The 60-Buck Dilemma

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  DavidThomas (Game Trust Writer)

  10/13/2009 11:26:53 AM

  @Andy Bates:
  
  I'd just like to point out that you are making the same point that the article is: Games are not worth $60. Some games are worth more to some people and they pay $60, some games are worth less, so they don't buy them because they cost $60.
  
  In other words, games are not worth $60. Or as you put it, some games you value at $60 or more and you are willing to pay that.
  
  Thus the question raised, and the article attempts to answer, is why? Just saying "It's capitalism" isn't enough!
  
  -- David

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  Andy Bates

  10/13/2009 4:27:22 AM

  Yes, games cost $60 because they are worth it. If people will pay $60 for games, then by definition they are worth it. That’s how capitalism works.
  
  There are several major flaws in this article. First of all, it is inane to claim that the value of a game is based on its play time. Is Halo worth more because you have to backtrack through the entire game at the end? Is Portal worth less because it can be finished in a single play session. Games are not a “by the hour” medium, just like books and movies aren’t.
  
  Secondly, quality is subjective, not objective. Sure, in an ideal world, games would be priced at the exact amount that would get YOU to buy them. The problem is, not everyone has the same tastes as you. I could care less about 500 cars in a racing game, but for someone else, $60 is a steal for that amount of content. And you may not be excited about WET or think it is worth 60 bucks, but maybe someone else does. (Maybe…) The point is, you can’t just say, “Most games aren’t that good, so most games shouldn’t be priced at $60.”
  
  Finally, the “hits-driven mentality” doesn’t marginalize smaller titles. Take movies for example: District 9 was made for (relatively) cheap, which allowed it to make a huge profit, even though it didn’t do as well as the big blockbusters. The smaller, cheaper titles DON’T have to compete with the big-budget titles, because they can make a greater profit with fewer sales. They don’t need to sell Halo 3 numbers; they just need to sell enough to make a nice profit.
  
  I think the entire premise of this article is flawed. For $60, I am getting a damn good value out of my games today. Maybe the author needs a sense of perspective, but I paid $50 for Space Invaders less than thirty years ago. Sure, it offered infinite play time, but very little in the way of actual content. There is more content on a title screen of today’s games than there was in the entire 2600 catalog back in the day. Paying $60 for a world of gameplay? Now that’s a steal!

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  CFGetzie

  10/8/2009 10:39:33 AM

  When Super Mario Brothers 3 came out for the NES in 1990, Toys R Us sold it for $49.99. New Super Mario Brothers Wii comes out next month, and Gamestop is selling it for $49.99. I would argue with your premise that top tier games used to cost only $40, or that they ALL now cost $60. But even if those stats WERE true, the increase doesn't even cover inflation.

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  saregos

  10/6/2009 1:15:30 PM

  @strawdog:
  
  My point here was less the fact that it costs less on PC, but that, when taken in association with other releases (for instance, Red Faction: Guerrilla), it makes an interesting comparison.
  
  More specifically: Those two games are judged to be worth the exact same, for whatever reason... on console. On PC, the prices they were released at vary.
  
  If publishers are the ones setting the price points, and the major driving force behind those points is the market equilibrium (i.e. Everyone else is selling for 60, I should too) you would expect that logic to carry over to PC. There's no reason offhand that I can think of why a publisher would choose to reduce the release price of a game on PC, but not on console. Unless there's an outside force encouraging them to set the price at 60 on console.
  
  In other words, using the $8 license fee as the only difference between PC and console (it's not, I know), why is Eidos sacrificing $2 profit on Batman (as compared to the console equivalent price), but THQ sacrificing $12 profit on Red Faction?
  
  For that matter, why is THQ choosing to not price any games on PC above $40? It's a choice that has no parallel in the console market.

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  strawdog

  9/30/2009 1:11:10 AM

  @saregos:
  "Batman - $50 on PC, $60 on console - this is pretty typical, the standard price point on PC is $50 instead of $60"
  
  As with everything in this discussion there is no simple reason for this. Part of this is perceived quality - a console is a dedicated games machine and worth a premium. Next the fact that the PC is an open platform. Time spent on a console is mostly spent gaming but time on a PC can be spent on multiple different past times. PC games must compete for time on the PC and part of that attempt to compete will be lower cost. Lastly, and probably most importantly console games cost more to manufacture because the publisher must pay an approx $8 license fee to the console company for every single unit they ship.

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  drixmok

  9/29/2009 10:38:57 AM

  Hi all !
  
