Video game prices: now a good time for major changes
By: Kostas Farkonas
Tags: Gaming, PlayStation, Retail, Xbox, Videogames

Road to NextGen 2020

Video game prices: now a good time for major changes

With PS5 and Xbox Series X looming, more flexibility in cost tiers would prove beneficial to everyone — why and how?

The video games market has employed the same price model, in retail as well as in digital delivery, for more than 30 years now. It’s high time that changed. (Image credit: CottonBro, Pexels)

The countdown to the release of the next PlayStation and Xbox is about to begin (cost and exact dates are all that’s needed for now) so the video gaming market is also preparing for a transitional period despite the pandemic of COVID-19. Various relevant discussions are held daily among the media, analysts and online communities, the potential raise in prices for PS5/XSX games come November remaining more important than most. While we’re still waiting for news on that front — Sony and Microsoft will probably set the tone for most third party publishers, but they have not shown their hand yet — this may be the perfect time to broaden this particular discussion.

In fact why not broaden it to its full extent and abandon the current approach of video game pricing altogether?

The “new AAA games have to cost $XX.XX” retail approach has been around since the days of 8-bit/16-bit home entertainment systems (even since the days of Amstrad or Commodore if one refers to top game publishers of that era). Yes, that would be the ’80s and ’90s. It was a time when video games were still seeking the attention of the mainstream and, well, one way to position themselves beside movie tickets or music albums was to standardize their price point for new releases just like those established forms of entertainment did for theirs.

The current retail model of video game pricing dates back to the ’80s… but the world is a totally different place now

Whether that actually worked or not — as far as the mainstream’s perception of video games is concerned in particular — is anyone’s guess, but it did create a point of reference for publishers, developers and consumers. Budgets and margins and marketing were planned based on specific price points and gamers came to expect a certain level of production values at those price points. So the “fixed price” approach was followed by Nintendo and Sega, by Atari and SNK, by Sony and Microsoft all through the next thirty years.

For physical copies of video games that retail model worked acceptably well. We’re fast approaching its 4th decade, though, and the world is a totally different place now. It’s time that model was radically changed or discarded.

Why fixed price points anyway?

That may be the only question needed in order for consumers to realize what an antiquated model this really is in 2020 terms. Why? If past experience is any indication, fixed cost tiers in video games do not relate to any set duration or specific features or even overall product quality. There have been 10-hour games and 100-hour games asking for the same money, there have been “everything but the kitchen sink” games and “the absolute minimum” games in terms of content asking for the same money, there have been “once in a generation” games and “not worth the cost of the DVD they are stored on” games asking for the same money. In gaming, as far as “entertainment value” in connection to retail cost is concerned, seemingly anything goes. So why the fixed price points?

It might have to do with the aforementioned “points of reference” they represent for publishers, developers and consumers. It might have to do with “tradition” in this market (whatever than means nowadays) or it might have to do with “perception of value” as it was formed in the course of the last 30 years. It might have to do with all of the above, none of the above or something else entirely. But the fact of the matter is that game publishers, for whatever reason, are hesitant to offer their titles in a more flexible manner.

The gaming industry basically only uses three (!) price tiers for new releases of PlayStation or Xbox titles, regardless of physical or digital versions. Consumers need more flexibility than that in 2020 and beyond. (Image credit: TBiley, Flickr)

For new PlayStation or Xbox releases there’s the “full price” $59.99/€69.99 price point for “AAA productions”, there’s the $29.99/€29.99 price point for big expansions or top indie games, there’s the $19.99/€19.99 for less ambitious expansions or indie games not developed by established teams and — with a handful of exceptions every year — well, that’s about it. For a new video game to be released at $39.99/€39.99 or $24.99/€24.99 or $14.99/€14.99 has come to almost feel like an admittance to mediocrity, even if all “full price” productions will eventually hit the same price points through discounts over time. But it does not have to be this way.

The cost of a video game does not signify anything in terms of product quality, duration or features — so why use it as indicative of anything?

