Monday, February 23, 2009

Pricing, Part Two

In reference to the Gabe Newell story about discounting and its effect on their total sales revenue, several people e-mailed and discussed the phenomena of discounting and perceived value. Basically, what they said was that if a game is discounted, particularly before its initial release, then it's perceived as a budget title of lower quality.

I think this is a tightly held belief of the gaming industry. I also think it's dead wrong, and let's look at why.

Let's say that I'm looking for a desk. If I go to Wal-Mart and see a desk that costs $39.99, I know (without even looking) that it's made out of particle board and was made in China (in Desktown, presumably).

By the same token, if I go to some custom furniture store and see a desk that costs $499.99, I can safely assume that it's not made out of particle board.

Why can I assume this? Because the raw materials used when making a desk cost money, and higher-quality materials cost much more. Plus, it takes much longer to make a desk with a high build quality and no workmanship errors.

Sure, there are some expensive, poorly-made desks, but the price premium is so high (10X or een 20x or) that a company probably won't last for long if their very expensive product is shoddy.

So price can, in a general sense, indicate quality. If I'm trying to buy a desk, anyway.

There's a rabbit hole here, which is how high a quality of desk I really need, which is why my desk actually is made out of particle board, but that's not the topic.

Let's say I'm trying to buy something else, though, like a music CD. Does price have any correlation whatsoever to quality? Absolutely not. Some of the worst CD's I've ever heard cost me $16.99, while some of the very best cost me $9.99 or less.


Well, for one, music is a more highly particularized and creative endeavor than making desks. Plus, there's really no base "cost" of materials, at least in any meaningful sense. For a few thousand dollars, anyone can make a music CD, and for 90% of the people who listen, its technical quality will be indistinguishable from a CD that cost five million dollars (or more) to produce.

Plus, that five million dollars says nothing about the quality of the music. The raw materials, in effect, are created by the musicians, not purchased.

So do I think that a music CD that costs $9.99 is going to be worse than a CD that costs $16.99? Of course not.

Art? Books? Same thing. Zero relation between cost and quality. There certainly can be a relationship between cost and reputation, particularly in art, but that's a different matter entirely.

What about games?

Well, three of my favorite games of the last two years have been Dwarf Fortress, Armageddon Empires, and Fairway Solitaire.

Dwarf Fortress is free (although I strongly encourage you to make an optional donation), and it's probably the deepest exercise in pure thinking in the history of gaming. Created by two guys. Programmed by one (Tarn Adams).

Armageddon Empires was $29.95 when I bought it, I think. Created and programmed by one guy (Vic Davis). Ridiculously addictive.

Fairway Solitaire. $19.95. I spent at least 30 hours playing it. I think images from the game burned themselves onto my retina.

So does price give us any indication of depth or quality when it comes to games? Of course not.

Why do so many people think that it does, then? Because the big gaming companies tell us it does.

They tell us (over and over again) that they HAVE to charge $60 for new games because they cost so incredibly much to make, because of the staggering effort they require, blah blah blah.

And if those $60 games really WERE of uniformly high quality and depth, I'd believe them. Instead, though, many of of them are shoddy as shit. Annual sports games are prime offenders--we often pay $60 for early betas. And there are plenty of $60 games now (particularly FPS games) that have a single-player experience lasting fifteen hours or less.

Like I said, that $60 price tag means nothing except that it's what the publisher wants us to pay. It says zero about quality, about effort, about intent. Nothing.

So what does that say about a game being perceived as a budget title? I think that notion is based only on very limited anecdotal evidence that doesn't hold up under further scrutiny. Seriously, has a developer ever claimed that a game failed because the price was too low?

Particularly in an age where information is so plentiful and easily accessible, it's not hard to tell pearls from swine. If a game is good, it's good, regardless of the cost.

I think every big publisher knows that if they dropped the price of all new 360/PS3 by $10 that their sales revenue would increase. At first.

The problem, though, is that every other big publisher would respond by dropping their price, and everyone is afraid of that scenario (well, everyone who isn't a consumer, anyway). So while an occasional title will come out for $50, no one's making a clean break yet.

That has nothing to do with quality, though. It's just a tactic.

I'm sure that the gaming industry must have some kind of data that makes them believe they're maximizing their revenue with the pricing structure they're using, though. What I wonder about, though, is when that data was collected. The consumer market for gaming changes so quickly (Gamestop, the Internet, DLC) that if their data is two years old, it may be completely irrelevant.

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