  I read the article and the following discussion with great interest, and I thought you might be interested to know a few things about the situation on the other side of the ocean. the Atlantic one. ;)
  
  Here in France, HD games cost 70€ (approximately 100$... yup!), whatever the console or the shop are. As in the USA, there is absolutely no concurrence.
  Therefore, many french gamers import their games from USA (because of the currency rates) or from the UK. You might ask why, considering what frogacuda previously said about the price rate fixed at 50£.
  It appears that UK and its tax free islands (Jersey, Guernesey, etc.) are on a constant tarification war. In this country, you can count the 50£ games on the fingers of one hand. A couple of examples :
  - Batman Arkham Asylum, maybe one of the biggest recent games, could be bought for about 22£ (36$) when preordered! And it can now easily be found under 35£ (58$).
  - the now wellknown WET is listed between 12£ (19$) and 32£ (51$).
  
  Knowing the situation everywhere else, I can't understand how this can possibly be. If anyone has any answer, I'd be glad to hear it.
  
  Anyway, as far as I can remember in my long gamer life (meaning since the NES), game prices have always been fixed. On the NES/Master System, it was - in Francs, our previous currency- 350F (77$). On SNES/Megadrive, it was more 450F (100$), with some crazy peaks around 600F (130$) for games like Super Street Fighter 2' or Secret of Mana. Then, on PS2/Xbox/GC, we came back down to 60€ (87$). of course, there have always been exceptions, but the fact is : prices are arbitrarily determined, and nobody knows how. except in the UK, it seems.

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  DavidThomas (Game Trust Writer)

  9/28/2009 5:57:06 PM

  @Frogacuda:
  
  OK. I am officially baffled. Entitlement?
  
  Huh?
  
  If WET is soooo awesome, and cost so much to make, then why don't they charge more for it?
  
  Because they can't, apparently. They are stuck with $59.99 and have to try and sell a lot of copies.
  
  So, how is pointing that out anti-developer?
  
  If anything, I think there should be more price points in games. I think some games should cost $100 and some $1. In practice, this is the case if you think about the whole inustry. But not so much on consoles. This story was only about the "Why" of the price point. It certainly does not argue that the price point is right. If anything, the story suggests that $59.99 is close to arbitrary.

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  CG-Gabe

  9/28/2009 5:53:56 PM

  @Frogacuda:
  
  I kind of agree with Frogacuda here. I recall spending $50 per game 20 years ago. Given the skyrocketing production costs, $60 seems like a bargain almost.

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  Frogacuda

  9/28/2009 5:31:51 PM

  More numbers:
  
  In 1988, the average game cost $50. Adjusted for inflation, this is roughly $90 now. Phantasy Star retailed for $80. Today that would be $143.
  
  Even if we look at when games were at their cheapest on the PlayStation 1, $40 from 1995 adjusted to now is about $57, and those devs had far lower development costs and somewhat lower license fees.

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  Frogacuda

  9/28/2009 5:23:30 PM

  Just some numbers:
  
  In the UK, games retail for 50 GBP, or $80 US Dollars.
  In Japan, games retail for 7.900 Yen, nearly $90.
  
  The rest of the world is subsidizing the industry so you can get your games cheaper. The fact that you think you're paying too much seems strange to me.

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  Frogacuda

  9/28/2009 5:16:08 PM

  @DavidThomas:
  
  The reason I've been frustrated and reading a sense of entitlement into what you say is because when you go:
  
  "What fascinates me even more at this point is that we have this price point at all. Maybe it's too low. Maybe it's too high. Maybe it's just right, but for fewer games than usually carries it."
  
  You don't even seem to be acknowledging the possibility that costs are too low. Games cost a lot more in Japan, and game companies are struggling to maintain profitability, and it's easy to see why.
  
  Let's use the first example in your article, WET. This is a game developed by a good sized studio over the course of 2 or 3 years, meaning it cost about $15 million to make. It has a national marketing campaign that probably cost about $10 million, and the publishers are likely taking a large cut too. Now if they're only making $30 per copy, this means that, WET has to sell a million copies to be profitable. That's a lot!
  
  Do we want to live in a world where the only games that get made are ones that can sell a million copies? Do we want to live in a world where the only movies that get made are Transformers 2 and GI Joe? If you don't shut up and pony up for games and stop waiting for stuff to price drop, this is the world you're making.
  
  You're just not crunching the numbers on the development side. At ALL. And yet you still want to insist that the number is weird/high. What's your motivation for this? If it's not wishful thinking or entitlement, then what is it?

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  DavidThomas (Game Trust Writer)

  9/28/2009 2:39:45 PM

  I have to say, this as been a very good discussion thread and great conversation on this topic. Clearly, the story was just scratching the surface on how game prices are determined. And there are a lot of counter examples to the $59.99 price point.
  
  What fascinates me even more at this point is that we have this price point at all. Maybe it's too low. Maybe it's too high. Maybe it's just right, but for fewer games than usually carries it.
  
