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[Skiptastic]

Basically, they want to charge you for stuff that has been "free" in the past. Sounds like it will work as well as Sony trying to charge for online gaming. You have to create the value or you risk killing your consumer base.

Works a lot better if you charged in the beginning then can lower your prices to achieve more market saturation. Much harder to go the other way.

 

[avatar299]

Basically, they want to charge you for stuff that has been "free" in the past.

Good.

People need to understand, that shit has never been free. Instead of paying with cash, you are paying with time, which quite frankly is retarded.

For example, I'm playing MAG right now and the first 4-6 hours are a complete waste of fucking time, becuase i have a shit gun and no skills. This idea that i have to grind away until i can create and customize the character i want to play is archaic. you waste time, and subsequently drip money away. However give consumers the option at the start to customize their characters the way they want with cash and you will see higher RoR and a more engaged consumer base with people playing the way they want to play, without enforcing a technical handicap on newer players

Farmville is an immediately rewarding game that you can sink 30 mins or 30 hours into depending on what you want to spend. it gives consumers way more options than many other games today, but people refuse to change the model because they are afraid gamers are going to rage quit which is dumb for whole other reasons.

 

[Mael]

What? You don't like metacritic?

You're telling me this serve as market research? Well no wonder they're fucked

 

[templeusox]

Rubin responds:

http://www.gameslice.com/2010/02/17/jason-rubin-responds-to-bonus-round-commenters/

 

[Kintaro]

Rubin responds:

http://www.gameslice.com/2010/02/17/jason-rubin-responds-to-bonus-round-commenters/

Maybe I just missed it because I've yet to have breakfast, but did he actually state what his opinion actually was? Or did he just spend all that time stating what he didn't say. Sounded like he actually didn't have one.

 

[gerg]

Maybe I just missed it because I've yet to have breakfast, but did he actually state what his opinion actually was? Or did he just spend all that time stating what he didn't say. Sounded like he actually didn't have one.

When you get down to it, his opinion is remarkably uncontroversial: game developers and producers need to bring in extra revenue, some of which may be generated by new and different distribution methods.

It's no surprise that, when all the hubris and misinformation about what he actually did or did not say clears, the final revelation is a bit of an anticlimax.

 

[Kintaro]

When you get down to it, his opinion is remarkably uncontroversial: game developers and producers need to bring in extra revenue, some of which may be generated by new and different distribution methods.

It's no surprise that, when all the hubris and misinformation about what he actually did or did not say clears, the final revelation is a bit of an anticlimax.

Pretty much. Or, you know, they should deal with the real issue: Stop throwing so much money around and get smarter about using it. Nah, it's easier to blame consumers and attempt to wrangle it out of them instead.

 

[DidntKnowJack]

Sorry, but I still disagree. He says "things have to change" because the current model doesn't work.

Rubin:

"Michael Pachter specifically pointed to EA’s recent earnings (or lack thereof) as an indication that something is indeed broken. EA and Activision’s large recent layoffs (Activision after the show’s taping) also point to less AAA games getting made and changes ahead. Losses and layoffs are not a sign of a healthy industry."

Jason. I don't know if you heard, but we're in the middle of a global recession. There are tons of industries that aren't healthy right now. If you think new pricing models is the key to making everything better, you're living in fantasyland. This is absolutely moronic.

 

[The Faceless Master]

what has to change is spending so much money to produce a game. get better at budgets on HD games or learn to compete in quality and advertising with Nintendo.

 

[Vinci]

Sorry, but I still disagree. He says "things have to change" because the current model doesn't work.

Rubin:

Jason. I don't know if you heard, but we're in the middle of a global recession. There are tons of industries that aren't healthy right now. If you think new pricing models is the key to making everything better, you're living in fantasyland. This is absolutely moronic.

The recession is accelerating things, not the underlying cause of the problem.

 

[Dan Yo]

.. game developers and producers need to bring in extra revenue.

