Your E-Mails: The Business of Gaming
As always, I received some interesting e-mail this week, and they were particularly interesting in response to the business of gaming columns.This is from a developer who wishes to remain anonymous. He wanted to respond to the comment about retailers getting charged more for games while the MSRP has held steady:
Which I would contend is to offset the "status quo" of our industry's unwritten collection of "standards":
1) ludicrous production values ("What do you mean there isn't normal and bump mapping on my AK-47 !?!")
2) extended feature sets ("How dare you not create a seamless programming API (or scripting language) for me to create my South Park mod to your game... You don't care about your customers... You guys suck!")
3) back-end infrastructure (server costs, etc.)
The above characterization makes it appear as though I'm picking on the average consumer, and I can promise that was not my sole intention. The truth is that the retailers crave these features just as much as the consumers do because the retailers consider themselves to be the only "consumer representative" in this little gaming dance between developers/publishers/distributors/retailers.
When a product purchaser (buyer) at a retailer (i.e. the guy who orders 5,000 copies of a game to be shipped to his company's stores) is "pitched" a game by a publisher/developer, they want to know:
"What other game is this game like?" (a.k.a. "So I can see how many copies that other game sold")
and...
"What features does this game have that other games don't?" (a.k.a. "So I can promote the game in some other silly way that has very little to do with the core gameplay but will sell more copies")
The door swings three ways on this little charade. So the fact that the wholesale price has steadily increased (again, I contend) is due to the fact that the required bar for "perceived product value" (consumer expectations) has grown steadily while the customer base has not grown quickly enough to offset those increased development costs.
That's a valid point, and if anything, MSRP for games overall has actually decreased in the last two decades while budgets have skyrocketed.
Here's another very interesting e-mail, this one about the used game market. I haven't heard back from the author to know if I can use her name, so for now she'll be Ms. Anonymous:
I am not an economist, but I work with them and it rubs off.
Manufacturers and others who sell new goods worry that used good markets will reduce the value of their new goods market. This doesn't actually happen. In fact, strong secondary markets increase the demand for the new good -- good examples are cars, where well-built cars maintain their value better and so have higher initial values. A really good example is white cars -- white cars have lower resale value than coloured ones (because they always look grubby) and so manufacturers have to sell them for less new, because people know this. Similarly, Apple computers hold their value really well compared to PCs, and people know that when choosing to buy Apples.
This is such a strong effect that some manufacturers pretend that there is a strong secondary market when there isn't really (cf Franklin mint).
Transitions can be tricky, but more efficient markets are generally a good thing in lots of ways. I am not convinced that anyone predicted that a major early win for the internet would be an order-of-magnitude improvement in the efficiency of the world's second hand goods market. (And to some extent, new goods market -- for example, I can buy hand-tailored clothes direct from India for a price that is simultaneously much more than the tailor can sell them for locally and much less than I can buy them for locally).
That goes in line with my boss's conceptual argument that more active used markets will always benefit the market for new products as well. I'd still like to see someone examine the used games or used book market and gather data. It would also be interesting to see data that could compare the effects of used merchandise on a purely "entertainment" market (games, DVD's) as opposed to a more functional market (automobiles, computers), because I'm not sure the effects would be comparable.
I will say this, though: to the best of my knowledge, I know of no new goods market that has ever been put out of business by the used goods market for that product.
Thanks to you guys for being intelligent and thoughtful. As usual.
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