  It is funny to think though, whether it happens in practice or not, gamers and developers alike starting with $59.99 and work backwards. Devs figure how much they might earn based on the $59.99 price and gamers save up based on the idea that will be what games will cost.
  
  So, whether the story nailed a definitive answer, the one thing I will stick with is this:
  
  It's really weird that so many games carry this $59.99 sticker.

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  Frogacuda

  9/28/2009 1:56:40 PM

  @DavidThomas:
  
  Obviously we'd be better with more diverse price points, and if you look at the PC market, you'll see just that. There are $10, $20, $30, $40, and $50 dollar games aplenty. But the overhead on consoles is much higher, which makes it really difficult for a game below the $40 mark to be both profitable and competitive.
  
  If we move to a third-party console standard and pay a bit more for hardware, we can have that dream, but the industry and the public still seem largely terrified of that thought.

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  Knight84

  9/27/2009 7:27:34 PM

  @DavidThomas:
  
  I also wanted to thank you for taking the time to respond to user comments. I understand that it would be easy for you to simply let everyone tear apart your argument, wether they are right or wrong, and do something more productive with your time.
  
  I also agree with the previous argument that inflation accounts for some of the price.
  
  The more I have thought about this argument though, I was wondering how we could really rate the number of hours a user will actually play a game. Everyone does this based on how long the story mode takes in an average play through and how many different modes there are availabe. Maybe the community is going about this the wrong way though. I do believe that the number of hours is relevant, but you can't expect that to be the most relevant criteria to the community. Some gamers will play a game with little story or sub bar extras based on the industry standard. Sometimes this may only be a few gamers however in other cases this is many gamers.
  
  Think about a game like Halo ODST. The story mode in this game has only nine missions. Regardless of how long each mission is the extra disc in this game is a compilation of the map packs and three extra maps.
  
  A lot of gamers have argued that the content is not worth the price yet the number of copies sold is well over 2 million. The market is unpredictable. The market also sets the price.
  
  Another factor that comes into play is used sales. When I worked for Gamestop/EB games I found out that used sales count for billions of dollars. This plays a roll in determining price point in new games as well.

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  Knight84

  9/27/2009 1:56:24 PM

  @DavidThomas:
  
  I agree with your argument that the industry does not take into account the differences between the products they produce.
  
  What I beleive helped drive the price up on games is the test marketing on collector edition games. Halo 2 limited edition was a test to see if gamers would pay the extra price for these games. It was certainly not limited, and if my memory serves me it sold very well.
  
  The Nash equilibrium argument serves to say the companies in this oligopoly are not competing on price. They are competing with differential advantage. Instead of trying to lower development cost constantly they just try to have something the competition doesn't like God of War, Halo, or Mario.
  
  

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  DavidThomas (Game Trust Writer)

  9/27/2009 12:09:46 PM

  @Stinking Kevin: Thanks for reading the article and bothering to think about the argument presented! I think you pretty much have it down. And, no, this little 1,000 words of summary certainly doesn’t pretend to have all the answers about game pricing. But talking to experts in the industry (and remember, a lot of the big players didn’t even want to talk about price!), you come to the conclusion that the price of games has this odd legacy.
  
  Whether we would be better off with a different price point, or many different price points, is really another question all together!
  
  @Knight84: Your points are well taken individually, but together, I think you might be missing the point. (And It always surprises me how business school people fail to remember their basic economics when making big proclamations about how markets functions!)
  
  So, is Nash Equilibrium an explanation? Maybe? The same solution is offered in the article as “price leadership”. In other words, rational competitors figure out that they maximize profit if they all set a higher price than they otherwise would in perfect competition. Right?
  
  As for utils, uh, what we are talking about here is aggregate demand in a mass market. The discussion following the article has covered individual opportunity cost. But that discussion doesn’t cast a whole lot of light on why we have these diverse products, called AAA console games, that all have the same price. Your util theory would suggest exactly the opposite because the opportunity cost for different people would be different, driving price differentiation in the market.
  
  For everyone: THINK ABOUT THIS:
  
  In games a relatively few game producers somehow settle on a $59.99 price for products that range in quality, development cost, length of play, type of play and relative size of fan market. Diverse product share a consolidated price.
  
  In automobiles there are relatively few producers and they somehow have a wide variety of prices ranges across cars of different quality, development cost, repair records and style of car and market size. Diverse products have diverse pricing.
  
  
  Why?
  
  Why do games cost $59.99 and cars don't generally cost $29,999?
  
  I'd say that the automobile industry works according the basic notion of the free market and the game business does not.
  
  Now, your turn. If you think that the article is full of hot air, then why are games $59.99?
  
  PS @Forgacuda: I appreciate your comments. But you are still arguing with someone else. The article simply does not make the claims you suggest!
  