Why? They already charge twice as much as it costs consumers to go see a movie in the theater AND buy the movie on disc while having a far smaller budget than most films. Which has also allowed the industry to consistently beat revenue records in the entire entertainment industry.

They're already squeezing about as much money out of us as they can. They don't NEED to do anything other than to teach some of the smaller, more vulnerable developers to manage themselves more properly.

 

[gerg]

Why? They already charge twice as much as it costs consumers to go see a movie in the theater AND buy the movie on disc while having a far smaller budget than most films. Which has also allowed the industry to consistently beat revenue records in the entire entertainment industry.

They're already squeezing about as much money out of us as they can. They don't NEED to do anything other than to teach some of the smaller, more vulnerable developers to manage themselves more properly.

I'm not sure what you're point is: are we back to saying that the industry is hunky dory, and that layoffs and closures and losses aren't the sign of some significant problems with game development throughout the industry?

Not only would the prominence and success of alternative revenue streams (such as DLC) contest the idea that developers are "squeezing about as much money out of us as they can", but you already beg the question of what it would be for supposedly "vulnerable" developers to manage themselves more properly. Wouldn't the latter partially entail making more money? (I'd also highlight that EA has been famously losing money. I don't think it paints a good sign for industry health if one of its biggest entities is supposedly "vulnerable".)

I admit that "revenue" may be a word less preferable to "profit", and I agree that development inefficiencies exacerbate the situation, but I'd think it pretty uncontroversial to argue that the basic problem of game development today is that games cost too much to make, and that a good way to solve this problem is to simply make more money.

 

[NeoUltima]

There is nothing terribly wrong with the pricing model, as in there isn't one much better that can be done. The problem is the stuff that makes the pricing not work for some(really this whole thing is overblown) companies(but there still isn't a better option for most games).

Anyway...Pach-Attack #2 http://www.gametrailers.com/video/episode-102-pach-attack/61972

 

[Vinci]

I admit that "revenue" may be a word less preferable to "profit", and I agree that development inefficiencies exacerbate the situation, but I'd think it pretty uncontroversial to argue that the basic problem of game development today is that games cost too much to make, and that a good way to solve this problem is to simply make more money.

The development inefficiencies will right themselves out over time one way or another. DLC isn't going to make something more profitable necessarily, as it requires even further planning and development to properly leverage - and that's sort of the underlying issue. The problem, also, is that very few brands can retain interest from their userbase enough to utilize DLC in a beneficial manner. Even GTA isn't strong enough to hold onto its customers and fans indefinitely.

 

[DidntKnowJack]

It just appears to me that people like Rubin want to shift all of the burden of higher development costs on to the consumer. Maybe they just need to invest more wisely, or roll back some investments altogether.

 

[Vinci]

It just appears to me that people like Rubin want to shift all of the burden of higher development costs on to the consumer. Maybe they just need to invest more wisely, or roll back some investments altogether.

But it's the consumers - at least the ones they're targeting - that are demanding all of this. It seems reasonable to suggest that people pay for what they demand. Nowadays if a game on the HD platforms isn't absolutely beautiful, have a healthy number of online modes, etc. and so on, it's going to be (for the most part) ignored.

EDIT: The industry set a standard for itself that it can't sustain.

 

[Y2Kev]

what has to change is spending so much money to produce a game. get better at budgets on HD games or learn to compete in quality and advertising with Nintendo.

Well, I agree for the most part. The problem is not just declining revenues...it's cost. You need to make cheaper games. If that means taste must change and most developers with "cinematic ambitions" need to shelve some of their larger projects, then I'd be willing to do that for the health of the industry.

Nowadays if a game on the HD platforms isn't absolutely beautiful, have a healthy number of online modes, etc. and so on, it's going to be (for the most part) ignored.

We'll continue to contract until the market is producing what consumers will support. I see this as a functioning market, Jason Rubin sees this as unhealthy. And I don't mean to be callous-- it sucks to see people lose their jobs, but the development and publishing side of the industry have leveraged all their bets on huge, big budget "AAA" projects when the market simply cannot support that many at that cost.

