This is a fantastic question, and the right one to ask. So, thanks.
I have to be careful how I answer (I cannot disclose pricing publicly) so I will talk about trend, and you're just going to have to take my word for it as I can't show actual pricing figures. Hope that's cool. If your employer has a contract, please have your folks chat with their account person from NPD and we can provide additional data and insights.
Lots of us in the industry (NB: not speaking for my employer) are concerned about the downward pressure on pricing for "premier" titles right now, through retail and now online discounting several weeks after release
Well first, you have to separate planned price drops versus unplanned price drops. Best way to know which are which is to check retail
print ads, that lock weeks in advance of running and, for new releases, before the launch of the promoted game. If a new release is discounted in a print ad a few weeks after launch, that was planned by the publisher. That is not a reactive price drop due to sales.
This is important, of course, because it should alleviate concerns about price weakness for those titles. In these cases, the publisher planned before launch to do a promotional event. And, given that price sensitivity spikes sharply between Black Friday and the end of December, it doesn't surprise me at all that we're seeing more and more deep discounting in the holiday period. It's actually a very smart thing to do.
On the other side, you have titles that are not being discounted in retailer print ads, and are only being discounted in online ads and online sales. These are far more likely to be reactive drops, and unplanned.
These drops are more troublesome. But you do then need to separate which drops are because retail is concerned about inventory, and which drops are because the publisher placed expectations that were too high on the title and are trying to claw back to a sales goal.
Finally, you have to separate the reality from what a small sample of high profile titles could lead one to believe. I'm seeing the same handful of titles getting unplanned deep discounting, and I'm not seeing a wide swath of games being handled this way. This leads me to believe that there are certain games that are struggling. I wouldn't say at this time that we have a widespread unplanned decline in pricing. I mean, I guess that could be happening, but one month of data (where many of these drops are steeper than we've seen in recent years) certainly isn't enough to come to that conclusion.
At this point, I'm far more interested in seeing the returns of how these deep discounts impacted the market, and right now it looks like the market is responding positively to the price drops.
This means, of course, I don't think we have any issue at all of demand dropping in a widespread manner regardless of pricing. Gaming is not doomed. At all. It just shows that there is intense competition in the market, which always brings price competition.
It's pretty healthy for the market to act this way given the intense competitive nature of the market, is I guess what I'm saying.
and whether this is a learned behavior from Steam Sales, Humble Bundles, and things like XBL and PSN give-aways.
There are a lot of theories. The "WoWification" of consoles, where a handful of games take up hundreds of hours of time, twitch/youtube impact, price training like you mention, etc. Lots of stuff going on, don't think any one theory has been proven. I'd also argue that some of these very concepts actually help the market as much as they potentially hurt it, but that's a story for another day.
Do you think this is new behavior, or replacement for the previous used-game trade-in cycle?
Not sure they target the same audiences fully? The young guy who funds new game purchasing partially through trading in his older games will still need that funding stream and will therefore continue to purchase packaged until his income rises enough to where he can go more digital more regularly. So, don't think used games are going away anytime soon.
There is another line of thought that this discounting is now essentially user-acquisition cost in the AAA console space and that the revenue generation will move to post-sale monetization through DLC and MTX, etc.
Now this is the most interesting point, and I have a piece coming out in the next week or so with my 2017 predictions that focus primarily on this concept.
I believe fully that the ARPU model will take over the financial planning at the title level across pubs, and that the post-purchase revenue stream will be just as important as selling the initial unit. I expect post launch MTX and consumables support across most, if not a vast majority, of major titles. And I think the willingness to discount more aggressively earlier,
by choice, reflects this new thinking.
That's my take. What do you think?