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  Stinking Kevin

  9/27/2009 8:37:57 AM

  @Frogacuda:
  Before you accuse anyone else of being naïve and selfish, consider that the marketing costs publishers pay for an AAA game are usually two to three times the development costs. These are the same publishers who decide how to price games, the same ones who got that $59.99 price point...from somewhere. If you read the article carefully, as the author suggests in his response to you, the question is more about where the numbers come from, more than whether or not they are "fair."
  
  I am pretty sure it has a lot less to do with development and manufacturing costs than you seem to think. I expect, as the article seems to suggest, that it has more to do with standards and expectations. If publishers can set the standards, they can control consumer expectations. It's not about anyone owing anyone anything, it's just about why $59.99 was set as the current standard.
  
  Stop me if you've heard this one before:
  Ralph Baer is the father of video games, because he is the was the first guy who figured out how to create interactive entertainment you play on your TV. Nolan Bushnell is the father of the video game industry, because he is the first guy who figured out he could charge $50 for a piece of silicon and plastic it cost $2.50 to manufacture.
  
  Maybe it's just easier for publishers to sell 100,000 games at $60 instead of 300,000 at $20. Especially if they can make us believe that the extra money is going to the poor overworked devs, instead of to all the PR reps and advertising campaigns that convinced us we needed to buy the game in the first place.

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  Knight84

  9/26/2009 9:55:29 AM

  I'm just curious as to how far in the education of business any of you have made it, including the author. I mean no disrespect to anyone.
  
  However it seems like most of you are generally using concepts from business and applying them incorectly or without a complete grasp of the concept.
  
  Has anyone ever heard of the Nash equilibrium. If you haven't I am sure you have heard of the movie "A beautifu Mind". Anyway the main reason that major companies do not compete on price directly is because of this. I could explain it or you could look it up. I think many of you would benefit from digging to find it as I have just explained this on my last two exams this week and don't wish to write another long example.
  
  Another couple concepts we are not taking into account are Utils and opportunity cost. Everyone is discussing these concepts without applying them directly.
  
  A sixty dollar price point does have many factors to it. I am not saying any of you inculding the author is inherently wrong. I am just saying that you are leaving out good explanations in your example, based on how business works fundamentaly.
  
  You can't define how much a game is worth to an individual without applying the opportunity cost and the number of utils one gains from playing said game.
  
  Lets say a person has 60 dollars to spend and a game cost exactly that. The individual has a choice spend 60 dollars on a game or something else as previously discussed.
  
  If they spend 60 dollars on one game they cannot spend it on another because they only have 60 dollars. However they could spend it on dinner with their significant other as previously mentioned. Deciding which to spend the money on is the opportunity cost to the individual. These actions will be dictated by several things. One of these things is the number of utils the consumer will receive from each activity. The higher the utils the more satisfaction one gains. This is how a consumer may choose between each product.

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  Frogacuda

  9/25/2009 10:05:16 PM

  And just to add to that, does it occur to you that games where development costs are lower (Wii) or manufacturing costs are lower (PC) cost less? Or that the price of games went DOWN when the industry moved to CDs (PSX and DC games were $40)? These numbers come from somewhere, whether they're an exact calculation or not. It's a rounding off of real factors to a number that sounds good to the consumer.
  
  You argue the number is strange and will change, but you don't base this on the needs or costs of the average dev house. Do you know what most devs make off games? They barely cover costs! And unless you're Valve, you probably get screwed out of royalties. It's just a naive and selfish argument.

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  Frogacuda

  9/25/2009 9:59:15 PM

  @DavidThomas:
  
  No, it's not a magic number, and it's not THE number, and I understand that. The number has changed many times, obviously. But the fact that, in a competitive market, competing products often tend to settle on a common pricepoint (new release DVDs are almost all $15 or $20, movie theaters tend to charge comparable prices within the same region, etc), it does not mean that that price point is arbitrary, as you seem to be implying.
  
  It isn't that they magically up and decided one day to charge more. Did you notice what that day happened to be? You know, when the new system that requires more the double the amount to develop for came out? But you want a better, more expensive product at the same price, year in, year out, regardless of inflation, regardless of the market, and regardless of any actual understanding of the business end of game development.
  
  The central problem with this article is the sense of entitlement. Rather than simply saying "Some of these games aren't worth my money," and spending it on something else, you act like you're owed those games at a price of your choosing. No one owes you anything!
  
  The fact is, games should be more expensive right now. The cost of development and marketing is so high, it's extremely difficult to be profitable in the HD market. And if you bothered to research this, you'd know that. Instead you just come off as another person that thinks the world owes them something. Keep your money and go home.

