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Next-gen software: Will pricing hold?

Next-gen software: Will pricing hold?

Fri 22 Feb 2013 8:30pm GMT / 3:30pm EST / 12:30pm PST
BusinessDevelopment

Games jumped from $49.99 to $59.99 in the last generation - analysts discuss whether $70 will become the next standard for AAA titles

With the PlayStation 4 unveiled and rumors swirling that Microsoft is preparing to announce a new Xbox in April, next-gen is all the buzz right now. These are massive investments from the respective platform holders, and under the old "razor and blades" model the hope is to make back much of the money on software. And since some of that software is going to cost a good deal more to develop (although not as much as some think, says Hermen Hulst) should consumers be worried that $69.99 will become the new standard AAA game price?

GamesIndustry International posed that question to a few analysts. The consensus seems to be that $59.99 should be able to hold, but some big budget titles like Call of Duty and others could get away with higher.

"I think that games should be priced based on the value proposition, so some games should be priced higher, but I don't think the publishers have the collective will to charge more. My guess is that $59.99 will be the price point. I would applaud the publishers if they tried to charge $69.99, although gamers would probably get upset," said Wedbush Securities' Michael Pachter.

"I would applaud the publishers if they tried to charge $69.99, although gamers would probably get upset"

Michael Pachter

Sony Computer Entertainment America boss Jack Tretton told AllThingsD that PS4 will support a variety of prices from $0.99 to the $60 range (of course, "range" could imply $69.99). But the bottom line is that in this digital era, a variety of content will lead to all kinds of pricing. And as EEDAR's Jesse Divnich pointed out to us, publishers can maintain the $59.99 price but bring in much more revenue with additional DLC.

"The $59.99 price point in the United States for next-generation games are unlikely to change. As we've seen through the years, however, revenue per game has increased gradually as publishers have been able to capitalize on additional in-game and digital content," he said. "With publishers focusing on fewer, yet bigger and longer lasting titles, I'd expect publishers to keep the $59.99 price point intact, but expand on their digital offerings with more in-game content and expansion packs."

He added, "And I don't think this is a scenario where publishers ship a 'base' product and gauge on digital offerings. We believe these digital offerings, like they are today, will expand upon the player experience and offer even more value than they do today."

David Cole of DFC Intelligence agrees. While he thinks the "super AAA" games may test out the $70 price, most content will come in much lower than that. "I think we will see an incredibly wide range of prices. Premium games command premium prices. Think Skylanders, Collector's editions, Guitar Hero and Wii Fit in their day. What gets squeezed is the stuff in the middle that must compete with high-end development on one hand and low cost/low price games on the other," he pointed out. "So you have fewer big budget titles but those will have even bigger budgets and that will be cost passed on to the consumer. Of course, very few games will be able to do this."

Even if there is a slight bump on AAA game pricing, the average selling price (ASP) will beging coming down as the cycle advances, according to IDC Research manager Lewis Ward.

"While there will always be collector's and limited edition console game discs that cost $80 or more, I'm not projecting that the PS4 or next-gen Xbox will raise the typical 'AAA' game disc to $70. 7th gen disc ASPs have trended down a couple dollars per year since 2006-2007. 8th generation discs will come in closer to $60 - which we're already seeing with Wii U - and then start trending down a few dollars per year. So there will probably be a ~$10 gap in pricing between 7th and 8th gen discs, but due to ASP slippage over time, the overall console discs ASP through 2016 should remain in the low to mid-$40s range," Ward explained.

An ASP in the mid-$40s is palatable for many hardcore gamers, but the console business is still going to have to face the fact that mobile, tablets, and free-to-play are changing the gaming landscape and the business of games. With PS4 supposedly being more open than any console before it, hopefully developers will being able to offer more free-to-play games and titles at more attractive prices.

21 Comments

Jose Martin
Entrepreneur & Financing - Media / Tech / Interactive Entertainment

23 19 0.8
From a hardcore gamer's point of view who has owned every major console starting with the Atari 2600...all the offerings from Sega, Nintendo, Sony and both MS consoles plus gaming capable PCs starting with the Commodore 64, Amiga 500 and current SLI, water-cooled i7 - I have about reached my price point limit for new releases - there simply hasn't been much out there over the last couple of years that I NEED to have badly enough that I would have paid $69.99 for it.

