DRM News

Yeah…titles are not exactly my forte.

I see a lot of people putting up content around the Internet that I think flat out misreads a lot of the economics in the games industry. Hell, some of the stuff I disagree with gets put up on this site by Brad. That’s right, we actually aren’t in lockstep on everything. We all have opinions, and that’s cool…I guess it’s time to let mine out a little bit. A lot of people probably won’t like it…that’s cool, too.

First, obviously there are some serious problems with the economic model in the games industry right now. Nobody in their right mind would disagree with that. When you have games publishers earning record gross profits, and yet LOSING money on a quarterly or annual basis, something is clearly very wrong with the industry model. Let’s take a look at some of that, and also some other concepts that I don’t think are necessarily weighted in reality.

Game sales rates for items marked down ARE NOT indicators that reducing prices will increase sales

Are prices too high? It’s quite possible that they are…but sales figures for how well something sold when it was at a reduced price do not serve as an indication that price drops would equal bigger profits.

Let’s use this Edge article about sales rates for games put on promotion on Valve’s Steam platform as a basis for this.

Newell showed the results of a Left 4 Dead promotion Valve ran last weekend, which cut the price of the game in half to $25. The discount (and promise of new content for the game) rocketed sales of the game on Steam by 3,000 percent.

Over the holidays, Steam discounted third-party titles. Sales increased 300 percent and units-sold increased by 600 percent.

During the 16-day sale window over the holidays, third-parties were given a choice as to how severely they would discount their games. Those that discounted their games by 10 percent saw a 35% uptick in sales–that’s dollars, not units. A 25 percent discount meant a 245 percent increase in sales. Dropping the price by 50 percent meant a sales increase of 320 percent. And a 75 percent decrease in the price point generated a 1,470 percent increase in sales.

Pretty compelling stuff, and it most definitely shows that a sale can be a GREAT way to re-ignite some buyer interest in a game. It does NOT, however, present a shred of evidence that a permanent price drop across the games industry would increase sales rates.

Think about it…what do all of these examples have in common? They’re all purchase increases seen during sales…TEMPORARY sales. The fact that everyone knows that it is a temporary sale is what provides that added impetus to buy now, because the customer knows that if he/she waits it will be back to its regular price soon. That’s why stores in every business you can think of put things on temporary mark down…to TEMPORARILY drive sales. They also hope that, by marking one item down it gets you ‘in the door’ and looking at other things you might want to buy but didn’t necessarily come in looking for.

Again, using that Valve example, if you buy Left 4 Dead at half off, it might lead to you being willing to drop the $25 you’re saving on that purchase on another game. So you’re still giving Valve the full $50.

There is a massive difference between offering a temporary price drop on a few items and permanently cutting in half the price of EVERY item. Do that, and you lose the anomaly factor that drives people to a sale. Now everything is half price permanently…it doesn’t have that WOW! factor that grabs people’s attention.

And let me ask you this…if this was such a guaranteed way to make extra money, why were the prices put BACK UP to their starting point? Wouldn’t it have made sense to KEEP the games at the reduced rate that provided that sales boom? Or perhaps Valve simply realize that the massive increase in sales WOULDN’T remain.

Of course the games with the deepest discounts see higher rates of sales…people intrinsically are drawn to bargains. However, if sales were all about the price, indie games would be the biggest selling titles every single year. They aren’t because it isn’t.

There is another part to this as well. If everyone drops prices across the board, everyone now needs to sell more copies of their game at that new standard price to earn the same amount of revenue. A game that wasn’t going to sell a million copies at $50 isn’t magically going to sell a million copies just because it’s now $25. There are many more considerations to take in to account that simply base price.

The Development model IS broken…and it’s partly our fault

This is where the costs come in. Ten years ago, a pretty decent fully featured first person shooter could be made with a couple of dozen employees and maybe 18 months of development time. Today, the number of employees required has escalated in to triple digits. Development costs have shot through the roof while prices have remained stagnant.

Now, I’m not saying that prices need to go up. What DOES need to happen is that development costs need to come down. Development companies are spending way too much money on expensive game engines, graphics development, big name voice actors and ever increasing levels of complexity. And they’re doing it because we tell them to.

The truth is, we’re graphics whores. Oh, we talk about how much we care about good AI and a good game experience, but the majority of us want something shiny and pretty to look at while we blow it apart. As hardware has become more and more powerful, our expectations for what should be done with that hardware have risen as well…and it’s those expectations that have driven development costs in to the stratosphere. All of those high end graphics and an ever increasing menu of play options with multiple branches cost more money.

The only way for those costs to return to something resembling a sensible amount is for fewer people to be involved. The only way for that to be feasible is for less complexity and the like to become a bit more standard. The only way for THAT to become an option in any way sensible for game developers to take is for us to stop crying every time a game releases that doesn’t immediately blow us away with visuals that look close to real.