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  Frogacuda

  9/25/2009 9:59:08 PM

  @DavidThomas:
  
  No, it's not a magic number, and it's not THE number, and I understand that. The number has changed many times, obviously. But the fact that, in a competitive market, competing products often tend to settle on a common pricepoint (new release DVDs are almost all $15 or $20, movie theaters tend to charge comparable prices within the same region, etc), it does not mean that that price point is arbitrary, as you seem to be implying.
  
  It isn't that they magically up and decided one day to charge more. Did you notice what that day happened to be? You know, when the new system that requires more the double the amount to develop for came out? But you want a better, more expensive product at the same price, year in, year out, regardless of inflation, regardless of the market, and regardless of any actual understanding of the business end of game development.
  
  The central problem with this article is the sense of entitlement. Rather than simply saying "Some of these games aren't worth my money," and spending it on something else, you act like you're owed those games at a price of your choosing. No one owes you anything!
  
  The fact is, games should be more expensive right now. The cost of development and marketing is so high, it's extremely difficult to be profitable in the HD market. And if you bothered to research this, you'd know that. Instead you just come off as another person that thinks the world owes them something. Keep your money and go home.

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  DavidThomas (Game Trust Writer)

  9/25/2009 6:34:18 PM

  @Frogacuda:
  
  Before I bother to reply, can you please go back and actually read the article I wrote? There are three whole pages after all!
  
  I don't mind being wrong or being criticize. But it's hard to know what to say when you are not characterizing the ideas in the article correctly.
  
  Personally, I don't judge a game by its length. But I don't see any reason why people wouldn't.
  
  And the central point of the article is this:
  
  $59.99 is not a magic price point for games. It is not number that pops out as a result of the game development cycle. It's a strange number that has been settled on, I argue in the piece, through a series of odd factors. Understanding these factors will tell you why it is entirely possible that games will sell for less in the future.
  
  So, take a breath, think about what a moron I am, and re-frame your argument.
  
  
  
  

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  CG-Prophet (Game Trust Writer)

  9/25/2009 6:14:14 PM

  @Frogacuda:
  
  "Nor is there any appreciation for the fact that there ARE games below the $60 point, but they're few these days because we have an industry controlled by a handful of first parties that rape the very developers selling consoles."
  
  
  
  I will agree wholeheartedly with this part of your statement. First parties are really what control price when it comes to console games.

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  Frogacuda

  9/25/2009 5:58:54 PM

  This article is gross.
  
  First of all, the author has zero respect for the medium, as evidenced by his emphasis on play length. Just as grocery stores list the price of rice by the pound, his only concern is how long he can stare at the screen before once again faced with the unfortunate reality of being alone with his thoughts. Time=value, with no regard for, say, the fact that a 7 hour game like Mirror's edge -- heavy on lush, detailed content that the player must run through quickly -- costs more to make than most 40 hour RPGs with repetitive hallways, palette swapped enemies, and the same fights over and over. There's also no regard to how unique or enjoyable that time was. Nope, all that matters is that I was able to go 40 hours without having to face my life.
  
  The other thing that's troubling is that he doesn't appreciate that an industry with such high overhead can't function any other way. A game like WET may not have cost as much to make as Grand Theft Auto 4, and it may not be as long or even as good. But it also isn't going to sell 1/10th as much, and in order to be profitable, it needs to sell for full price.
  
  This is the same reason movie theaters don't charge different prices based on what movie you're going to see, nor to the price by the minute. You make your decision about which movie you want to see and you pay your $10 (in New York, anyway) to see the movie you've selected. If you're unhappy with that, you should have seen a different movie (and indeed many will have chosen differently than you).
  
  The sense of entitlement in this article, and the lack of respect is appalling. There's not appreciation for history, really, or the fact that we payed $60-$80 for SNES games back when those dollars were worth a lot more. Nor is there any appreciation for the fact that there ARE games below the $60 point, but they're few these days because we have an industry controlled by a handful of first parties that rape the very developers selling consoles.

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  saregos

  9/24/2009 1:49:58 PM

  It's rather interesting, in this case, to take a look at the vast difference between PC and console gaming.
  Just going through a little of Steam as compared to EB's website:
  
  Batman - $50 on PC, $60 on console - this is pretty typical, the standard price point on PC is $50 instead of $60
  
  Red Faction: Guerilla - 40 on PC, 60 on console - This raises an interesting point, as you'd expect the conversion between PC-cost and console-cost to be the same across the board. Which it's not.
  
  Tales of Monkey Island - 35 for the whole set on PC, as compared to 50 for the whole set on Wii (1000 points each)
  
  Oblivion - Game of the year edition is 30 on each
  
  It's interesting to note that in none of these cases, in theory at least, are you getting a different game on PC as opposed to console. You're getting the same value for two notably different prices.
  
