Friday, May 11, 2012

Death of the $60 Retail Disk

Is the $60.00 retail disk on it's way to irrelevancy? This is the question I've been pondering for some time now. There seems to be more and more titles succeeding at a variety of price points and a variety of monetization methods that perhaps with more time the $60.00 retail disk will be reserved only for flagship blockbuster titles that you see once or twice a year. Let's have a look at the trend's I've been seeing as well as what it might point to in the future.

What drives these new price points and methods of monetizing game properties? It's the competition for your dollars. You only have so many of them and perhaps you'd like to spend $60.00 on a nice meal AND a game instead of purchasing just one title this weekend. The economy both in the US and globally isn't doing so hot and the game industry's usual customers do not necessarily have the disposable income the once did. As much as you might think otherwise games are not a necessity item that everyone will buy regardless of price.

We also have to take note that the cost of creating games has increased with higher end PC components and Hi-Definition gaming consoles becoming commonplace. The average price of game production slowly rose from $1M–4M in 2000 to over 5M in 2006 to over 20 Milllion dollars in 2010. Even Warren Spector, an industry luminary and veteran responsible for some of the greatest titles ever released, is concerned about rising costs. In an interview with VG247 he posits,
“Someone’s going to spend… well, there are already people spending $100 million on games, that’s not even insane anymore. $200, 300 million games, I’m a little scared about that, there aren’t a lot of companies that have the resources or the courage to spend that much."
Spector went on to explain that the math just doesn't add up to profitability,
“If you’re spending $200 million on a game and you’re making $60 on 20 million copies sold, oh wait, you’re losing money if you’re the best-selling game of all time basically, right? I don’t know how the business works anymore, that’s the problem."
In an industry where only the top 5% of games make a profit perhaps Warren Spector's fears are indeed
totally legitimate. But I'm personally not sure Mr. Spector should worry so much. If there's a way the market will find one. And it turns out it's found many in the past few years.

Smaller Independent game studios are producing titles that become very profitable relative to the initial monetary investment. There's been a resurgence of nostalgic 2D side-scrollers with a twist like And Yet it Moves and Super Meat Boy as well as a market for eclectic titles like Fez or Journey that could just not exist at a $60 price point. Granted the scope of the games at the 5 to 20 dollar range is significantly reduced but perhaps that's the problem with industry. Not every game needs to be a 3D high resolution blockbuster with multi-player, coop, single-player and top tier voice acting.

But those smaller titles would not be possible without digital distribution platforms that reduce the cost of getting your game into the hands of the people. Steam, GreenManGamer, D2D,, Amazon, Impulse and more are all potentially great vehicles for getting your game to the player. Even the iOS and Google Play stores contribute to allowing smaller developers with smaller but specific and perfectly valid visions achieve their goals of getting their game out as well as profitably. Would you buy Words with Friends if it was $60 and on a DVD? Doubtful.

Even these smaller titles; however, seem to succumb to some of the problems that plague their $60 big brothers. Games are depreciated at an astounding rate by comparison to 10 years prior. As recent as 2007 games depreciated 60% in the first 8 months! According to Patrick Steen, research found that brand new games lose more value in three days than a car does over three years." This problem along with used game sales is a frequent reason developers give for including multiplayer in titles that it, perhaps, doesn't need to be included in. Other developers; however, are switching gears to try out new ways to monetize their properties. You may have heard of it. It's called Free to Play.

Free to Play, ironically, may end up taking more than $60 from your wallet  if you enjoy the game enough. Just to name a few, League of Legends, Lord of the Rings: Online, Super Monday Night Combat and Tribes: Ascend all are free to download and start playing. These games fund their ongoing development and expansion of content via micro-transactions. Mostly players pay small fees to customize their character or level their character at a faster rate. The methods may vary slightly but fundamentally players are paying small fees, similar to the cost of a mobile game. This allows players to both purchase on a whim as well as try out the game to see if they want to spend any money on it at all.

Meanwhile a paid $60 megaton title by the name of Diablo III is looking at supplementing it's ongoing development and offset some of it's costs by taking a cut from their Real Money Auction House. Blizzard is taking $1 per item sold and 15-30% of commodities sold depending on whether you'd like to get the money transferred to Paypal or not. On the other hand Torchlight 2, a Diablo inspired game itself, will only cost you $20 and provide a similar experience. As of yet no micro-transactions have been announced.

Clearly different strategies are being developed in order to offset development costs and remain profitable. Yet, I would not say having played both games that one game is inherently higher quality than the other despite the price difference.

The market is adapting already because, I believe, companies are seeing the writing on the wall. Developers and Publishers are restructuring their business or claiming bankruptcy left and right. For instance, THQ, Sega, Team Bondi, Midway, GRIN and more have all had financial difficulties in the last five years. Publishers need to learn that not every game can put up Call of Duty type sales numbers and not every game needs to.

So what does this all mean? Do I think the $60 retail disk is an arcane idea that is doing to die off? Somehow I doubt this will be the case as retailers still have a significant choke hold on the profits of publishers and developers alike but I will say that gradual change and multiple new monetization methods and price points are most likely going to keep popping up as the market experiments with what works and what does not.

Kickstarter, anyone?

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