Over inflated Launch Prices

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FamilyFriendlyGaming
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Over inflated Launch Prices

Postby FamilyFriendlyGaming » Tue Mar 17, 2015 9:28 pm

I have noticed something over the years in the video game industry. By and large, generally speaking, the majority of video games drop in price from their launch. I noticed on Amazon yesterday that Project STEAM was selling used for ten dollars cheaper three days after the game launched. Now yes a new game, and a used game are a bit different. But still ten dollars is a steep drop from new to used in just three days.

Plenty of video games are in the clearance racks for way cheaper than their launch prices.

So why is that? Normal depreciation?

I must admit looking at how the prices plummet for some games I have wonder if the initial launch prices of many games are too high. Are more gamers being patient and waiting for price drops? If you always stay one year behind you get more games for your money. And the games are always new to you. Supply and demand apply. Prices drop when there is little to no demand.

I also talk to a lot of retro gamers who have a blast playing older games on older systems. They spend less and get more games.

There are a few games that actually do go up in value, but they are few and far between. Or they are something like Cubic Ninja 3D that homebrew wants.

I personally feel the prices start too high, and companies could make more money if they lowered initial launch prices.

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Re: Over inflated Launch Prices

Postby Deepfreeze32 » Tue Mar 17, 2015 10:10 pm

We see this a lot with Steam. Game launches for $60, next seasonal sale, it's marked down to $45. A year later, it might even be 30% of launch price before sale price. Not to mention, developers have said that they make more money than ever with sale-priced games. So I'm wondering: What's the cause?

Well, I have a theory.


So by far the biggest chunk of change from a game sale goes to the publishing and distribution of games. See this for an example. Over half of the $60 price goes into distribution alone! And of course, a publisher takes a nice slice of the remainder, meaning at best (say the publisher ONLY takes 25% of the after-distribution revenue) the developer might get $20 from a $60 game.

But digitally distributed games are different. There's no physical place the games are stacked up on shelves. There's no costs associated with physical production (E.G. packaging and producing hard copies). In a best-case scenario, (Self-published, no royalty licenses) you pay whatever the fee is for a digital distributor. Apple's App store is 30% and Steam is 30%-40% (IIRC). That seems like a lot, but remember that it's the sale price. Paying 33% of $60 ($20, you keep $40) is a much better deal than 25% of $30 ($7.50, you keep $22.50 and consumer pays same price).

When your profit margins are higher, it makes sense to lower the cost. A lower cost means more people are likely to impulse-buy it. Goodness knows I've done that with Steam all too much. So you make less gross per copy than at $60, but the quantity sold more than makes up for it.

Now you mention used and new games, implying the physical copy prices are falling. I suspect that it's probably influenced by both the rise of good digital distribution (App Store and Steam) and the expectation of good sale prices not being met. To move more copies, they have to lower prices. This isn't a very sustainable solution for physical games, though.

That's my theory, at any rate.

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Re: Over inflated Launch Prices

Postby CodePro1.0 » Wed Mar 18, 2015 1:41 pm

Boy... This seems deep....

Nice theory Deep.

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Re: Over inflated Launch Prices

Postby FamilyFriendlyGaming » Wed Mar 18, 2015 2:30 pm

Deep,

Makes sense. So when Nintendo, Sony, and Microsoft sell a digital version of a game for the same price as a physical copy in the store they are taking the same slice of the game as the distribution. Because it has bothered me to see Mario Kart 8 selling for the same price digitally as at the store. I heard they had a contract with the retail chains to do that - not sure how much stock to put into that though. I have thought we should pay less for a digital download than for a physical copy at a store.

Let me throw a real monkey wrench into this. Minecraft. Started digital download, and then moved into physical copies. Plus the price of Minecraft physical copy at retail on the Xbox 360, PS3, PS4, and Xbox One started at $19.99. Mojang got crazy rich off Minecraft. So why can't other companies start their game prices as $19.99?