  I don't really know much about the legalities, but if the console manufacturers wanted all new games on their console to cost the same initially, does there exist any legal argument as to why they can't do that? It seems to fall within the context of a business agreement: I'll allow you to use my proprietary equipment if you agree to sell your game at this price point for a certain length of time.
  
  That would explain why prices are fixed on the consoles even though they're incredibly fluid, for the same product, on PC.

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  2DX

  9/24/2009 12:33:05 PM

  This is why downloadable games, which I was initially a bit cold toward, is a technological godsend.
  
  Back when I was a dumb kid and I tossed cash about like it was a frisbee, $60 for a game was nothing. This is coming from someone that was a Neo Geo owner, I should add.
  
  $60 now? If just couldn't swing it if I was in the habit pf purchasing title. But $15 or so for Shadow Complex. YES, PLEASE. Castle Crashers? YUP. I havent played Contra Rebirth yet, but looking forward to it.
  
  I wonder if guys like me are simply a tiny portion of the gaming population that won't greatly impact the big prices--but i'm hoping for the revolution!
  
  

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  DavidThomas (Game Trust Writer)

  9/24/2009 10:46:04 AM

  @w1ndst0rm: It figures that I got into a debate about price with someone in finance! Hehehe. But I do agree we are sort of arguing two sides of the same coin. There is no inherent value in a game. So the length of play can be a pro or a con (as is noted by @vherub.
  
  @jabberwockgee: Yes. I think it would make sense to include inflation in the bigger picture. The trouble is twofold, as I pointed out when Kyle noticed my ommision. 1. Inflation still doesn't explain why pricing is fixed across so many different products at any level. 2. CPI-based inflation adjustments show a big trend. But we have lots of examples of declining prices in games (in the PC market for example) and of computing hardware (you can buy a desktop system for under $500. Ten years ago, the low end desktop was probably $2500). So, inflation needs to be looked at, but I don't think it is a driving factor.
  
  What I would love to know is some industry average financial info like gross margin or compound annual growth or some other bottom line measure, adjusted for inflation. Why? That would tell us if the game business is making more or less than it used to, on average. If they are making more at each price jump, well, that sure does indicate that that inflation has less to do with than profit maximization.
  
  And, oh dear, here we go again, back down the economics and finance rabbit hole. Weeeeee!
  
  

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  jabberwockgee

  9/23/2009 9:47:11 PM

  CPI in October 2000 (when PS2 came out) = 174
  CPI in November 2006 (when PS3 came out) = 201
  
  Inflation according to these = ((201-174)/174*100%) = 15.5%
  
  A $50 game in Oct. 2000 * 1.155 = $57.75
  
  Maybe they're just correcting for inflation. Something to think about.

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  vherub

  9/23/2009 9:20:55 PM

  I'm pretty sure I threw down more than $50 msrp for certain snes rpgs when they came out.
  When I was young, I hand plenty of time, but not much money.
  Now, I have enough money to buy whatever games I want, but time is the restraint.
  More often than not, a game that lasts a hundred hours I stay away from- much of that huge time sink is filler and not as enjoyable. But game reviewers rarely knock a game for being too long, while reviewers kill games that are too short.
  A tight game that is fun from start to finish and clocks in at less than 10 hours is what I target.

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  w1ndst0rm

  9/23/2009 5:27:59 PM

  @DavidThomas:
  
  I hope you keep having this conversation with me. This is why I love Crispy Gamer. I agree with 90% of your last post. The point of my last post was that we were getting into two different discussions. Two closely related and sometimes intertwined discussions but not the same. The two discussions being 'opportunity cost/marginal value of a dollar' and 'the set value of a thing.' The reason the distintion is important is that developers can't take into account all of the marginal value decisions out there when setting the price/value. (Having said that there have been a few times that releases have been rescheudled so as not to go up against some other epic title.)
  
  The conversation made for a good afternoon at work ... in finance. ;)

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  DavidThomas (Game Trust Writer)

  9/23/2009 4:59:54 PM

  @w1ndst0rm:
  
  I'm just gonna keep having this conversation with you, aren't I? :)
  
  OK, to tie the girlfriend comment to the entertainment per dollar comment:
  
  In both cases, we are talking about the marginal value of the dollar. I might spend $100 on a dinner with my lady that might only last 2 hours, but that is worth it to me. That does not mean I would spend, or can afford $50 an hour for entertainment (I'm not Scott Jones, after all).
  
  The same logic applies to games. If I only have $60 to spend between now and Christmas on one game, I might decide to buy Fallout simply because I have heard it includes hundreds of hours of play and skip RE5, because I think it will be shorter.
  
  On the other hand, if I have plenty of money, I might buy Fallout, play it for 6 hours and be happy.
  
