It's surely no surprise that supermarkets are demanding that publishers lower the prices of new games.
The likes of Tesco, Sainsbury’s and Asda have been aggressive in their pursuit of entertainment market share. They’ve increased in-store space for games and have been recruiting high-profile buyers to their teams.
Some are even toying with pre-owned and downloads.
But despite the success, the supermarket games teams are under pressure to prove to their paymasters that the games sector is worth it.
For all their market share boasts, profit has been hard to come by – so the challenge for these experienced teams is to balance the price demands of its consumers with the need for profit.
“Our role within the market is to offer great value to our customers, “ said Asda’s head of games Andrew Thompson.
“However, we need to strike an appropriate and sensible balance between price and profitability.
“Our new release strategy going forward will be more focused on projects that can deliver value for customers and profitability for our business.”
The days when grocers could cut £30 off the price of Call of Duty during its release weekend may be coming to an end. Hence Sainsbury’s non-food MD Luke Jensen telling suppliers during the firm’s Entertainment Conference (more on that on page 14) that they “will not bleed margin on your behalf forever.”
He said: “I’ve heard people in the entertainment industry complain about the fact that prices are being driven down, but what is happening is happening. The customers are leading the charge and we have to follow.”
He went on to add that lower prices provide an ‘opportunity’ for an industry looking to reach new consumers. But his words angered the games publishers who highlight how the DVD and music sectors have suffered at the hands of the grocers.
One MD of a major publisher told MCV: “The grocers played a key part in destroying value in music and DVD and I can’t believe they’d even have the cheek to suggest that we should want to follow suit to drive their share ambitions.
“I hope all publishers can see the folly in this. Sainsbury’s needs to think about adding value to the category and taking a responsibility to support an industry which takes huge risks on its behalf.”
Indeed, video games is a risky business. Even the big publishers are struggling for profit – so how can they afford to lower prices?
Codemasters CEO Rod Cousens added: “Publisher terms are doubtless driven by the business model options open to them and prices are unlikely to fall, particularly given the fact that most are in a loss making position presently.
”Consumers have benefited from software prices which have not moved upwards while the entertainment experience has increased and the production costs have escalated.
“Any call for downward movement in publisher pricing is misdirected.”
Even specialist retailers appreciate the need to keep prices high. One senior exec at a leading specialist told MCV: “By selling things at a loss you’re suggesting to customers that the product is over priced when it isn’t,” he said.
“Reducing the value on CDs and DVDs has not helped to grow these markets but simply de-valued them.
“The costs to produce games are very high, they have no theatrical release to re-coup money and high levels of marketing are required to promote the products. Customers will not buy more if the market cheapens – we will all just make less money.”
But price is clearly an issue for consumers. The Entertainment Retail Association’s director general Kim Bayley says that consumers don’t value their entertainment as much as they used to, and prices need to reflect that.
“Retailers have a good grasp of how consumers view the market,” she said.
“In recent years, entertainment values have been under pressure as a result of new business models and changing consumer habits.
“Retailers need to offer products at a value which consumers are prepared to pay. It is only natural that the effect of these pricing expectations should be shared between retailer and supplier.”
Game prices are beginning to go down. Wii and DS titles are often sold at budget costs, games are discounted heavily post-launch, and that’s not to mention pre-owned. In fact, according to TNS the average game price was £21.34 last year, down from £22.99 in 2008.
Some publishers are also being more flexible on price. In May, Warner released its Clash of the Titans game at a lower price and Ubisoft did the same for Pure Football.
Meanwhile, Sony has just released its £9.99 PSP Essentials range – classic PSP titles available on the cheap.
But what about the big triple-A titles? The games that are too expensive to make to risk having a £25 price tag?
One solution could be in episodic content. As DLC continues to become more prominent, perhaps publishers should consider putting out a cheaper boxed game that can be updated periodically via paid-for DLC?
Whatever the answer, we need to come up with some solutions fast. As Namco Bandai Partners boss Olivier Comte told MCV in May: “We need to discuss with first parties and retail about their vision of the future of the business.
“All these problems need to be placed on a table, and we need to come up with some solutions.”