What bothers me even more is when companies like Nintendo brag about making hundreds of millions to billions of dollars. They could cut us gamers a financial break since it was our money that made them wealthy. Mojang cares more about their peeps in my humble opinion. :)

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Re: Over inflated Launch Prices

Postby ccgr » Wed Mar 18, 2015 3:00 pm

Another thing to take into consideration is the cost of the game development process. Indie games generally cost less to make and for the consumer to buy.

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Re: Over inflated Launch Prices

Postby FamilyFriendlyGaming » Wed Mar 18, 2015 8:17 pm

Another thing to take into consideration is the cost of the game development process. Indie games generally cost less to make and for the consumer to buy.
Good point. :)

What about all the recycling, rehash, and re-using Nintendo does in many of their games? Using the same graphics, sounds, worlds, etc. should lower the development time and costs. Square did it with three Final Fantasy XIII games. Plenty of re-use. Tales of Xillia 2 is another example. Costs should be lower when companies re-use, but they are not.

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Re: Over inflated Launch Prices

Postby ArchAngel » Wed Mar 18, 2015 9:11 pm

I think development costs and release plays a lot into this.

When a game launches, especially for big titles, they get the most of their sales on release, like with movies. If they're going to make money, it's going to be with release hype.
Secondly, the cost of development is just about all before the first sale. These costs need to be covered as soon as possible. This combined with sales trends on release, you release with full price.

Also, as people's perceptions goes, it's better to start out expensive and drop the price than to start low and raise it.

After release and sales drop, you lower the price and do sales to pick up the impulse buys like Deep mentioned.
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Re: Over inflated Launch Prices

Postby FamilyFriendlyGaming » Tue Mar 24, 2015 4:52 pm

I think development costs and release plays a lot into this.

When a game launches, especially for big titles, they get the most of their sales on release, like with movies. If they're going to make money, it's going to be with release hype.
Secondly, the cost of development is just about all before the first sale. These costs need to be covered as soon as possible. This combined with sales trends on release, you release with full price.

Also, as people's perceptions goes, it's better to start out expensive and drop the price than to start low and raise it.

After release and sales drop, you lower the price and do sales to pick up the impulse buys like Deep mentioned.
Kind of like the gaming media. We spend all this money covering their products, hoping to be picked to receive a reviewable copy. We spend all that money on the front end, hoping for a pay off on the back end. :)

So why are Wii games made by Nintendo still selling for 50 dollars at retail? We saw something interesting at a local Wal-mart - Kirby and the Epic Yarn on the Wii selling for 50, and Kirby and the Rainbow Curse on the Wii U selling for 40. Shouldn't the Wii Kirby have come down to a better price by now? I know what Nintendo says: "they make quality games that last." Sounds like arrogance to me to support their greed.

Then there are companies like Natsume that don't make many sales on say the most recent Harvest Moon game. So they are trying free DLC to spike sales months after the release.

A lot of companies shoot for that Christmas window - which can be hit or miss. They might get lost in all that shuffle. :)

Movies can make money at the theater, and on Blu-ray, DVD, digital, etc. Movies can make more money off of Blu-ray/DVD than from the theater. I guess the video game equivalent is the Virtual Console where they sale digital downloads of older games. No real development cost for them to re-release their game in the ROM format on their own machine. Companies like Nintendo are also getting money from Let's Play from Youtubers. They put nothing into those videos, and reap the financial benefits. Then there are toys, T-shirts, etc.

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Re: Over inflated Launch Prices

Postby SSquared » Sun Apr 05, 2015 5:57 pm

I've been waiting a year or two to buy games for close to 15 years. The games are still enjoyable and I really don't care to have the latest/greatest. I just picked up Skyrim and Orange Box last year, for example. I'm also a single player gamer. If I played MP games, I'd maybe be a little more swayed to buy earlier.

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Re: Over inflated Launch Prices

Postby FamilyFriendlyGaming » Mon Apr 06, 2015 8:14 pm

I've been waiting a year or two to buy games for close to 15 years. The games are still enjoyable and I really don't care to have the latest/greatest. I just picked up Skyrim and Orange Box last year, for example. I'm also a single player gamer. If I played MP games, I'd maybe be a little more swayed to buy earlier.
Amen!!


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