 

[DidntKnowJack]

We demand the experience, yes. But we don't demand one studio or publisher invest in X amount of games a year. That's completely their call.

 

[Vinci]

We demand the experience, yes. But we don't demand one studio or publisher invest in X amount of games a year. That's completely their call.

So you're saying you'd rather they make less games a year but not decrease the cost of those games' developments?

 

[gerg]

It just appears to me that people like Rubin want to shift all of the burden of higher development costs on to the consumer. Maybe they just need to invest more wisely, or roll back some investments altogether.

And of course, the price increases we've seen from generation to generation have nothing to do with passing the "burden of higher development costs" on to the consumer. Really now.

But hey, I like your idea of "rolling back investments": fewer games for all!

The development inefficiencies will right themselves out over time one way or another. DLC isn't going to make something more profitable necessarily, as it requires even further planning and development to properly leverage - and that's sort of the underlying issue. The problem, also, is that very few brands can retain interest from their userbase enough to utilize DLC in a beneficial manner. Even GTA isn't strong enough to hold onto its customers and fans indefinitely.

Sure. DLC won't work for all games.

I think that Rubin's basic point is that it's beneficial to be able to monetize your fanbase after they've made their initial purchase. Doing so allows you to lower the cost of the initial investment, hopefully to the point that you can sell to more and more customers, to whom you can then sell more and more "post-purchase" content.

We'll continue to contract until the market is producing what consumers will support. I see this as a functioning market, Jason Rubin sees this as unhealthy. And I don't mean to be callous-- it sucks to see people lose their jobs, but the development and publishing side of the industry have leveraged all their bets on huge, big budget "AAA" projects when the market simply cannot support that many at that cost.

If the games market contracts to the point where one game is being produced a year (as that is what consumers will support), will it be healthy?

 

[DidntKnowJack]

Both of you seem baffled.

Yes. Make less games. Invest in less games. Publish less games. You know, make wise decisions so you don't over extend yourselves. If you're hurting financially, make those tough decisions.

 

[Deku]

Rubin responds:

http://www.gameslice.com/2010/02/17/jason-rubin-responds-to-bonus-round-commenters/

Well it's kind of pointless and I have no doubt Mr. Rubin has these fairly tame pro-gamer ideas.

My issue is that I simply have no faith the industry as a whole won't abuse the system in the ways he's saying his idea isn't
-game shutting down if you don't pay some microtransaction fee
-letting people buy their way through games.
-games won't cost more in his alternate model.


All of those may not be Mr. Rubin's ideas and he may not believe in them, but trust me, an industry dominated by microtransactions is going to make all 3 happen as a standard. And we have the DLC expereince this gen to see how things will go down. And most importantly, he admits that the 3rd objection to his position (that games won't cost more if you add up all the silly microtransactions + base cost) is an unknown quantity and that he himself doesn't know how it will turn out.

Undoubtedly, There will be pockets of 'well to do' developers eschewing such monkey business, and maybe, a console manufacturer may even step forward and trying to differentiate itself by refusing such practices. But that doesn't detract from the point that an industry dominated by content based microtransactions is not a good one.

And to address his final point that the current pricing 'isn't fair'

It's about as fair as someone who can't pay for all the microtransactions that will be shoved down people's throats.

 

[Vinci]

I think that Rubin's basic point is that it's beneficial to be able to monetize your fanbase after they've made their initial purchase.

Of course it's nice to be able to do that. Traditionally that's done through a sequel, but now we're gearing up to try and push out DLC of undetermined size and quality out over a long period of time and hope that people don't rush off to another game based on the novelty factor or because they've grown bored with the experience they were getting earlier.

