As with all discretionary spending, the true value of a Video Game is different for each person... which is why companies offer “self selection” price points.
The difficulty is that the companies making the video games are not able to truly control the price of these games due to variable distribution channels and monkey wrenches like the used games market. The ideal solution appears to be to digital distribution. Unfortunately game companies do not seem to realize that these channels represent a fundamentally different product then those available at retail, and as such, users are not adopting them.
That said, the prevalence of “game apps” on a variety of mobile devices has opened the floodgates in the general public to the idea of digital distribution... so now it’s up to the game companies to resolve the remaining value disparities or continue to waste potential revenue on obsolete market forces.
The “Real Value” of a video game
When a “real” game is released it costs about $70. Renting this game for a week costs about $10 so the assumption then is that this game will be used for 7 weeks, or sold/traded in after a certain number of weeks for the remaining value (calculated as -10% per week).
The first and most obvious difficulty comes from the fact that most people will “wait and buy it used” which represents a loss to the developer in the following way.
Player 1 Buys a Game at $70, Player 1 Sells the game for 40 after approximately 4 weeks, Player 2 Buys the game Used for $50.
In this scenario the material cost of 2 copies of the game is very low (disk and manual and packaging, let’s say about $10 at the highest). So the game company makes 60 dollars.
If the “used game store” was eliminated then the company would instead make, 60 from the first Player at $70 and then, 4 weeks later they could lower the price to $50 and sell a second copy making another $40 for a total profit of 100$... but that’s unrealistic.
The truth is that in the first scenario Player 1 is actually only paying $30 for the game and Player 2 is very likely to sell the game back 4 more weeks later for $20 and then he, too, will only have payed $30 for the game... and the “game store” will sell the game one more time to a third player for $30 recovering another $10 of their initial sale.
So, paying $70 for a digital version of a game is definitely a bad idea for Player 1 because he is actually paying $40 more for his copy of the game then if he bought a copy he could later sell to a used game store.
Solution: Screw retailers... their bad for business.
So, the solution in my mind if for game companies to charge $40 for the game digitally if its being sold in store for $70, this would represent the “real price”... and then, after about 10 weeks drop the digital price down to $30, then again down to $20 after another 10 weeks to target the “people who are willing to wait and then buy used” market.
The difficulty is that the companies making the video games are not able to truly control the price of these games due to variable distribution channels and monkey wrenches like the used games market. The ideal solution appears to be to digital distribution. Unfortunately game companies do not seem to realize that these channels represent a fundamentally different product then those available at retail, and as such, users are not adopting them.
That said, the prevalence of “game apps” on a variety of mobile devices has opened the floodgates in the general public to the idea of digital distribution... so now it’s up to the game companies to resolve the remaining value disparities or continue to waste potential revenue on obsolete market forces.
The “Real Value” of a video game
When a “real” game is released it costs about $70. Renting this game for a week costs about $10 so the assumption then is that this game will be used for 7 weeks, or sold/traded in after a certain number of weeks for the remaining value (calculated as -10% per week).
The first and most obvious difficulty comes from the fact that most people will “wait and buy it used” which represents a loss to the developer in the following way.
Player 1 Buys a Game at $70, Player 1 Sells the game for 40 after approximately 4 weeks, Player 2 Buys the game Used for $50.
In this scenario the material cost of 2 copies of the game is very low (disk and manual and packaging, let’s say about $10 at the highest). So the game company makes 60 dollars.
If the “used game store” was eliminated then the company would instead make, 60 from the first Player at $70 and then, 4 weeks later they could lower the price to $50 and sell a second copy making another $40 for a total profit of 100$... but that’s unrealistic.
The truth is that in the first scenario Player 1 is actually only paying $30 for the game and Player 2 is very likely to sell the game back 4 more weeks later for $20 and then he, too, will only have payed $30 for the game... and the “game store” will sell the game one more time to a third player for $30 recovering another $10 of their initial sale.
So, paying $70 for a digital version of a game is definitely a bad idea for Player 1 because he is actually paying $40 more for his copy of the game then if he bought a copy he could later sell to a used game store.
Solution: Screw retailers... their bad for business.
So, the solution in my mind if for game companies to charge $40 for the game digitally if its being sold in store for $70, this would represent the “real price”... and then, after about 10 weeks drop the digital price down to $30, then again down to $20 after another 10 weeks to target the “people who are willing to wait and then buy used” market.
The advantage here is that the whole system is a win/win. Players spend less and Game Companies earn a lot more off of each Player because now a sale represents one player rather then 3 or more. True, the player who buys the game at $40 is sort-of paying $10 more for his copy of the game, but he's also benefiting from not having to make two separate trips to the game store and the fact that many game stores only give "store credit" for the used games they buy.
