychologically and financially devaluing the product and making more and more customers wait for a price drop.

By the time the price drop comes, they've already been swayed by a AAA release with an immense advertisement budget. Overpricing your games at launch results in lesser initial sales from the non-pre-comitted consumers, and decreased over-time sales because games earn significantly less money in post-release weeks than they do on launch weeks.

@jams: Speaking plainly, removing features from games for profits' sake would more likely harm the single-player and cooperative-multiplayer more than it is likely to remove completely unwarranted multiplayer.

At the end of the day, it's far easier to build a sub-par or just-par multiplayer map than it is to construct an appealing single-player story scenario or do motion- and acting-capturing. Also far less costly.

well- all of this should be premised by saying i'm not a businessman, and my working knowledge of market economics is limited. but having extremely flexible pricing seems to have worked for steam, and anecdotally, developers seem to love that. so i dunno.

as a consumer, all that matters to me is value. i'm not a early adopter, nor a day one shopper (i need multiple reviews of expensive products before i'll purchase them)- so i'm all for diverse pricing if it means there's less of a disparity between the cost of a game and the value of it's experience. ultimately (at least to me) the price is just a number- the jump from 60 to 70 doesn't mean as much to me as the quality of experience i'm having.

The "prices haven't changed in twenty years!" apologists never seem to acknowledge that while prices have not changed, the number of units sold has. As with most products, the cost of production and distribution drop with greater sales.

Additionally, other similar content (music, movies, and books) have not only maintained the same price for the last two or three decades, but they have significantly dropped with the advent of alternative (now mainstrain, I suppose) distribution methods that excise a significant part of manufacture and distribution expenses. Even digitally, games are still $60, while other media cost less than ever. CDs were $16 to $20 and more, but are now $9.99 on iTunes and even less on Amazon, often. Books are significantly less. So are movies. But games? Nope. They retain the same price and then we're told that we should be grateful, because we should be spending $100 per game. Pretty difficult to maintain that assertion when you're the sole form of entertainment claiming to need that.

The cost of music production on scale has increased (except for indies, which can now do it in their bedroom -- but so do game developers). The cost of movie production has absolutely increased. The cost of promoting and selling books has increased. But only games hold their ground and claim nobody should have the right to first sale, nobody should have the right to share a game with a friend, nobody should ever pay less than full price, the price shouldn't waver just because it's digital where the cost of distribution and duplication is nearly null, and we should fall to our knees and thank publishers for not doubling the prices.

PS: Look at the "ending as DLC" and "important plot elements and characters stripped out and added as DLC later" and "season pass" bullshit and you see that games are already far more than $60 -- publishers are just such giant pussies that they won't man-up and put the price they really want on the fucking box.

Because they are too fucking expensive already.

I believe the prices will rise, but that isn't certain, when for a game, a publisher can charge the normal $60 and just double it with DLC and Season Passes, like Mass Effect 3 and Amalur.

There is no way prices will rise to $70 next generation. It's not only the economy that cant support it's the industry itself as well as its customer base. The only reason we had the jump from 50 to 60 the beginning of this generation was because the hardware from ps2 to ps3 (as well as xbox) was such a huge jump they didn't anticipate the production cost so they raised game prices. Now as we get farther and farther out of this generation I imagine it getting cheaper as we understand the technology more and more. I don't mean to say games will be cheaper... the model shows that people will buy $60 games so why lower it or why risk totally losing your customer base by increasing the price. The only way I see it happening is if the next gen consoles are so crazy that it drives production costs even further through the roof or "they" decide to take a huge risk and see what happens... I don't see any of that happening. But if in some way it does I can see Jeffs vision of a "game depression" coming sooner than he thinks.

@branthog: your not completely wrong but you also have to look at the medium itself... its still relatively small, at least compared to the others you mentioned (movies, books, music etc.) being its still not as mainstream as the other entertainment mediums, developers still have to fight to get more and more people into it. That means keeping the prices at a reasonable rate. Yeah, maybe we are lucky that we are spending as much as we are on games and not what is actually feasible compared to how much it actually costs to produce your typical triple A game or what have you... if that is indeed true. But if prices of games were to raise that much the customer base they are searching for just wont support it so they have to come to a good middle ground which I think 50 to 60 is. The majority of people who buy games may be adults in there 20's to 30's but a huge part of it is still young teens who rely on either weeks of saved up allowance or there parents to buy a game for them and with that being the case how likely is it that they will willingly spend 70 bucks on multiple games a year? I think very low. I'm 22 I have a good job and not that many bills and I barely ever spend a full 60 on any game (with few exceptions). Not that I should be a use case for the entire industry but I think more and more people do the exact same.

Can people stop making threads based on what latest bullshit Pachter says then maybe he will go away. MAYBE?

Never.

I'm not certain what point you're trying to argue against. My point was that the video game industry is the single largest entertainment industry and has been since at least 2004. They have a product with infinite supply that has no related costs to duplication once the content has been produced and while the price may be the same that it was a decade or two ago, they have significantly more sales. The cost of production should be offset by the massive increase in sales, due to the popularity of the medium (which is clearly not small compared to anything).