  Same game, different value per hour. But also two different values of the original $60.
  
  So, maybe the way of saying this more clearly is: There is no inherent calculation of dollars of entertainment per hour per game. But individuals can make that calculation. And they probably do at some level. It's one of the reasons Left 4 Dead is so popular, right? It's Gus' deck of cards. You keep playing it over and over with friends and that makes it seem like a really great purchase.
  
  Or something like that!
  
  Oh, and @Mogget, I can only hope you are a game developer, since that is the most awesome game pitch I have heard in years!

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  Mogget

  9/23/2009 4:18:41 PM

  Now I really want to know what Graylo 2 is like.
  Wait...I see it! It's an rpg - platformer hybrid(think Super Paper Mario) where this little grey guy is saving the world from the invasion of crayons, and you meet pencil-people in towns and - now I really want this game.
  
  Oh, and great article, by the way.
  I have always taken these prices for granted. Maybe I should put some more thought into the world around me.

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  RyanKuo (Game Trust Writer)

  9/23/2009 3:58:52 PM

  @w1ndst0rm:
  
  (You can actually edit your comment in forum view. Click the "Forums" link all the way below and find your post there!)

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  w1ndst0rm

  9/23/2009 3:54:39 PM

  @w1ndst0rm:
  
  bah, missed a tag in there
  
  Thanks Ryan, and it only took me three tries to figure it out.

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  w1ndst0rm

  9/23/2009 3:52:27 PM

  @DavidThomas: I hear you/Jesse but the 'under pricing' will differ and depend on each individual player's preferences and opinions. Also, in this pricing world what if I buy FallOut 3 for $80 but only play $63 worth? Do I get a refund? Would any/all of us have had more fun if BioShock was $48? Really? The idea leads to variably quantified craziness in practice; fun to discuss but not to work with.
  
  I do agree that it isn't the whole story but probably because I still don't buy it that it should be a part of the story and I think it should be tossed out. (I do understand that is purely opinion.)
  
  When you said this: "People generally have only so much of their budget allocated to entertainment. So it's not so much: How much fun per dollar do I get from this game? As it is: Should I spend this $60 on a game or taking my lady out to a movie?" It became a different discussion. We left the realm of 'what is a game worth in dollars per hour' and moved into discussing opportunity costs associated with being a gamer with a girlfriend.
  
  ~Rarely applicable.
  

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  DiTrent

  9/23/2009 3:25:49 PM

  Here in Canada, many new game releases are $69.99. Especially the most anticipated. RE5 is STILL $69.99 and it was released in March! The price has not dropped in 6 months! At what point does a game become a Greatest Hit? How many copies do they need to sell?

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  DavidThomas (Game Trust Writer)

  9/23/2009 2:32:44 PM

  @w1ndst0rm On the cost versus playtime argument:
  
  What he was suggesting in the article is that there is not a tight relationship between price and quality in games. In other words, because you pay $60 for Bioshock and enjoy the heck out of it, that just means that Fallout 3 is a crazy deal, not that Bioshock wasn't worth it to you. In that sense, he is making a similar argument to yours. The difference here is,he says that games might be underpriced in many cases, not necessarily overpriced.
  
  But that's not the whole story, I think.
  
  Sports games have traditionally sold well, I would argue, because to someone who is only going to buy a couple of games in year, Madden does seem like a deal.
  
  And we do price books with more of an eye to quality and length of experience. New hardbacks cost more than trade paperbacks. Longer books can cost more than shorter books or, if you are Neil Stephenson, you make your one book into 12 books and sell them separately for $6 a piece.
  
  So, while the entertainment per dollar argument isn't complete on its own, I don't think you should toss it out.
  
  People generally have only so much of their budget allocated to entertainment. So it's not so much: How much fun per dollar do I get from this game? As it is: Should I spend this $60 on a game or taking my lady out to a movie?
  

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  GusMastrapa (Game Trust Writer)

  9/23/2009 1:48:22 PM

  Well said, w1ndst0rm. If money was the ultimate concern I already have a deck of cards and know how to play solitaire. I'd never need to play another videogame again.

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  Tyber

  9/23/2009 1:43:54 PM

  Something that the hourly rate argument doesn't really cover is quality. Sure, Bioshock was a very short game, but damn, those few hours really packed a punch. I still can gain enjoyment from the memory of playing the game, just like I can from a good book or movie.
  
  I spent a LOT more time playing Halo 3, and can still pick it up and enjoy it, but those hours were not as enjoyable as when playing through Bioshock.

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  RyanKuo (Game Trust Writer)

  9/23/2009 1:19:32 PM

  @w1ndst0rm:
  
  I'm with you. Nobody applies that utilitarian line of thought to books for example.
  
