Wednesday, 22 July 2009

L'Angleterre est une nation de boutiquiers

"A Nation of Shopkeepers" ("L'Angleterre est une nation de boutiquiers" is how Napoleon once famously described our fair isle (although it was probably first coined by Adam Smith). There are two topics of conversation that all British people are obsessed with: the weather, and “the price of fish”. Well, not just fish, anything and everything!

We have a culture that is always skewed towards cheapness over quality: from badly placed government IT contracts and infrastructure projects, to supermarket produce and hooky DVDs down the pub. This obsession also skews our retailers and high-streets.

Walk into any shop and 60-80% of the stock is “on-sale”, “on offer”, or “buy one get one free”. It’s like no one will buy anything unless they think they are getting a deal. But of course, the retailer has to make money, so products now must routinely carry a higher recommended retail price to make margin so that it can then be artificially discounted.

Listen to many UK-based gaming podcasts and you’d be forgiven for thinking that the only thing that matters is the price. With the exception of often sound consumer advice on FrugalGaming, I have become increasingly annoyed at complaints about the price of video games, in particular those on Xbox Live and the iPhone.

I think a lot of gamers fail to appreciate just how much it costs to create a game, even a fairly small one. The average Xbox 360 and Playstation 3 game costs £5-15m to create. That is a considerable investment for any company to make. Only half of all games made actually break even. In the beginning of Xbox Live Arcade titles were small ports of PC games that were produced for less than £100k and came in under 50MB. Today, Xbox Live Arcade games can be anything up to 500MB and costs between £100k and £1m to make: for example Braid is reported to have cost $200k.

Given the dramatic increase in the quality, size, value and cost of an Xbox Live Arcade titles isn’t it inevitable that the retail cost must increase. Given the 200-1000% increase in production costs, it would not be unexpected to see a similar increase in the purchase price? However, most games are today are either 800 or 1200 Microsoft Points: that a miserly increase of 50%, or just £3.40. Are we really trying to say that we are not prepared to pay an extra £3 for games that have the quality and production values of Battlefield 1943 or Braid, or would we rather stick to playing cheap thrill ports like Wik?

Incidentally, £3.40 buys you:

A pint of beer and some peanuts

A fish pie ready meal

A copy of the TV Times

A Venti Skinny Latte

The iPhone has revolutionised handheld gaming, and has created a new wave of “bedroom” indie games developers. The App Store provides an opportunity for games developers to produce small, cheap games that can be enjoyed by the masses. Prices range from 59p to £5.99, with most games selling for between £1 and £3. Considering the more expensive studio games, such as Tiger Woods, it still seems incredible value when compared to the cost of the same game on a Nintendo DS or Sony PSP (£25+). Yet, I still hear complaints about the pricing!

So what is the underlying problem here? Is it because these games have no physical media, and so therefore our perceived value of the product is less, even if the game may be identical to a physical version of greater cost? Probably.

Maybe it is the method of pricing that is the issue? 1200 sounds like a lot of money compared to 800. But £10.20 doesn’t sound like a huge amount of money; after all it’s the price of the average movie DVD?

Activision recently announced that their premium titles would carry and premium price. Not totally unexpected. Modern Warfare 2 is likely to be the best selling game of the year, but also one of the most expensive games ever produced. The publisher’s margins will also have been squeezed by the dramatic increase in the popularity of game rentals and trading that become a feature of this generation.

Whilst the timing of this price increase seems opportunistic, I have felt for some time that the impact of game trading and rental, on the scale we are seeing today, can only ever result in forcing prices up. A similar thing occurred in the early 90s when rampant piracy on the Commodore Amiga saw the price of games increase twofold in a couple of years. Video Games cost a lot of money to make, and the main means of returning a profit is to sell disks. If the disk is being resold or rented then you aren’t making money on that.

The issue of retail price is further exaggerated in the UK by our obsession with “getting a deal”. I can’t remember the last time I actually paid RRP (recommended retail price) for a game, even on pre-order. There is almost an unwritten rule that all games bought online or on the high-street carry a 20% discount!

I have a feeling we are heading towards a very uncomfortable future. Retail copies of games are likely to continue to increase in price in an effort to claw back revenue lost to trading and rental. The publishers are keen to get their games distributed online, but that carries the burden of massive IT infrastructure; discrimination against those gamers who are not online; or who can only “trade purchase”; and the aforementioned perception that download games are overpriced or lower value.

Microsoft are due to launch their own On-Demand service soon. It is the future, but I can already hear the complaints from British podcasters; I might just have to take a 3 month holiday when it arrives!