In a way, what DidntKnowJack is talking about is the same reason why DLC is a limited time offer. Too many games are coming out that are too similar that are all drawing from pretty much the same userbase. And these companies are spending millions and millions of dollars to do whatever is necessary to make sure their title isn't ignored. How is DLC supposed to compete with that?

Both of you seem baffled.

Yes. Make less games. Invest in less games. Publish less games. You know, make wise decisions so you don't over extend yourselves. If you're hurting financially, make those tough decisions.

Who's baffled? The problem is management. The problem is budgeting. The problem is that these companies are vying for the same exact people title after title. As I said: What you're suggesting? That's what is happening right now - it's just happening naturally as opposed to by choice.

 

[Y2Kev]

If the games market contracts to the point where one game is being produced a year (as that is what consumers will support), will it be healthy?

We've got two different ideas at play here: first, that a market is healthy (that is, it can clear successfully, there are no "market imperfections" in the form of externalities), and second, that an "industry" is healthy. The first is really a matter of market theory, and the second is almost normative. I've already commented too much on the latter, frankly, and I don't know if I feel that strongly about what I've said.

But I do still believe we have too many products with costs too high, both in costs that are capitalized and those that are immediately expensed (like R&D). EA is the prime example.

 

[DidntKnowJack]

Who's baffled? The problem is management. The problem is budgeting. The problem is that these companies are vying for the same exact people title after title. As I said: What you're suggesting? That's what is happening right now - it's just happening naturally as opposed to by choice.

Ah. Ok, I misunderstood. I can't say I disagree with any of that.

 

[gerg]

Of course it's nice to be able to do that. Traditionally that's done through a sequel, but now we're gearing up to try and push out DLC of undetermined size and quality out over a long period of time and hope that people don't rush off to another game based on the novelty factor or because they've grown bored with the experience they were getting earlier.

I'm tired, and so I'm finding it difficult to properly explain what I mean.

I'm not denying that DLC may, at the end of the day, sell to very few people (as a percentage of the overall userbase). However, there's power in numbers. Consider FarmVille: even if only 1% of its entire userbase only buys $1 of digital content a month, considering the 30million+ userbase, they generate over $3.6million of revenue a year. Heck, you only need 0.1% of all people to spend $10 a month to get the same affect.

Currently, lowering the price of a retail game is a risky proposition as you need to sell more copies of the game to produce the same return as when selling the game at a higher price point, and you may end up just making less money. If you can monetize the fanbase after they've paid for your title, however, then selling your game for less becomes much more favourable. Consider the following example:

1% of all customers who buy Bayonetta then go onto buy the "Super Tits Expansion Pack" for $10.
One option is to sell the game for $60, at which price 100 people buy the game: you make $610.
Another option is to sell the game for $320, at which price 200 people buy the game: you make $620.

I think that this is the kind of advantage which Jason Rubin is talking about, not "OMG! This cool new game just got awesome DLC! I just have to have it!"

In a way, what DidntKnowJack is talking about is the same reason why DLC is a limited time offer. Too many games are coming out that are too similar that are all drawing from pretty much the same userbase. And these companies are spending millions and millions of dollars to do whatever is necessary to make sure their title isn't ignored. How is DLC supposed to compete with that?

I'm not sure I understand what you mean. In any case, the point isn't to use DLC as a bullet point on the back of the box; the point is allow you to squeeze extra money out of the people willing to spend it, whilst simultaneously allowing everyone else who can't be bothered with it to avoid it (and, ideally, to enable you to lower the base price of the game so that you can then sell your game to more people, some of whom will then go on to buy DLC).

We've got two different ideas at play here: first, that a market is healthy (that is, it can clear successfully, there are no "market imperfections" in the form of externalities), and second, that an "industry" is healthy. The first is really a matter of market theory, and the second is almost normative. I've already commented too much on the latter, frankly, and I don't know if I feel that strongly about what I've said.

But I do still believe we have too many products with costs too high, both in costs that are capitalized and those that are immediately expensed (like R&D). EA is the prime example.