  @CG-Gabe:
  
  Oh! I forgot. Luckily a copy of GoW2 will cost me $0. I believe every office should have its own gaming library.

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  CG-Prophet (Game Trust Writer)

  9/23/2009 12:20:02 PM

  @DavidThomas:
  
  Price fixing?

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  CG-Gabe

  9/23/2009 12:16:57 PM

  @RyanKuo:
  
  In five months I'll be over GoW2. :(

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  w1ndst0rm

  9/23/2009 12:15:03 PM

  ""A consumer will pay $60 for a Call of Duty game, log in 100 hours of play (at about 60 cents an hour), and at the same time pay $60 for the first BioShock and only log in about 20 hours of gameplay (or $3 per hour of entertainment). That is a 400-percent difference in value.""
  
  I so hate that metric and I still do not believe consumers actually sit in an aisle at Target or on a website from home and do that math.
  
  If we are deciding which game to buy based on that the gamer subculture is in a bad place. People buy things based on hard to qualify or quantify feelings. Will I have fun? How much fun is it? Am I invested into a character or a franchise? Is this game 'good' or 'bad?' My point is that if your decision process gets all the way down to dollars per hour the game probably sucks - or doesn't have better things to base a decision on.
  
  Plus NPR and PBS have done plenty of shows with academics showing how humans make emotional purchases rather than rational purchases.
  
  
  Furthermore if you have decided to spend your money on a game in the first place the dollar value metric is in vain. There are many more important things in this world to spend, or give your sixty bucks on/to . . . /end soapbox.

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  Agnitio

  9/23/2009 11:51:17 AM

  @DavidThomas:
  
  2k Sports did try to price their games at $20 some years ago. No one has really tried that since so I'm going to assume it wasn't successful?

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  HaroldGoldberg (Game Trust Writer)

  9/23/2009 11:49:22 AM

  If you talk to other analysts (ask me offline who), they'll say the center will not hold for a $60 game in the future, especially with the economy the way it is. The pricing to me is outrageous, unless it's a game like GTA IV or Fallout 3 which has so much gameplay. But look at how far Madden has fallen this year when it comes to sales. Is it the price or the quality (or the fact that Madden now sits next to George W. Bush at football games)?

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  DavidThomas (Game Trust Writer)

  9/23/2009 11:45:46 AM

  @RyanKuo:
  
  Oh, and Ryan, you are personally ruining the videogame industry. Developers can't live on that dollar!

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  DavidThomas (Game Trust Writer)

  9/23/2009 11:44:54 AM

  @CG-Prophet:
  
  I think that is part of the answer.
  
  But why doesn't Sony sell games for $54.99? Nintendo sells games, usually, for $49.99. Why doesn't EA sell games at all kinds of crazy price points? We have greatest hits that are routinely resold at lower price points. And games get steadily discounted after they are launched new.
  
  Price theory usually supports the notion of stratified pricing to meet a lot of different marginal demands. And we see that over time. But why not more price variability with brand new console games?
  
  If anything clear emerged from looking into this question, it was that a very weird and complex set of factors had collided to make this price point stick.
  
  Maybe the next question to ask is the one the story ends on: What is the future of game pricing?

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  RyanKuo (Game Trust Writer)

  9/23/2009 11:22:48 AM

  My solution is to only play GeoDefense Swarm for the next five months. That's $1 for five good, solid months of intense, fast-paced, frustrating, existential gaming.

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  CG-Prophet (Game Trust Writer)

  9/23/2009 11:17:29 AM

  Games are priced the way they are because of console makers. They set the price, and even though there was no secret meeting amongst them, Microsoft had plenty of time to set the standard with the Xbox 360. That's the real answer.

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  DavidThomas (Game Trust Writer)

  9/23/2009 11:17:09 AM

  Good point. But as you note, this just moves the conversation back a few years--why did games used to be $49.99. And in an expanding market, why haven't game prices declined? I mean, consoles are more expensive and computers are less expensive, right?
  
  So, inflation should be a part of the explanation. But it doesn't really tell us much on its own.
  
  Me, I am hoping for a subscription model. I happily pay Netflix $25 a month to watch nearly new movies and last year's television shows. Sure, I miss out on the premier excitement. Then again, I don't have to pay $10 for a movie or $50 a month for cable:)

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  KyleOrland (Game Trust Writer)

  9/23/2009 10:33:41 AM

  Good piece, but you missed one really obvious cause for the increase in game prices over time: inflation.
  
  $40 in 1989 dollars is $68.61 in 2008 dollars, going by the Consumer Price Index (source: http://www.westegg.com/inflation/).
  
  Of course, this alone doesn't explain why $59.99 is the flat standard for seemingly every game. Still, I don't think a $70 game standard is out of the question in the next ten years. Remember, $70 ain't what it used to be.

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