Thanks for clarifing your position Callate. I know it is hard to make a detailed point on a forum. I apologize for over explaining. I always would rather not assume anyone knows everything (the only thing I know is how little I know).
"The cost of creating a video game has increased dramatically, but the price a consumer is willing to pay for a video game has not, especially in the United States. The increase in price here has barely kept up with the cost of inflation, let alone the increased cost of development.
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This is very true. It's the same in most industries, and could lead to the collapse you speak of. However, gaming companies are still here and making money, so I don't think we are there yet. It will come down to whether or not they can make games more cost effectively or if the consumer will pay more.
"A company should make a profit, but that's not a given. Part of the thrust of Jim's argument is that game companies might be able to sell more units at a lower price. But even that's not a certainty. Games like World of Goo have done a good job of making the case that predicting around traditional market models with regard to video games isn't necessarily a good bet: even offering the a popular and well-received game for pennies wasn't proof against it being pirated.
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No it is never a given a company will make a profit. If they don't they fail. That is the nature of our economy. Also selling for lest may not generate more sales. Companies put a lot of effort into finding the right price point. It will always be the highest they can to maximze profit as we have both said. Perhaps their current model of high price for the first few months and then lowering it after works best for them. Nothing will stop piracy, but that isn't the real issue here. Make something your customers want and price it where they can afford and you will make money.
"The price of video games is artificially low from one standpoint in that a great many games are selling at a price point that won't allow them to recoup their costs and doesn't reflect the price in other markets. It's artificially high from another standpoint in that those same games are selling at a price point that may keep potential customers from buying, cause them to buy used, or wait for the price to come down. Also from the point of view that the cost difference between offering 1,000 copies of the game and 100,000 copies of the game may be negligible, so why not sell [or try to sell] 100,000 at the lower price rather than 1,000 at the higher one?"
I am not sure here if you speak from inside knowledge or assumption. All valid points from what I know, but I don't know the inside workings of game companies.
"Just to add further perversity to the mix, there's also the issue of the perceived value of a game being partially based on its price. A $60 game may come with the perception that it's a blockbuster in part because it's priced like one. The same game priced at $40 may suggest to its market that it lacks the confidence that it can sell at the same price as its competition, therefore it must be an inferior offering."
I once took a marketing class within a proff who use to work at proctor gamble. Their premium soaps were made with the exact same formula as recular soap. It onyl had a different scent, yet they charged much, much more and people paid it, because they perceived it to be of a higher value. This is a pretty common marketing practice. It plays on the egos of individuals. I never have a problem buying no-name brand, adn I guage a game based on what I see. I wish more people did that.
"Game prices are just artificial in that they are set on the basis of clearly flawed market examinations, a pricing based on how competing companies price their own goods, and an established "maximum" price based on consumers' expectations that haven't changed in step with the rising costs of creating their product.
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Yes and no on this point. Few companies want to compete on price. You will rarely see the same products made by different companies priced very differently. The try other methods to entice you to buy. I don't know what goes into the pricing structure of most gaming companies. they should evaluate these pricing structures, but they can't do so in a vacuum. Knowing how your competion is pricing makes a difference in how you need to price.
"And yet there used to be more companies making more games. When single programmers and three-person teams could make a state-of-the-art game, it could be commercially viable even if it only sold on one system, and a breakaway hit if it sold 100,000 copies. Now the risk is so high that major releases can fail selling a million copies. It's only over-saturation because rather than being able to succeed off of capturing a portion of the market, game creators nearly have to capture the majority of the market. And then go back and do it again, and again, and again.
Sometimes it isn't individual companies going under; sometimes the market doesn't balance out. Sometimes it just collapses. Sometimes entire industries are annihilated. I have yet to see a good counter argument that, at least as far as the AAA-game market goes, we aren't nearly at that breaking point."
I guess I am speaking more frmo the 90's perspective. It was hard to find as much variety then, but maybe I am rememebring wrong. I still stand by my statement that today there is a lot of competition. In pretty much every industry you are either a nich market or a major player. If your not then you cand survive that middle ground (most likely you get scooped up by the bigger fish). With the costs involved in modern game si think you are more right in that it is hard to be a successful nich game (but obviously not impossible), which is why you see smaller companies bought by the EA's of the world.
As far as markets balancing out, that all depends on the demand. Had Ford, GM and Crystler failed (and lets ignore the number of job losses in the US), would that have reduced how many people wanted cars? Or woudl Toyoto and Honda started selling a lot more? Would another car manufacturer start up since there is now a demand but less supply? They obviously have to be more cost effective than the previous companies that failed. I would see the gaming industry in the same light.
Thanks for the response. It is nice to see a good debate from someone with good ideas.
And one day I will learn how to use the tools on this site for quoting people better.