I’m not saying every game needs to do this. If the game being worked on is a legitimate AAA title that should sell millions of copies, go for broke. But we need a more realistic business model that realizes that not every game is going to be a platinum hit and then budgets accordingly. It’s not ALL our fault…too many developers have become so obsessed with pushing every thing they release to the brink that they’re spending well beyond what’s reasonable for them to. Everyone needs to get a grip on reality and take a step back, though. They need to go back to an economic model that makes sense. We need to actually put our money where our mouths are when it comes to caring about things other than “SHINY!”

And frankly, not pushing hardware as hard as possible with every game IS a great way to increase potential sales. You’re no longer forcing people to require the biggest, baddest hardware imaginable to run everything at a decent clip. And honestly, I think it would be a bit refreshing to not see every game trying to be ‘as realistic as possible’.

Reducing the number of people needed for active development of a project is also going to create room for perhaps a few extra people to help root out some technical problems with the game before it hits the market. I don’t think you’ll see much complaint about that.

Really, what this boils down to is pretty simple. Let the development budget for the game reflect a realistic appraisal of what that game can do in the marketplace.

It’s not the worst thing in the world to charge for bonus content

A few caveats right off the bat here…NO part of a game that is essential, or that gives someone who has it a massive and unfair advantage, should be ‘extra’. That’s where things begin to cross the line and you run in to a real danger of shifting the economics of gaming to the point where only the elite and those with a lot of extra cash to throw around can really win big. Also, I don’t think making EVERY piece of developed content for a game something that has to be purchased is a smart move…there has to be a happy medium. Finally, game fixes and patches should NEVER be charged for. If it’s needed to make the game function better or correctly, that should always be free to the consumer.

That being said, I find it quite laughable the number of people who demand lower prices and ALSO decry the sale of DLC or maps or what have you. Think about what you’re asking if you’re one of these people : We want you to charge less money (while still spending the same amount on development), then spend MORE money developing extra content that you give to us for free. That sort of economic model would bankrupt a corner lemonade stand. Frankly, the ONLY way you’re going to see a price drop across the board is if more of a DLC model is taken by developers.

The important part to all of this is that the content has to match the price being asked for it. We don’t need more examples like the infamous Oblivion Horse Armour fiasco. And this is where things get a little interesting, because this is where a ‘meeting of the minds’ is necessary between developers and consumers.

I don’t think you’ll see a massive hue and cry if a company charges $9.99 for a map pack that contains a substantial amount of good content. If it’s a reasonable amount of content that some development money went in to building, a fair number of people aren’t going to mind paying for it. You DO see a hue and cry when you see an example like Activision charging $15 for 5 maps, 2 of which are essentially re-runs. There needs to be a balance.

Obviously, every gamer can decide for themselves whether or not they want to purchase extra content, and if they don’t wish to they shouldn’t be penalized for it. Every gamer ALSO needs to decide what content is worth what money, and this is where things become a bit bigger. If we allow something like the Activision map pack bundle to become the accepted market standard, we can’t be surprised when similar prices for similar content are being charged across the board. It really is up to us here.

The key is, keep it reasonable. And the key for US is to help keep it reasonable by not paying too much for too little. Incidentally, Cliff Harris (the man behind Positech Games) has just written an article over at Bit Tech that really dives in to the DLC side of things. Definitely worth reading.

Offering incentives for buying new ISN’T wrong

This is becoming an increasingly hot button issue, whether we’re talking about EA, Ubisoft or THQ. More and more companies are charging used gamers $5-$10 to access certain bonus items in a game that are free to a new buyer.

I’m of two minds on this. I don’t like the THQ plan (or EA Sports’ similar plan) to charge $5 for access to online multiplayer…if you’re offering online MP, you’re using that as a main selling feature in your game, and I don’t feel it’s right to charge extra for someone to obtain that if they buy it used.

On the other hand, I don’t have a problem with the model on offer with EA’s Project Ten Dollar. While everyone tends to look at it as charging extra for used buyers (and it is), it’s ALSO offering bonus incentive to new buyers. The fact that NONE of the content that will cost extra for a used buyer is necessary to the game also makes it a bit more acceptable in my mind. The used buyer isn’t missing screwed if they decide not to drop a few extra dollars to gain access to that content…they can still play and complete the main bulk of the game. So you aren’t affecting anyone’s right to buy or sell their game if they choose to.

Again, so long as plans like this stick to offering new buyers a bit of bonus content, I don’t see the problem with it. When it begins to cross the line in to major game features or required content, then it becomes an issue.

Now, do I expect everyone to agree with me? Of course not…the world would be incredibly boring (if incredibly awesome) if everyone did that. All I’m asking for is for everyone to just give some of these things some thought. If you’re demanding a game be sold for half as much while pushing your $5000 Alienware gaming PC to the max, you have to realize that simply isn’t in any way realistic or sensible.