Features// Are Games too Expensive

Activision CEO Bobby Kotick made few friends earlier this year when he announced that the eagerly anticipated Call of Duty: Modern Warfare 2 would carry an RRP of £54.99. He continued to remove his name from gamers’ Christmas card lists by adding that if it was left to him, he would raise prices even further – hardly a statement befitting a world in recession, but not surprising from an industry feeling the crunch and escalating production costs.

Due to various factors (downloading, competition and other nasties) the prices for music and movies have come down considerably over the past decade, while video game prices have remained relatively constant. Since the early 90s games have stayed at a steady price of between £30 and £40 in stores, with their RRP usually about £10 higher.

In the mid 1990s I paid around £60 for Super Street Fighter 2 and had friends paying over £100 for the title on import from Japan. There were eight selectable characters, no online options and, well if you don’t know about SF2 I’m not about to give you a lesson now. Suffice to say, at the time, the price was high but seen as worth it to get the biggest game from the arcades in to your bedroom. SF2 proved to be an exception, but today’s gamers would expect a set of plastic instruments or some kind of ‘special edition’ tag for that kind of money - a sentiment echoed by ‘Mr. Playstation’ Chris Deering.

At this year’s Edinburgh Interactive Festival, Deering claimed that to maintain the trade’s current cycle of ‘blockbuster games’ the industry would need to price them at £70, a price-point that even he saw as impossible due to a ‘psychological glass ceiling’.

Deering went on to state: “The cost of development is ten times what it was for PS2, and more like 20 to 50 times more than on PSOne.”

Halo 3 is reported to have cost $30m to make, while Grand Theft Auto 4 set Rockstar back £100m. This is before other costs are taken in to account, such as marketing. Fortunately these titles they sold by the bucket load and more than paid for their inflated budgets. But few titles do so well. A study by Electronic Entertainment Design and Research in 2008 found that roughly 20 percent of video games that make it to market are actually profitable. Forbes took this statistic a step further by claiming that only four percent of games that start production make a profit.

It’s worth remembering that both Deering and Kotick are looking at the pricing and development of triple-A titles and not Wii shovel-ware, movie tie-ins and other off-the-peg games. However, with the aforementioned glass ceiling preventing such a price hike, the industry needs another way to recoup the apparent lost millions. One solution, which has been eating in to gamers’ budgets for a couple of years, is downloadable content.

The industry would like gamers to believe that DLC enables them to offer more game for a little extra cost - the truth is that while DLC does achieve this, it also helps boost the bottom line in a variety of fashions.

The obvious tactic is for producers to sell a game at full retail price then later in the product’s life-cycle charge extra for content that some believe should have been included from the beginning.

Call of Duty: World at War came packed with 13 maps, with an additional 12 through DLC at a combined cost of £20.40. While it is unlikely that COD: MW2 will come with 25 maps before DLC, it proves that many gamers have little problem paying over £60 on one title, so long as it’s done right.

Problems occur when publishers do DLC badly. An example of this is Resident Evil 5’s multiplayer mode that was available for download on the day of release. Christian Svensson, Vice President of Strategic Planning & Business Development for Capcom responded to frustrated gamers by telling them on the company’s forums that DLC has its own budget and profit and loss sheet. He went on to claim that RE5 was great value and gamers didn’t feel ripped off before the announcement so they shouldn’t be too pissed off afterwards.

The problem with Capcom’s method was that the extra modes downloaded at a tiny 180kbs, suggesting that they already existed on the disc and the paid DLC was actually an unlock code. The extra modes only cost £3.40, but the way Capcom marketed them generated a lot of negative feeling towards the Japanese giants who have come under fire for similar tactics regarding downloadable costumes for Street Fighter 4.

Another unfortunate bi-product of DLC is that while it can be argued that if you don’t want the extra content, you don’t have to pay for it, some titles, like Halo 3, make having the basic package a hindrance when playing online where extra map packs are a necessity.

With publishers playing their DLC cards close to their chests it is hard to know exactly how they budgeted but it is clear that DLC is a healthy and previously un-tapped stream of revenue.

There is another motive behind the industry's adoption of DLC – it fends off the secondhand market by keeping the title in the gamers’ collection as they wait for extra maps, missions or other digital goodies.

Believe it or not, retailers don’t make a great profit from their mark-up of new titles (around 15-20 percent), however, they do profit relatively handsomely from games they buy themselves from bored punters.

Ever had an employee of Game tell you they have a second-hand copy of Street Fighter 4 cheaper than the shiny new one in your hand? This is why they do it and why the publishers hate it. There have been countless tales of industry big-wigs arguing that they should either get a percentage of used game sales or even that punters should be banned from trading in altogether.

While these tactics offer substantial rewards for publishers there is the added bonus for the gamers. Blockbusters like Fallout 3 and Grand Theft Auto 4 have received substantial DLC that have been well received by fans who acknowledge the work that has been put in to extending the life of their games and bought the bonus content in their millions.

There is a camp that argues games are too expensive and lowering prices is the answer. This camp isn’t solely occupied by tight fisted gamers; it also includes Valve Corporation, the publisher behind co-op shooter par excellence Left4Dead and content delivery system Steam. In February Valve Software President Gabe Newell said that data from Steam suggested games are too expensive, with a half price offer on Left 4 Dead seeing sales explode by 3,000%. "We sold more in revenue this last weekend than we did when we launched the product," said a rather proud Newell.

The advantage that Valve has over other publishers is its ability to control pricing through Steam. Activision, for its part, is going to have to try the ‘suck it and see’ method when Modern Warfare 2 hits stores in November.

If Modern Warfare 2 tanks (relatively), it will be unlikely that other publishers will follow Activision’s lead. However, if it succeeds it could open the floodgate to an army of cocky publishers thinking (mistakenly) that if Modern Warfare 2 can sell for an extra tenner, then why can’t their latest bog-standard shooter do likewise?