I'm not sure I quite understand your post, so I can't comment extensively, but my basic point is that it seems that our understanding of a "healthy" market rests on more than just "is consumer demand being fulfilled" (including such factors as the number of people employed, how profitable companies operating within the industry), such that we'd be reluctant to call a "one game produced a year and sold to one consumer" game industry healthy.

I may be conflating "market" with "industry", when one should refer to demand and one should refer to supply.

 

[Deku]

Currently, lowering the price of a retail game is a risky proposition as you need to sell more copies of the game to produce the same return as when selling the game at a higher price point, and you may end up just making less money. If you can monetize the fanbase after they've paid for your title, however, then selling your game for less becomes much more favourable. Consider the following example:

1% of all customers who buy Bayonetta then go onto buy the "Super Tits Expansion Pack" for $10.
One option is to sell the game for $60, at which price 100 people buy the game: you make $610.
Another option is to sell the game for $320, at which price 200 people buy the game: you make $620.

Depends on elasticity of demand and the demand curve.

Given how frontloaded many of the HD titles are, and its generally those titles that's putting studios in financial trouble, it tends to suggest demand is highly inelastic and that they'd get more or less the same sales for $10 less.

There may be a better tail end for some games, that is assuming most publishers go with the model of restocking their games like Nintendo does but most titles just generally drop off normal retail channels after about a month. So a lower MSRP will just cut into Gamestop's profits as they will have to charge a bit less than MSRP for their used titles.

Realistically, it comes down to charging gamers the same price, and adding all these microtransactions ontop of it to monetize lost value. Let's not kid ourselves. Activision is not going to sell a $30 Modern Warfare 3.

The real problem with HD games now is they can spend $30 million on a title but their potential sales is going to be 1-2 million units for most of the successful title. They just need to spend less, but there's deeply ingrained taboos in the industry that if you spend less, you sell less because games have to have all these 'set' features.

THQ is trying to go with the budget HD gaming train, but I suspect they'll crash and burn when EA and five other publishers outspends them on everything and they can't compete. That's sort of the problem in the industry. The bar is set so high that if you come off it, you sell less. If you don't come off it, you still suffer financial catastrophe if your games don't sell in the 3-5 million range.

So of course the obvious solution is to charge more.

 

[gerg]

Depends on elasticity of demand and the demand curve.

Of course - my example is far from realistic. All I wanted to demonstrate were the kinds of advantages I think Jason was talking about.

Realistically, it comes down to charging gamers the same price, and adding all these microtransactions ontop of it to monetize lost value. Let's not kid ourselves. Activision is not going to sell a $30 Modern Warfare 3.

But that's because Activision can sell millions of copies of Modern Warfare at $60. That's not a liberty available to most publishers, however.

 

[Vinci]

I think that this is the kind of advantage which Jason Rubin is talking about, not "OMG! This cool new game just got awesome DLC! I just have to have it!"

I'm not saying I disagree with the DLC concept, gerg. I get the point of it and what it might entail. What I'm saying is that it depends heavily on the sort of DLC you offer and how much further effort and funding it requires to produce it. Right now, DLC varies pretty dramatically from game to game - but like everything else, it's eventually going to become fairly standardized. Just like most other features in these games are. At that point, once this standardization has taken place, we're all back where we were before. It's getting to a point in which developers / publishers do, in fact, state in interviews that, "Yes, we have DLC planned. Great stuff. Big. Buy it please." And that's fine - but gamers are going to begin looking at DLC and grouping it in a variety of categories based on their perception of value which is largely going to be determined by the genre kings that have the funding to do whatever the hell they want.

So again, this doesn't correct the real issue - it's just an attempt to hide it a bit. Problem is, the real issue is going to get these people anyway. So now developers not only have to make a really visually appealing game, they have to make sure their Achievements / Trophies are well thought-out (as this metagame becomes more and more important, which it will), that their online modes are competitive with what's out there, and that their DLC isn't going to be seen as too little-too late when X,Y, and Z are offering better for the same price (oh, and there's a new similar game out that's full of 100% new and interesting content!).

