Jeff over at Make It Big In Games has a post outlining his belief that the price of games is going keep falling. All the evidence indicates that he’s right. Game prices are steadily going down. However, does this mean game industry is destined to follow the music industry?
Jeff thinks the games are not just going to be cheaper, he believes they’re going to be free:
As an example of the future, look at the game section of the iPhone App Store. In this market, the right price for a game is $0, and I believe that is where all game prices are heading. For a while, there will be successes at $3.99 to $1, but eventually, I think you will see capitulation to the $0 price point.
At the same time Ars Technica is reporting that gamers are being more prudent about their purchases. On top of that, casual gamers seem to be even more cost sensitive. Here’s one surprising quote picked from the original report covered by Ars:
[Casual gamers] are likely more price sensitive and prefer less expensive games. The median price for Wii games released in 2008 was $39.99, compared to $49.99 in 2007.
This is comparatively much lower than the average prices for games on the Xbox and PS3 which sell for $53. The original report goes on to claim that as the price of the consoles comes down there will be additional pressure on publishers to reduce the price of their software, too.
So if we accept games are going to get cheaper how much cheaper will they get? Personally, I don’t believe that professional games will ever be free for one reason:
- The game industry has a good track record creating excludable goods
The fact is that selling software is a very lucrative business. Once you’ve written it you can sell as many copies as you like, or even better you can license it out to multiple parties. That said, because it’s so easy to duplicate it’s difficult to sell software when the user can just as easily copy it himself. This is a problem the music industry knows a lot about. The heart of the problem is that software is a non-excludable good. Why won’t this happen to the gaming industry?
Well, it will and it won’t. The PC gaming industry is already plagued by piracy for all of the same reasons that impact the music industry. However, as soon as you create a box with custom hardware and software and print CDs with custom DRM you have effectively created an excludable good. Of course, piracy is still technically possible but the barriers in place are sufficient high. On top of that the vendor can try to forecast the revenue lost to piracy and factor into the price of the hardware.
In that light, why would the gaming industry stop charging for its games? There are alternative business models — ad-based revenue, for instance. However, will the alternative methods produce enough revenue to offset the what’s lose in sales? I’m skeptical, but fortunately we can look to the music industry which is currently grappling with these problems.
So will games be free? To equivocate yes and no. I think that alternative models will stick and create new markets for free professional games. At the same time I don’t think that the current model is going anywhere. As long as there is demand for something resembling a console I believe there will be a market for games at a reasonable price point.
What do you think?
Hello, my name is Alex Schearer. I grew up in New York and currently live in Seattle.
One Comment
Very interesteding read. I’ve always wondered why the game industry has not been hit as hard as the music industry even though piracy of both mediums began at relatively the same time.
There are several reasons why i feel that the game industry wasn’t as much affected by piracy as the music industry. the first being online games such a the blizzard series (warcraft, starcraft, diablo, wow,…), Steam, and others alike survive by requiring authenic copies of the software or some sort of pay-to-play mechanism. And it is because human’s propensity to socialize that multiplayer will thrive and subsequently online games will continue to exist.
Secondly, the barrier for pirating console games is too high and often requires taking the console machine to a engineer to soldier some hacked chip onto the motherboard; doing this voids the warranty and some people are simply not comfortable having their machine tweaked. Game piracy has been here since the amiga era, but somehow piracy has not won.
I’ve read this article somewhere that nintendo actually does not mind as much people pirating nintendo DS games. it is because DS systems sell so godamn well that pirate games can somewhat boost ds console sales.