When you factor in the insane amount of paid DLC which is now being released so close to the base game release, gamers are more sensitive than ever to the base game price. Steam has also had a drastic effect on gamer's attitudes toward pricing. Yes, many great titles have been console exclusives but there is just too much great stuff being released on PC now that can be had for much less than $59.99 and certainly $69.99 if that became a next-gen console standard AAA release price point. I have more than enough gaming entetainment available on PC to keep me busy until a console exclusive drops a bit in price.

On PC, a littlle patience and a Steam Sale usually comes along a few weeks after a game release, where you are saving anywhere from 25 to 50% ... other digital stores like Origin and Gamefly have certainly followed suit, offering great deals for titles that are still fairly new. If a Steam Box is released and gains any traction, that will even put more pressure on console makers...they have to get in line with the new reality.... better to sell 5 million copies at $49.99 than 2 million at $69.99.

Edited 1 times. Last edit by Jose Martin on 22nd February 2013 11:05pm

Posted:A year ago

#1

Paul Jace
Merchandiser

770 1,005 1.3
I agree with Jose. The majority of console games aren't even worth $60 brand new, let alone a jump to $70. Are there exceptions? Of course. I can play last years Halo or Call or Duty online for the next 3+ years and still find lobby rooms full of people. And they of course still have their single player and co-op content to further extend the play value. Thats what you call getting your money's worth.

What should NO LONGER be priced at $60 are single player only games with a campaign lasting less than 8 hours and no replay value. I always use the game Wanted: Weapons Of Fate as my example. I played the game and thought is was an ok distraction that lasted 5-7 hours. Once I beat it there was no reason to ever play it again. Of course I only paid $13 for it on clearance and at that price I can't complain much. But had I bought it for $60 I would have been extremely frustrated.

So I think that developers need to take a hard honest look at their games before pricing them. Single player only games with no multiplayer and gameplay not exceeding atleast 10 hours of gameplay need to start coming in at $40 or less in my humble opinion. That doesn't mean that there still won't be single player only games that deserve that $60 launch price such as rpgs and such. But as we get more of these mobile/tablet esque pricing models on consoles the cost of many traditional console games needs to come down. The main two barriers to this are A). No publishers want to admit their games aren't good/replayable(no those two are not interchangable) enough to be priced at $60 and B). atleast during this current gen I think that retail games had to maintain certain launch prices due to the console makers(Microsoft, Sony, Nintendo). So hopefully they will be much more laxed in their aversion to retail price change.

Posted:A year ago

#2
Impact on future (Gen8) pricing:

- New dev kit, tool acquisition (brand new Gen8 tools make up for mess of Gen7..right)
- New I/O interface and control support (no one has any idea how that touch pad works on the new PS4)
- Multi-format design (i.e. having to create four versions of the same game - Gen 8, Gen 7 and Gen... WiiU - look out Watchdoog)
- New localization model (retail release, cloud teaser, cloud delivery)
- New media model (advertorial through smaller review structure... bye bye Gamespy!)
- New online / subscription payola structure (no idea but you have to pay!)

Have to say, I am happy I do not have to support this mess!

Posted:A year ago

#3

Cale Barnett
Animator

28 30 1.1
Spare a thought for us Aussies, we've had dollar parity with the US for a long time now, but still pay around $100 for a new game.

Posted:A year ago

#4
...and no broadband!

Posted:A year ago

#5

Private
Industry

1,187 185 0.2
Havent noticed a price increase in Europe as far as Xbox and PS games go. I pay here the same amount for PS3 as I had to pay for PS2. Sure the US increase has nothing to do with a tax increase?

Also if you account for inflation and so on you will see that games are cheaper now than 3-4 generations ago while it costs a lot more money to make them now.

Posted:A year ago

#6

Dave Herod
Senior Programmer

517 731 1.4
That's just it, people act like they're putting prices up and up, whereas they've not actually changed since the early 90s. NES, Megadrive, SNES games all used to cost 40-50 and unlike today, didn't seem to drop in price a month or two after release. With inflation taken into account, 40-50 back then is more like 70-80 of today's money, so games are cheaper than ever. But it's about what people are willing to pay. The state of the economy means people don't have as much money to throw around and customers have other options.

Posted:A year ago

#7

Yiannis Koumoutzelis
Founder & Creative Director

357 181 0.5
when a game with better options, and often higher quality is available on PC for 10-20 less, taking the price higher really doesn't make much sense! especially if console versions sell more than PC. console releases for some reason are still charging premium (the media have helped in that by creating and sustaining this perception) while in fact they never really were a premium platform, more often than not, consoles trailed behind PC in terms of production quality. (ranging from visuals due to technical limitations to online and modding options, patches additional content etc.)