In the end: It's all going to end up in the same place. Those who are able to manage, or are the owners of genre king IPs, will survive... while those who don't will die.

 

[Kai Dracon]

Observation: I can guarantee that one huge reason the game industry has a problem expanding out of the geek sector (even if the geek sector is very large now) is that the average person may be ignorant about gaming, but that doesn't mean they're stupid. (Geeks just like to think so.)

For Joe Average, a $60 videogame looks outrageously priced, when even those fancy-shmancy new Blu-Ray movies are $30. It gets even worse as games try to become more cinematic and imitate movies. Then people look at a game which is an "interactive" movie, and then at a regular movie, and ask "so they want you to pay double the price for making it work with a controller?"

The geek stands at the ready with a thousand justifications and excuses, such as "replayability" (as if nobody ever watches a movie twice), content, length of the experience, and so forth. But at the end of the day, for the non-gamer, this all sounds like a lot of excuses. The bottom line is that those fancy videogames are insanely expensive and not worth the trouble.

But the industry wants to have all cakes and eat them too. They want to spend less than making a motion picture and charge double the price to own it. They want to grow the industry and take over entertainment, but want to keep extracting revenue from customers like milk cows hooked up in a machine farm. They want to make sure nobody actually owns anything, and merely rents it.

The geeks put up with it because 1. they're addicted, let's face it, and 2. the benefits for them outweigh the costs. And because of those two points the industry has been rubbing its palms together and slowly turning up the knob on the burner.

It's getting increasingly uncomfortable here in the pot.

 

[gerg]

So again, this doesn't correct the real issue - it's just an attempt to hide it a bit.

I'm not quite sure I understand what you think that the "real issue" is.

Is it that lots of games aren't selling well? Well, imo, that's not the problem. The problem with the current generation isn't that games aren't selling well, it's that they're losing money whilst simultaneously selling poorly.

Alternative revenue streams aren't going to change the latter - if Bayonetta is selling twice as many copies on the back of a half-price reduction, then I imagine that most every other game is going to do so too - but they should help alleviate the former.

In the end: It's all going to end up in the same place. Those who are able to manage, or are the owners of genre king IPs, will survive... while those who don't will die.

Well... sure. But that's the nature of competition. Some games sell well; some games don't. That's not a problem, that's a "feature".

 

[Safe Bet]

Pretty much. Or, you know, they should deal with the real issue: Stop throwing so much money around and get smarter about using it. Nah, it's easier to blame consumers and attempt to wrangle it out of them instead.

I have a real problem with a man who's done very well for himself in the videogame business telling me the industry is in trouble because gamers don't pay enough for their games.




Edit: I know that's an attack on character and I apologize, but ffs...

I'm so tired of people not realizing how expensive this 'hobby' is for the majority of us.




Edit #2:

The third misconception is that while many of the comments have assumed that alternate business models must mean higher costs to gamers on average. We do not know this to be true. I do believe that the model will distribute costs differently, and hopefully a model that is as good for the gamer and better for the industry can be found.

link

I hope so because I suspect the hardcore crowd doesn't have much more to give.

Most of us already spend more money on videogames than we should.

 

[Vinci]

I'm not quite sure I understand what you think that the "real issue" is.

These people don't know how to manage themselves and this mad charge towards the blockbuster model. That's the problem.

Is it that lots of games aren't selling well?

No, that even games that sell well may not make back what it cost to produce and advertise them. Taking three to four years to create a product. Cutting out any sort of development that isn't AAA. Not taking advantage of less cost-escalating revenue opportunities.

Basically, I look at these 3rd parties and the way they're conducting themselves... and I think most of them are in deep shit; that they're part of a cycle they very likely won't be able to escape from.

 

[gerg]

These people don't know how to manage themselves and this mad charge towards the blockbuster model. That's the problem.

