The old debate and the new one….

August 18, 2009

Over the past few weeks I have been reading views from many in this industry we like to call gaming – all commenting on the impending release of Call of Duty 6 or Modern Warfare 2 or Call of Duty 4 Modern Warfare 2 or whatever it is called this week. When Activision originally announced that it was going to charge £5 more for the game when released, it seemed to go relatively un-noticed and I think some at Blizzard Activision might have thought they could dodge this bullet yet. But slowly and surely, most parties have been coming out and having their say.

To summarise so far, I think those in the developer ‘camp’ largely welcome the move and will look to the effect on the games sales performance to see whether they can follow Activision’s lead. After all, it wasn’t that long ago when we were regularly selling new release titles (not always triple A either – Turok on N64 anyone?!?!?) for north of £60.

The retail camp (for me at least) seems to fall into two sub-categories – those who take the view that increasing prices is anti-consumer and those who support price increases on the basis that they would like to return to the hey day of video gaming when they could charge the earth and the customer wouldn’t bat an eye!

So – three different views then. In camp one, developers (and publishers with them) argue that they are struggling to make profits in today’s crowded and competitive gaming market, so the move to increase prices is only natural if they are to survive. Of course, some have already done so – citing the currency fluctuations against the UK market as the reason for doing this. Nintendo’s Wii console increased in price to the trade earlier in the year and whilst we haven’t seen an increase in the retail price, there has certainly been less aggressive discounting and bundling on the Wii this year – even though the console is now available as free stock. I understand why developers and publishers are struggling but to a certain extent this situation is of their own making. For the last five years publishers have fought with each other to be the number one. EA for a long time held this crown and Ubisoft and SEGA have been pretenders to the thrown – all at one point or another at pains to point out to all who will listen that their market share is growing or was number 1 in the year so far or has been increasing year on year – or whatever. To drive this growth, they have been happy to commission title after title that is effectively a re-hash of a previous years franchise and publish licence after licence that is just a re-skinning of the same game with a different IP. So when gamers see this year after year, being asked to fork out more and more, they are bound to expect to pay less and less.

Supermarkets (and large generalist retailers) shall be know as camp two, and for years have played the role of the consumer champion so were happy to cater to this demand to pay less. By beating up the supply chain, as they have done in so many other industries, they could maintain their margins whilst offering the same to the consumer for less. Publishers offering marketing credits, campaign payments, volume discounts etc are only fanning the fire. Any retail buyer worth his or her salt will use the number of store fronts they have as a big battering ram on the publishers door. Give me the deal I want or I won’t give you the shelf space, store coverage etc you need for your second rate 2008 re-hash of four year old IP!!! Sounds harsh? – perhaps a little in the language but the point remains that as the quantity of titles published increases, the quality must diminish, and therefore the average price will too.

Don’t get me wrong – I have been as guilty as the next buyer. This is not a criticism per-se – more an observation. Economies of scale rule in the open market. Many would also argue – and I would be inclined to agree – that this is simply a sign of a maturing market and that market forces are coming to bear as technology barriars fall. More developers can do the work that only a select view were able to in the past, but that is nothing different to what has happened in a thousand other markets that have developed since time immemorial.

Camp three is the indie camp – watching all this from the outside looking in, hoping beyond hope that maybe at last after years of decline we might see an opportunity to charge customers more than we actually pay for games and make a bit of profit on new games for once. After all, those of us still here (or like Playtime, here but not in their original guise) and can remember back to the launch of the PS1 and the N64 (and others) would relish the opportunity to make those sorts of profits on new releases once again. Some have even linked this to the ‘old debate’ that keeps on raging, that is pre-owned games. After all, if we could make money on new releases again, then we wouldn’t need to offer the pre-owned route to our customers, would we. After all, it is a lot more complicated and costly to do in-store than simply selling 100’s of new release titles on release day at full retail and making 30% on each one.

But this is the nub of the issue – the market isn’t the same as it was 10 years ago. Things have moved on. Supermarkets have entered the game of selling games, general retailers too. They have taken customers away from specialists in the only ways they can – offering price and convenience advantages. Publishers (with developers in tow) fed this by conceding to retailers supply chain demands as they chased their own goals of growth and market share. Activision’s attempt to increase prices surely is a last resort in the face of inevitable downward price pressure. There can’t be any going back to the old days…..?


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