Game Pricing

(Some thoughts I supplied for a piece about on a big games website that got spiked because of politics...)

Question 1 (Of 1)

1. Do you believe that the recently rumoured price-hikes of triple-A games in the UK are justified. If yes, why? If no, why?

From an economics point of view, it’s entirely rational. If you believe, like a good Ayn Rand pupil should, that businesses do best when unfettered from regulation and morals, and that businesses doing best is best for the rest of us, then companies should be allowed to set their own prices, relative to the rest of the market, and see how the consumers respond to it.

And games-consumers will buy Modern Warfare 2 for £50+, where they wouldn’t buy Bookworm Adventures for the same price. It’s all about demand curves here; set the price high for Modern Warfare and you won’t cut out that many consumers, as they’ll forgo other pleasures to pay more for this; demand is relatively inflexible. Activision could have set the price at £60 and people would still have bought it in nearly the same numbers. However, try doing that for a weaker license or a first time game, and it won’t sell. Demand is relatively flexible, until the franchise is proved. When a franchise is this strong, you’re getting close to monopsony conditions and the publisher can charge whatever they like.

Whether it’s moral; well, publishers aren’t in business to be moral – they’re in business to maximise their revenues and they’re ethically and psychologically closer to venture capitalists than they are to developers, who want their games to have as wide a distribution as possible for fame / their message.

This turns hardcore gamers into early adopters. If you want to get the game on the day of release, you have to pay a premium; otherwise, you can wait a week or two and the standard discounting will kick in, and you can get it at the price you would normally have bought it – and you can keep that process going on, until a year down the line the people with lower price expectations scrabbling through second hand stores (if they haven’t already pirated it, which is a threat only to PC games, really). Notably, though, Call of Duty 5 has never been properly discounted and still sells heavily at a premium price – as does the original Modern Warfare – so Activision know that hiking the price of this iteration really isn’t a risk.