Apologists for the high price of games often assert that "well, games haven't gone up in price, even though inflation has reduced the value of that money", without yielding the fact that the inflation and static price have been more than made up for by the incredible increase in sales.

There is no reason why companies shouldn't attempt to raise prices next generation because they are always free to lower them if sales are slow, just like they already are doing this generation. Sure, the price of a new release game is $60, but how many games actually stay at that price point for more than a few weeks? People already know that the price for most games will drop soon after release so only the people that have to get in on a game on Day 1 or in that first 2 or 3 weeks end up paying that much.

With certain games - COD, Halo, Madden, FIFA and other big sellers - why not push the price up to $70? There are tons of people out there who will pay it. As a consumer, I don't want to see this happen but, from a business perspective, I don't see why they wouldn't want to give it a shot. They have nothing to lose since they can always drop the price later if the market really won't allow it. The problem is that the market probably will let it get away with the price increase, just like it has with DLC and microtransactions. Until consumers start voting with their wallets and saying no, publishers will keep pushing the envelope to find out just how much people really are willing to spend.

The industry really could use a variable price point structure, as mentioned in the OP, because all games are not created equally and aren't worth the same amount. I, personally, would think that there's a large market for mid-tier games that release at $30 - meaning they're not AAA but also not Indies developed by 2 people - but it seems that everything's been pushed to those two extremes, with no middle ground. How many games have you played or have you read about in a review where the impression was that the game was good, but probably not worth $60? The problem, I've heard, is that publishers refuse to release games below the $60 price point because it would create the perception that the game was of lower quality and that could have a negative impact on sales. Most video games have their best sales in their first month so they might as well take advantage of the initial sales boom and then lower the price after sales numbers diminish.

Three points:

1) There are good reasons for a higher price point: inflation all on its own justifies a $70 price point. And consider the benefits: with a higher per unit cost, more mid-budget titles will be able to succeed despite having narrower appeal. More cost = more revenue.

2) A $10 increase is not enough to drop demand dramatically in the long term once the sticker shock of seeing 70 wears off.

3) Pachter is relentlessly cynical about avenues by which developers can increase revenues. In a way, I think he enjoys prodding his viewers into consumerist outrage. For example, he's also been very vocal about the likelihood that at some point Activision will charge a monthly fee for playing COD online. I think he's wrong on that one (as he has been so far), and I do not take his analysis on matters of cost very seriously in general.

Digital distribution will hopefully create a great open market for publishers to price their software. Let's be real here: games are $60 now because publishers know that they're putting a product out there that is going to be shared and reused. There may be a million in recorded sales, but several times that will actually play the game. Not counting piracy. They might price for more or less if they knew they'd actually get paid for all the plays.

If publishers know that they can fully manipulate pricing to milk out the demand curve, it'll end up being a great benefit to everyone involved. Some people will be willing to pay 100 for Day -7 or Day -14 or some special content, some will be willing to pony up 60 or 70 for day 1 standard issue. If the systems are secure enough that people don't just pirate the shit out of games, then publishers can eventually drop the price to 50, 40, so on down, just like the used market.

They'll make a lot more money. We players can pay the prices we're willing and able to pay, while still being able to actually support developers. Really, what I'd hope for in a flexible digital model is to see publishers be so successful that more software is developed and they actually have to become more competitive at release, say dropping new AAA prices to 40 or 50 trying to spur sales in a genuinely engaged market.

I know it likely won't work out that cleanly, but I'd personally love it. I almost exclusively buy used, just because of saving money and because there are so very many awesome titles out there that I haven't played yet, both modern and classic. I'd really enjoy the opportunity to pay $10 or $15 for a five year old AAA game and still have my purchase counted in support of the developer. Instead, I buy the Fallout 3 GOTY or whatever from some guy on eBay. I've played dozens of games in the last few years, but not counting a handful of XBLA purchases, the only ones where any money actually went to developers were Ni No Kuni, Dark Souls, Catherine (pizza box edition, MF), and Demon's Souls.

Let them go to $70. The popular games (Your Madden's and Call of Duty's) will won't be affected at all while other games will get totally screwed. No matter though because I will continue to not buy games at full price and just wait for a sale just like always.

Let the publishers price games at whatever they think the market will bear. Maybe that's $80, I dunno. I could definitely see people buying Madden and Call of Duty at the price, since for a lot of them that's all they'll buy all year. It still doesn't spell doom and gloom for smaller publishers and indies, though. They can still price games more reasonably. As it is now, I very rarely buy $60 games, so if they think I'll buy them for $70 or more well, good fucking luck with that.

I've said it before and it bears repeating, I think price will rise on the 'back-end', not on the base price of games. The MSPR for a packaged or downloaded game will still be $60. But, we have to get used to the fact that all publishers will be creating systems to squeeze another $5-$10 out of most of us, and another $30-$50 from a niche of core gamers for any particular series.

Is Michael Pachter wrong, maybe not, but it depends on how you look at costs. I think our current DLC system is going to change, so in some ways Pachter is probably less wrong then we think because it won't just be the current types of DLC we have now. I think we will see more "in game currency" and that means just to play the game even without new maps, new costumes, or new characters you might be paying a publisher for some "coins"...so yeah hidden costs might be something to watch.