[...]

No, that even games that sell well may not make back what it cost to produce and advertise them. Taking three to four years to create a product. Cutting out any sort of development that isn't AAA. Not taking advantage of less cost-escalating revenue opportunities.

So... the solution would be to expand the marketplace. I would think that that's something that what I suggested could accomplish.

There's nothing inherently wrong with the blockbuster model. The problem is that the gaming industry, at the moment, is too small to adopt it.

 

[Milabrega]

Rubin's right in that there is already an "unfairness" barrier with games priced at $60. Alternative business models can provide access to substitute gaming at lower entry points. Just a brief take on the alternate to $60 retail we've seen emerge recently, or that can be applied to future gaming business models.

-Subscription unlimited models have worked (Everquest) does work (WoW, Eve, and to a degree Xbox Live) and likely will continue to work (Old Republic, CoD?).

-The Korean model has finally emerged successfully in the western market (League of Legends, Farmville) though it has been met with rejection when done wrong (Battlefield Heroes?). Its proven successful when selling superficial things with no impact to gameplay like alternate color schemes and themes. Its also proven successful when selling time, in LoL you can unlock every hero and rune through playing, you can however pay to be granted access to stuff earlier. This does not create a balance schism between payers and normal players. Battlefield Heroes went a stray, when (among server and basic gameplay issues) they began to sell power for the dollar.

-Episodic Model (Strongbad, That new Sonic) seems to be emerging as a dominant force in the digital distribution arena. It delivers a fraction of the amount of content normally found in a retail release, at a fraction of the cost. It should/will (does?) provide access to content to a much larger audience than it theoretically could at retail. It has the potential to build a base, and to continue to provide consumers with ever increase content to consume at a price. We already know the fanatical fans will spend more, this model attempts to both get them to spend more, and to groom casuals to gradually consume more as well.

-Pachter's Magic the Gathering mode. The theory he proposed on a Bonus Round much early sounds interesting, I don't know how, if or when it could be applied to gaming or if in practice its any different than the Episodic model. The gist of it though however, is consumers buy a "starter pack" loaded with a wide breadth of a game's content, however to further that content and to get access to more, you have to purchase booster packs. It also seems similar to the DLC and expansion models currently employed.

-I think we've grown beyond PayGo models (Example: 1990's AOL) and society just won't accept that kind of business model anymore.

-I also don't seriously consider an Ad-Only model. Simply because ads are currently deployed to mitigate development risk and or add additional revenue stream (Sports titles), pay for free services vital to a game's function (Battle.net, Steam). Though I'd like to see On Live attempt to go down this path.

These models could all be used to lower the barrier to entry for gaming. They could also effectively be employed to increase revenue beyond the restriction of the $60 model. The $60 model is reliant on collector's editions, DLC and expansion packs to see any form of revenue growth. From a manger and or employee perspective, what is attractive about these models over the retail model in addition to higher potential revenue steams, is sustainability. Right now a large number of publishers employ on a project by project basis, it allows for a lot of mobility (which won't be lost as these new models won't entirely replace the retail model) but doesn't provide a lot of long term insurance for employees looking to settle into a stage of life (city, career, family). The above models require the continuous release of content, so, as long as that particular game is viable there will always be a need for the content creators (as well as managers, account handlers etc). There will still have a need for temp and per project employees in this field, especially in the creation of new a property, but the sustainable content delivery can be handled by a smaller team of secure employees. Though I guess many of these models are best applied to alternative gaming sources facebook, browser, phones, pc, console download services and well, the bonus round, like industry analysts and executives are still to elitist (LOL Palin buzz word) to consider them a part of the industry.

What I'd like to know is why haven't gaming companies diversified beyond well, games. We've seen a few attempts at entering the film industry, whether it be licensing (Resident Evil, Uwe Boll's army of crap) or more hands on approaches (Prince of Persia, Lost Planet). Why stop there though? Look at Disney and the strength of their company coming from the merchandising. Action Figures, Comic books, tv, clothing, sleeping bags, lunch boxes.

