The Industry Sees Record Video Game Profits, Yet We Still Pay Elevated Prices
A recent infograph put out by Ubisoft showed a marked rise in video game profits for the gaming industry based on four of the biggest publishers in the business. Naturally this brings about the debate that we are likely being overcharged and perhaps the price could be dropped by a significant margin. On the flipside of the coin, there’s the argument that the rise in profits can be reinvested to allow for bigger and better games, and that it’s not just a licence to print money. Two of COGconnected’s best, Alex and errr… Alex, have differing opinions on the issue, so we’re putting them head-to-head. Where do you lie on the great pricing debate? We’d love to know your opinion (hopefully an informed one), so leave us a comment in the comments section.
Ready… Set… Debate!
Alexander Thomas: A brand new game will cost you nearly $60 for the privilege of being the first to open it, but is it worth it? In the last decade we sat in an economic drop, with lowered income rates and a rising cost of living. During this period video game companies saw a loss in sales as we, the consumer, had to evaluate our purchases. To offset that loss the price of games rose along with the cost of everything else. In that time, the latest generation of consoles had launched and the economy has started its way back up again. So why are we paying $60 for a game?
Alex Everatt: A recently released chart showcasing an average profitability trend line for the top four publishers (EA, Activision, Ubisoft & Take Two) showed their average video game is generating 25% profit and rising. A 25% profit seems like a lot, maybe even enough to justify lowering the current $60 price point. Yet, there is no sign game companies intend to drop their prices. (Note: it’s also difficult to know how much of the 25% profit is due to the significant increase in downloadable content developed for most new games).
Please, Tell Me More…
Alexander Thomas: Video games are made for an array of people to enjoy, but those of us who can actually afford to buy them now are the people who have other financial concerns like rent/mortgage, insurance, food etc. Just because income is starting to rise again doesn’t mean companies can expect the same quantity of sales. The economic drop opened people’s eyes to selective purchases of necessity. The only way we will drop $60 now is if it’s a certified AAA title with numerous hours of replayability (Alternate endings, morality choices, new game + modes, etc), and even then we consider it carefully.
If video game companies want to see a profit, the smart choice is to lower the cost. It doesn’t have to be drastic, even a $15 drop might be asking too much, but whatever loss they have would more than be made up for in quantity of sales. People shouldn’t have to debate whether to buy a game or a weeks’ worth of groceries, but the truth is, we will. We want to own the games that entice us, but not all games are created equal; they are simply priced that way. If the excuse is that more technology and effort goes into these current gen games (despite their similarity to last gen), where will we be when VR is in full swing? Should we expect to spend over $90 on a game? A price drop would not only make the game more desirable – especially for the first company to explore this avenue – but it would make the game available to a larger income bracket and make people feel confident in their entertainment spending again.
A similar concern is the Digital Download. Consumers are paying the same price for a hard copy as they are digital. The market is transitioning to digital media and people increasingly prefer to download a game rather than reserve a copy and go to the store. GameStop is already aware of the trend, transitioning into a developer company, they know the future of games will be digital. Given that this will cut the manufacturing and shipping costs, why should the digital medium cost the same? I firmly believe whichever developer is the first to drop their prices below that of their competitors will be the one to see the largest profits.
Click on thru to page two to see Alex Everatt’s thoughts…