The sad fact is they can set what ever price they want, but in the end the customer will set the price for them.

Take MW 1, the was £40 when it came out, then at the start of December gamestation cut the game £25, which then sky rocketed the number of sales.

Take last Christmas with huge number of AA games that came out together, would see them for £40 for the first week and then the cost dropped in some cases to £20.

Need more proof, pick any mediocre title coming out between October and November and see how long they keep the £40 price point.
In fact lets see how long COD keeps it £55 price point.

It's interesting that cinema is mentioned in the article because a blockbuster movie can often cost £100 million and upwards to produce, far more still than any video game.
Yet the dvd release will only set you back around £15. Of course we know that Mircosoft and Sony add markup to the final cost of every game but even so I'm finding it hard to accept the idea that because a game now costs as much as £50 million to develop that prices have to increase.

Another significant difference between cinema and games is that a big movie you really want to see at the big screen.

A game however usually presents no different an experience 6 months after release than in the first week. A game has to be really special for me to pay full price on the first wave. If games were closer to DVD prices publishers may find some titles sell more in the first few weeks where valudable chart position will keep them visible.

@ holdmykidney
Yes I agree. £40 - £45 is not an impulse buy for most people. A game may well represent more value but only if that game really appeals to you. That being said things have been pretty good recently. Since xmas 08 it has been possible to snap up some real bargains, and I think this has definitely attributed to the constant growth the video games market has seen recently. Raising prices to £50 - £55 will have an adverse effect on things moving forward... unless your game is called 'Modern Warfare 2', and then it appears you can charge what you like and get away with it.

IMHO, Activision are taking the mickey. In these economic times, everyone is pulling the belt tighter --> and Activision are increasing their prices, on the grounds that the games take to long to develp?

Times are hard, cut wages do whatever you have to, to stay ahead of the competition and it looks like EA is going to be on the right foot to exploit Activisions mistake. Amazingly enough without doing anything.

So remind me why Activision are raising their prices?!!

@2, "It's interesting that cinema is mentioned in the article because a blockbuster movie can often cost £100 million and upwards to produce, far more still than any video game. Yet the dvd release will only set you back around £15."

Well, let's say the average price of a cinema ticket is £5 (as it is in the UK), break even on £100m would be 20m cinema tickets, which isn't inconceivable for a £100m budget film. Or you could break even on 10m cinema tickets and over 3m DVDs. Again, not inconceivable for that budget.

(those are very rough figures but you get the idea.)

"Of course we know that Mircosoft and Sony add markup to the final cost of every game"

They get a significant proportion of the ARP but it isn't the biggest slice of the pie.

"but even so I'm finding it hard to accept the idea that because a game now costs as much as £50 million to develop that prices have to increase."

Huh? If a game costs more to develop you have to raise prices and/or sell more units. Look, a £50m game will have to sell roughly 2m units to break even at £49 99 ARP. I think less than 10 titles across PS360 shifted over 1m units in 2008 - I don't know what the ARP was, but you must get the point.

You have to say fair play to EA. This year's a huge one for us – and there's a LOT of pressure for this Q4. Every penny counts. Activision have stung us here, there's no getting round it. EA's reputation as THE ruthless giant is getting worn down... As someone points out above, they're coming across very well by doing what they've always done. Plus, EA Sports Active's doing the business for us in a big way.

@JS
"Well, let's say the average price of a cinema ticket is £5 (as it is in the UK), break even on £100m would be 20m cinema tickets, which isn't inconceivable for a £100m budget film. Or you could break even on 10m cinema tickets and over 3m DVDs. Again, not inconceivable for that budget."

Exactly! They sell more at a lower price point. If video games were around the £15 - £20 mark common sense would suggest that more would be sold. Because then as a product a video game becomes an item that can be bought on a whim, just like a dvd or a visit to the cinema.

"Huh? If a game costs more to develop you have to raise prices and/or sell more units. Look, a £50m game will have to sell roughly 2m units to break even at £49 99 ARP. I think less than 10 titles across PS360 shifted over 1m units in 2008..."

When a movie costs more to produce do you see the price of the cinema ticket rise? Or the dvd price? No they remain the same. Raising prices will only make things worse for publishers, developers and retailers. In my opinion the combined 360/PS3/wii market is big enough now that you can lower the price and see a substantial increase in profits. However due to the current pricing model that is tricky because we all know Sony and MS take a cut from every game sold. I have no idea what the percentages are and would not like to speculate as to how big or small that cut actually is.

geeQ you make an interesting point but I have a few problems with it - as you might expect :)

1. As in other sectors there may not be a linear relationship between price and sales, i.e. halving the price may not double the sales, you may see much less than double;

2. But, at current costs, you might need to more than double the sales if you halved the price in order to break even, so by halving the price you significantly increase the risk of not breaking even;

3. The number of cinema visitors and DVD players is orders of magnitude more than the number of next-gen consoles, so in these terms a film distributor can be more confident that he will break even than a games publisher.

"we all know Sony and MS take a cut from every game sold. I have no idea what the percentages are and would not like to speculate as to how big or small that cut actually is."

It is significant but not nearly the biggest slice of the pie.

Incidentally, considering the financials alone, if you cut out retail and sold our £50m game direct to the consumer at the wholesale price, I think you would break even on shifting roughly 250k fewer units.

The special edition of EA's Need for Speed: Shift has an RRP £5 greater than the standard edition.

Do commenters believe that the cost of goods for the poster and
special box, and the development costs of an additional, unlockable car and race, amount to an extra £5 per unit?

It's ok, game distribution will be much cheaper via digital means so we will see prices drop in the not to distant future......or will we?

It's interesting you mention downloadable content Booner, because that's fast turning into a 2nd revenue stream for Video Games. Just like films have cinema and dvd. Many video games released now don't just have the retail release, but also publishers are extracting additional revenue by selling extras that can be downloaded, such as extra cars or tracks etc.
JS this is also worth considering when we try to understand whether a video game could indeed be sold for less. However I do recognize the points you raised in post 9.

I think it's also worth mentioning that as well as the 3 console platforms many games are indeed finding there way onto the PC which again is yet another revenue stream... So yes development costs have increased but so has the overall size of the video games market and thats before we begin to talk about new additional revenue streams such as downloadable content, or the existing pc market.

Boomer, "game distribution will be much cheaper via digital means so we will see prices drop in the not to distant future......or will we?"

Certainly there is *potential* for great discounts because of the significant wedge that would otherwise go to retail, returns and price protection reserve, distribution, trade marketing etc. Of course (as you imply) we may not see those discounts - but then again, publishers may argue that rising costs are absorbed into the margin. Somewhere in the middle would be my guess.

GeeQ I agree that DLC realises additional revenue. In the "£54 99 Modern Warfare 2 to lead Xmas price hike" thread I suggested that publishers will "consider episodic and DLC, because the costs per 'title' are lower [which means less risk, too], the lower ARP is immediately more attractive to the consumer, and you'll probably distribute it digitally, which means better margin".

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