Posted:A year ago

#8

Nick Parker
Consultant

264 124 0.5
Donkey Kong Country in 1994 on SNES/Super Famicom was 64.99 ($100 at todays FX) and was one of the best selling games on the console in the UK (and elsewhere at prevailing exchange rates); it ran out of stock. That was almost 19 years ago (wow!) and online has entered the value chain to flip that one time purchase model.

Posted:A year ago

#9

Daniel Hughes
Studying PhD Literary Modernism

410 455 1.1
Hasn't Jack Tretton already stated that PS4 software will range from 99 cents to $60? Is that a good indication of what Sony are planning from day one, or is it another "aspirational" aspect of the system, like streaming older titles, and therefore subject to change?

Posted:A year ago

#10

Dave Herod
Senior Programmer

517 731 1.4
@Yiannis
when a game with better options, and often higher quality is available on PC for 10-20 less, taking the price higher really doesn't make much sense!
That's not helpful to someone who doesn't already have a PC and is going to have to shell out 1000 for a decent PC to play them in the first place. You have to play a LOT of PC games before the price advantage on the games makes up the difference in hardware cost.

Posted:A year ago

#11

James Prendergast
Research Chemist

730 410 0.6
Popular Comment
You can't really compare cartridge games where a large portion of the cost of the game for the consumer was the packaging itself. Games aren't much cheaper now than they were 10-20 years ago on a number of fronts:

1) Packaging was much larger, bulkier and costlier (e.g. huge manuals and maps in the "non-special" releases)
2) Formats costed more. (as I said above, cartridges cost more than CDs/DVDs/digital)
3) Wages haven't risen in line with inflation over that period therefore the cost of a game is a larger part of your monthly income.
4) Economies of scale on the distribution front: (i.e. the gaming market has expanded several fold since 1990 and it's cheaper than ever to make physical media
5) A larger market supports bigger games. (Your game may cost more to make but it stands to make a much larger return on investment - not to mention that if the market didn't support hugely expensive games, they wouldn't get made.)


Thus I really dislike the "You should be happy you pay so much for games because they cost so much to make" argument because games aren't expensive for no reason. There are plenty of cheaper ways to make games that succeed and economically, it's infeasible to make a game that the market cannot support anyway. The choice is on the developer/publisher, not on the consumer. It's kind of like saying the car that Homer designed in the Simpsons was a bargain despite being so expensive despite no one asking for it or there being a supporting market for its release... It's the argument of blaming the market for not wanting what you're selling.

Posted:A year ago

#12
I miss the days when a game for my ZX Spectrum cost me at most 5

Posted:A year ago

#13

David Spender
Lead Programmer

127 51 0.4
The 'new' $60 price point has definitely made me buy way less games at launch. A key point missing from the $60 price point discussion is DLC. Not only do gamers now have to pay more for a game, they have to pay more to get all the content for that game.

This is more incentive for me to wait for the $39.99 Goty edition that has all the DLC included. Or at least wait until the game is $20 in 6 months or less. That's the course of action I normally take now.

Rare exception - Ni no kuni which was well worth a launch purchase just to poke Namco and others into porting more of these types of games over to NA/EU

Posted:A year ago

#14

James Verity

132 25 0.2
I miss the days when a game for my ZX Spectrum cost me at most 5
also take into account the games filled all the ram available... shame about the load times ;)

gamers will not pay more than 40 in the UK for a standard version of the game on release... a lot more will just wait for a price drop... the DLC cash cow has got out of hand, and that little stunt has a very limited lifespan... as for freemium I doubt that will work in the long run either...

Posted:A year ago

#15
Basically, income among the majority of middle class people in the western world, and so the majority of gamers hasnt gone up in around 20 years, prices of all products continued and continue to rise, the idea gamers can afford such a price point would be a very poor business idea, personally I can count the number of games I've bought full price in the last few years with one hand, with several digits left over, personally I spend a couple of hundred on steam christmas sales, being a hardcore gamer, and this keeps me tided over for the rest of year, only if a similarly discounted sale of a title then that offered during the christmas period, sure I spent about 200 - 250, some years even 300 pounds but I'll get 20-30 games + full dlc for the lot.

