Ars Technica has a silly rant about the cost of computer games.
People often write me with their worries about the state of the gaming industry. No topic is more prevalent than how expensive the hobby has become over the last decade. Jason D. wrote to me last week and had this to say:
“Can you post an article about the INSANE pricing of games lately. I went to the local EB here and found out the selling price with tax for Warcraft 3 and NeverWinter Nights was a McDonalds meal short of a $100CDN! That is bloody insane! I can buy 4-5 DVD’s of 90 million dollar budgeted movies for that price! I have written a few of the offending parties with no reply if you can imagine. Game companies wonder why piracy is rampant well it’s because a game is not worth for the average Joe a days worth of after tax pay. Thanks in advance if you can publicly respond to this.” – Jason D.
I thought his point about a $90 billion movie costing $25 was an interesting analogy.
No, it’s a stupid point. How many movies spend 4-5 years in filming? How many movieslast 40 or 60 hours? Good computer games are a great value — piracy is rampant because so many gamers are cheap bastards.
What we have to remember is that a movie keeps making profit after the box office. Merchandise from baseball caps to action figures and DVD rentals help to keep the price of purchasing the movie down. When a game has passed its peak, it heads to the bargain bin and then eventually into gaming history, with a few exceptions like Starcraft or RollerCoaster Tycoon. So developers and publishers need to score big profits off early sales numbers.
Nope, sorry, try again. Games are priced where they are because gamers will pay high prices. Jesus, these geeks can go on at length about watercooling processors but have never even heard of something as basic as a demand curve or marginal pricing?
On the other hand, how many people would pay $60 to sit in a movie theater and watch a two-hour film? How many would pay $60 to buy the DVD for a two-hour film? Not many, I suspect, and the market price bears that out. If anything, the $25 price for a new release DVD suggests that computer games might be under-priced (the difference being that the total consumer base for a computer game is far lower than for a DVD or movie release — if the audiences were similar in size, I suspect that computer game prices would be similar to those of DVDs).
The idea of piracy being rampant because games are expensive is a two-sided affair. Prices are bolstered to offset losses from piracy, so it comes down to this: Piracy will become more prevalent as prices rise, but as piracy becomes more prevalent, prices will rise…ad infinitum.
I don’t buy this argument for a second. If piracy is so rampant, how come millions of people ponied up to buy The Sims and Diablo II when they could have just pirated the games?
I suspect piracy plays a very limited role in denying sales to computer companies. Instead, pirates are likely those people who would only buy a game at say $20. If a game company optimizes its revenues by pricing at $65, then the person who would have bought the game at $20 but pirates it at $65 isn’t really a lost sale at all.
Not that the company wouldn’t prefer to sell to that consumer at $20 rather than see him pirate a copy, but the constant technological change makes it difficult to price discriminate to capture that customer.
With a DVD, after a couple years the manufacturer can lower the price to maximize revenues. With a computer game, two years later the game is so dated that even drastic price cuts seem unable to motivate people to buy (in many ways, the computer game market is similar to the music industry in that today’s hot thing dates very quickly).