For instance: did a small team of developers make a game that depends more on an amazing, original idea and less on its technical aspects, requiring only a year or so of work? Great, offer it at $19.99/€19.99 instead of $59.99/€69.99 and have it compete for consumer attention based on the idea, not the specs. Did a dev team of two thousand people take 5 years to make an absolutely epic game that offers every technical bell and whistle under the sun, spans 100 hours of quality gameplay and includes extensive, exciting multiplayer modes? Great, offer it as the must-have of its generation at $99.99/€99.99 because of all the work involved and all the value offered. It will be deemed to be expensive at first, yes. But critical reception and word of mouth will do the work, if the game itself deserves it.

The cost of a video game does not signify anything in terms of product quality in 2020. That much all gamers can attest to. We’ve seen it all. So why not forget about those three tiers altogether? Developers and publishers should work together in order to offer games at whatever cost satisfies both and has a better chance to entice consumers. It’s that simple.

Flexible prices, flexible development — but is the App Store paradigm applicable to video games?

A number of industry veterans and insiders are calling for more flexible game pricing not just for consumers’ sake. They do so because it would also greatly help the development of video games on multiple levels (and the development community through that). Following an approach of many more price points than currently targeted, publishers and developers could go for shorter in duration or lighter on features but also easier to make, less risky to invest in and cheaper to offer titles. Those would not require multiple years of hard work — often extremely taxing on people — but a fraction of that, focusing in compact, more dense but potentially more entertaining productions not artificially “stuffed” with repetitive or pointless content just to hit a “size” that would “justify” the “full price” cost.

Sony has followed the fixed price approach for AAA heavy hitters — such as the recent The Ghost of Tsushima — throughout the PS4 generation, but former company exec Shawn Layden suggests that this cannot work across the industry for much longer. (Image credit: Sony Interactive Entertainment)

The former head of Sony Computer Entertainment America, Shawn Layden, suggested as much back in June. “Major AAA games in the current generation go anywhere from $80 million to $150 million or more to build and that’s before marketing. It’s a huge up-front cost. If you don’t have elasticity on the price point, but you have huge volatility on the cost line, the model becomes more difficult. This generation is going to see those two imperatives collide”. In the upcoming PS5/XSX generation this situation could be balanced with less costly to make, shorter in length but no less entertaining games that are flexibly priced. What would happen in that scenario? “I would finish more games, first of all”, Layden responds. “And just like a well-edited piece of literature or a movie it could get us tighter, more compelling content”.

Ironically there’s a chance that all of the above might seem self-evident to a certain type of consumer. What type is that? The type who’s into gaming primarily or exclusively through mobile/tablet games. The mentality of “we charge whatever we deem appropriate for our app” is not just prevalent in Apple’s App Store or in Google Play: it is the normal state of affairs. It has been from the very beginning. A game for iPhone/iPad can cost anything between $0.49/€0.49 and $19.99/€19.99 (cent increments included!). Anything costing more than that is extremely unusual — truth be told, most games hover well below the €9.99 mark.

With digital delivery of video games becoming the norm during this transition, it’s high time game publishers started thinking differently about pricing

Yes, that’s a big step down from the prices targeted by PlayStation or Xbox games, but as an extreme example it serves to make a point: new video game releases being practically locked into just three cost tiers in 2020 is just plain dumb. PC games have not broken those same chains completely (many of them are multiformat releases shared with PlayStation and Xbox after all), so there is a traditional price point of $49.99/€49.99 associated with many new AAA releases. But a visit to Valve’s Steam store or Epic’s Game Store reveals a wider gamut of prices offered for new PC titles — certainly much wider than that of the PS Store or the Xbox store as far as new releases are concerned.

New video games for PlayStation or Xbox would never survive a market as competitive or one of such razor-sharp margins as those of the App Store or Google Play. It’s the reason why most iOS or Android developers believe that there is no real profit to be made in premium apps/games nowadays. But PC games offer a more balanced approach and a lot more different price points for new releases than video games do, proving that there is a sustainable model the latter could explore.

Game publishers should have started thinking differently about cost tiers for new games a long time ago, but the release of the PlayStation5 or the Xbox Series X/S is as good a reason to start experimenting as any. With digital delivery of video games becoming the norm during this transition, after all, it’s high time they did.