I occasionally pre-order games but the pre-order discounts are pretty poor, so only a couple a year at most, as for console games despite owning a ps3 and an xbox360 from the current generation I havent bought a new game for years, I've bought a couple a little dlc from some old titles, and a couple of old titles I missed down to under a 10er, but nothing new on consoles, the existing price for console games is already ridiculous from the point of view of me and my friends, and the playstation stores prices no less so, seen some titles at 50, one even 60 pounds, ones you could get for 20-25 on amazon or less at the right time of year on steam, even were steam and all its sales disappear tmrw, id just have to give up buying until the companies went bankrupt and the creditors put them on sale, then hopefully the next bunch will be less greedy.

As a result of current prices what games I buy on sale (I occasonally buy a few on impulse to) are up to a year old unless they happen to be released before or during december and take a good discount (50-70% at least), which is pretty rare for a new release, so yeah all these rising prices does not raise income, it merely makes gamers ever more stingy with their money, specially as quite rightly pointed out above, you no longer get a full games worth of content with the game, indeed ive been messed around with buying games in the price on pre-order as the dlc price for the up to 5 expansions/mini-expansions released for a given game are quite high, and its much cheaper to wait a year or so for the goty edition during christmas sales where youll get the dlc for free with the price of the game and even that with up to 90% off.

Rather than raise prices they should lower them significantly and all services should get some sales, then far more gamers would buy games their interested in, sure gamers choose their fav games to buy, but many eye up other titles, but its just not worth the risk over such a large investment of cash nowadays, you can be sure an elder scrolls game will give you, your moneys worth of hundreds of hours but even a call of duty campaign is 8 hours or so long, 14 is your the worlds slowest gamer, and unless you play it mp, its pretty darn steep per hour entertainment you could watch sky box office films for 14 hours and have enough left over for another 14 hours worth afterwards and probably some more for that price.

Current prices specially with every other price squeezing people as it is, are a symptom of whats wrong with the industry and the solution is surely not to raise them further.

Edited 2 times. Last edit by Alexander McConnell on 26th February 2013 12:19am

Posted:A year ago

#16

Ai-Vern Siow
Snr Product Executive

4 0 0.0
1000 for a decent PC? Where the hell are you buying your parts from? Golden plated?

Posted:A year ago

#17

Cameron Lourenco
Studying Business Managemant

22 16 0.7
Most games released aren't worth $60 to me. Other people may find it worth it for them personally, but for me I buy everything used. I refuse to pay those outrageous prices when a month down the road I can get it on Ebay for 20 bucks off or more. The problem comes in when you label your game 'AAA', and you want people to think that its 'AAA', gamers have it in their head that if the game cost's less then $60 it's not 'AAA' and probably sub par in terms of quality etc. This is a serious problem, as gamers associate price or value of a game with how much they're paying. Charging less will cause gamers to shy away, when they see something they aren't familiar with and it's 50, 40 or 30 dollars, there's an assumption that it's not top tier quality, it can't possibly have top production values etc. Getting over this is going to be very difficult, as gamers are more and more selective with their purchasing, it has resulted in gamers buying just a couple of big games per year, resulting in a few very large successes (ie. Call of Duty), where other games tend to suffer even when the quality is there.

Posted:A year ago

#18

Mark Boon
3D Artist

7 4 0.6
@Dave @Nicholas I was recently at my folks and I found my old copy of Sonic 3, the sticker on the front read "Was 59.99 now 44.99!" I'm still shocked that I had convinced my parents to get me it!

Edited 1 times. Last edit by Mark Boon on 26th February 2013 8:54am

Posted:A year ago

#19

Fazi Zsolt
Game Designer

18 8 0.4
You can get a decent PC up with 600, and you can do hell of a lot more with it, than with a console. You can also run most of the games in full detail and most of the pc games are at half the price of their console versions. PC is not going anywhere, but consoles might end up like the dinosaurs did, extinct.

Edited 1 times. Last edit by Fazi Zsolt on 26th February 2013 8:53am

Posted:A year ago

#20

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
@Fazi: the thing ALL the PC-centric folks who keep posting about fail (fail, FAIL - echo endlessly) to realize is the bulk of people who aren't sitting there all agog over their "better'n the consolez!" systems is they can't get a decent internet connection to download games, PERIOD. Sure, YOU and millions of others can, but consoles serve a huge purpose to those who can't game on PC, like it or not.

Posted:A year ago

#21

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