Pricing The Issue

One of the reasons that the Nintendo Wii is a sales leader is because of its affordability compared to other consoles.

Being a gamer has never been particularly inexpensive. Every so many years, new hardware is released and the new consoles always cost hundreds of dollars. Some gamers prefer to think of consoles as “investments.” When gamers say they’re going to “invest” in a console, they actually mean purchasing plenty of video games for said hardware.

Over the course of the console’s lifespan, gamers will likely eclipse the cost of the console in purchasing games for said console. The console’s lifespan winds down, the console war/cycle comes to an end and new hardware comes out. The process then repeats itself all over again.

However, there may have never been such a pricey console war as this one. Everything in this console war seems to have a significant price tag. Consoles are more expensive, games are more expensive and independent games and DLC are going for as much as $15 or more.

When the issue of price hiking is brought up, many gamers might be tempted to point the finger at Sony, but the truth is that there are few companies in the video game industry who haven’t raised prices in some way.

Consumers were suddenly introduced to $59.99 for games for high definition-capable consoles in the single turn of a generation. Then, we were introduced to a new world of downloadable content where paying $59.99 for a game simply wasn’t enough.

Suddenly, there are new installments of these games and they cost up to a quarter of what the consumer paid for what is supposed to be a “full” game.

DLC was initially supposed to be extra content for major titles only, but now it seems like any title worth having has DLC of some sort. DLC costs so much that it’s nearly competing with new games, as opposed to the used market it’s supposed to be helping to thwart.

The increase in pricing and the creation of DLC is understandable from an industry perspective. A game’s budget can easily cost up to twenty million dollars. Development budgets are skyrocketing and game developers are doing all that they can to contain their costs.

Developers are playing a game of survival, trying their hardest to get to their work picked up by publishers while colleagues shut their doors for good. They need to see significant return on their games just to stay afloat.

However, from a consumer’s perspective, things are different. Games are expensive and their price tags might be close to reaching the consumer’s threshold for pricing, if they haven’t already. The industry’s budget problems are understandable, but gaming is an expensive hobby and consumers have other priorities that come first.

They have bills to pay, people in their families to support and other expenses that come first.

The PlayStation3 Slim’s $299.99 price point is far more consumer-friendly than previous PS3 models. Sony should see a rise in sales as a result.

Consumers are voting with their hard-earned dollars for affordable entertainment and the signs are everywhere, such as in the success of platforms like the Wii, DS and the iPhone’s App Store.

As a result, Sony and Microsoft have learned a very difficult lesson: a majority of consumers aren’t willing to pay hundreds of dollars just for video game hardware. The “experience” and “platform” taglines mean little to them — or, to the very least, not as much as they do to core gamers.

Most consumers simply want to play video games and play them affordably. This is why Microsoft has the more affordable Xbox Live Arcade SKU that was quickly dropped to a sub-Wii price tag and the reason why Sony came under so much pressure to drop the price of the PS3 to $299.99.

Downloadable content is under pressure as well, as gamers are beginning to backlash against DLC deemed not offering enough value for the price of said content. However, the sales of independent games are up and more gamers are talking about independent titles like Braid and Shadow Complex.

Consumers want affordable entertainment and they want value for their dollar now more than ever, especially in sensitive economic times.

The global recession is certainly playing at least some role in consumer resistance to highly priced consoles and games. Money and jobs are scarce, so consumers are less willing to spend money on luxury items and that includes video games.

The industry is not recession proof, as recent NPD numbers have reported declines in year-over-year console hardware sales. Certainly, without the recession, there would be less resistance and less pressure.

However, there is recession and it comes with a powerful message that the industry cannot forget: there is most definitely a line by which consumers will refuse to move from if they feel video games or video game hardware have become too expensive.

Many have speculated that video game industry development budgets will double in the next cycle of consoles. That’s not a risk that the industry can particularly afford to take — an increase in development budgets will likely result in an increase in price for video games. Consumers being willing to yield to higher price tags than $59.99 is not likely, recession recovery beforehand or not.

The video game industry is not a luxury industry. The millions of consumers who purchase video game hardware once it reaches below a certain price point are proof of this. Those millions of consumers are necessary to the survival of publishers and developers alike, who need to sell millions of copies of games in order to stay in business.

Keeping prices up keeps console hardware install bases smaller, which keeps publishers and developers from reaching their sales goals.

The best move that the industry can make moving forward is to take whatever steps are necessary to contain costs. If that means the next-generation of consoles must possess mid-range specs as opposed to bleeding-edge specs to make them more affordable, then so be it.

One thing’s for sure: the video game industry cannot continue to survive in its current price raising pattern every generation, especially if it hopes to continue to expand its audience.

Recently, The Cable & Telecommunications Association for Marketing reported that there was no year-over-year growth in the percentage of U.S. households that have video game consoles in them.

Consumers are saying loud and clear with their hard-earned dollars that when video games are too expensive, they will wait to purchase them until prices are more affordable.

The video game industry needs to listen to them and plan ahead accordingly, because the price of ignoring consumers’ demands for more affordable gaming is one that it cannot possibly spare.