 

[Vinci]

So... the solution would be to expand the marketplace. I would think that that's something that what I suggested could accomplish.

There's nothing inherently wrong with the blockbuster model. The problem is that the gaming industry, at the moment, is too small to adopt it.

Exactly. Only the DLC method is a short-term salvation rather than an actual way to expand the marketplace and make it applicable for all developers and publishers. Nintendo's strategy, for example, succeeds in expanding the marketplace by head count - which is far more profitable and sustainable than the other option.

 

[charlequin]

It just appears to me that people like Rubin want to shift all of the burden of higher development costs on to the consumer.

Correct. You have a small core group of consumers who heavily value the rapidly-increasing production values and rising costs that are driving the industry from a net money-maker to a net money-loser, and then a ton of other consumers who really don't give a shit about these things at all. Rubin's position is that the industry should find ways to keep subsidizing these rising costs either by taking those core consumers for all they're worth (via DLC, subscription fees, raised prices, etc.) or by somehow milking more out of all those less-dedicated purchasers.

My position is to make games that can actually be profitable at a $30 pricepoint and sell those.

Given how frontloaded many of the HD titles are, and its generally those titles that's putting studios in financial trouble, it tends to suggest demand is highly inelastic and that they'd get more or less the same sales for $10 less.

As other areas like DLC pricing convincingly argue, the issue here is that there's a discontinuity in the market's demand curve.

Basically, you have a small (percentage-wise) group of individuals whose price ceiling is dramatically higher than the current industry norm; these people are willingly paying $60, jump at the chance to pay $70 when offered it (via "collector's editions" and whatnot), and would almost certainly pay as much as $100 without meaningfully reducing their total number of purchases. Then you have a kink in the graph, followed by a group who have a relatively normal price-sensitivity, and whose sales change in the manner you would expect in response to price fluctuations. (These are the people who make Gamestop's gigantic pawnshop operation running by buying games used.)

I think you're correct that sales won't really change much at $50 for exactly that reason; no one from the price-is-no-object crowd will come back in, while it's still too rich for the less-dedicated crowd. But if you drop the standard retail price to $30, you would indeed see a significant uptick of purchasing for a ton of new titles compared to what they do at $60.

 

[Dan Yo]

Correct. You have a small core group of consumers who heavily value the rapidly-increasing production values and rising costs that are driving the industry from a net money-maker to a net money-loser, and then a ton of other consumers who really don't give a shit about these things at all. Rubin's position is that the industry should find ways to keep subsidizing these rising costs either by taking those core consumers for all they're worth (via DLC, subscription fees, raised prices, etc.) or by somehow milking more out of all those less-dedicated purchasers.

My position is to make games that can actually be profitable at a $30 pricepoint and sell those.



As other areas like DLC pricing convincingly argue, the issue here is that there's a discontinuity in the market's demand curve.

Basically, you have a small (percentage-wise) group of individuals whose price ceiling is dramatically higher than the current industry norm; these people are willingly paying $60, jump at the chance to pay $70 when offered it (via "collector's editions" and whatnot), and would almost certainly pay as much as $100 without meaningfully reducing their total number of purchases. Then you have a kink in the graph, followed by a group who have a relatively normal price-sensitivity, and whose sales change in the manner you would expect in response to price fluctuations. (These are the people who make Gamestop's gigantic pawnshop operation running by buying games used.)

I think you're correct that sales won't really change much at $50 for exactly that reason; no one from the price-is-no-object crowd will come back in, while it's still too rich for the less-dedicated crowd. But if you drop the standard retail price to $30, you would indeed see a significant uptick of purchasing for a ton of new titles compared to what they do at $60.

I agree entirely. $30 is the perfect price point for games.

It always bugged me that a game with a $10 million budget like Gears of War was priced at $60 while a $200 million budget film costed $30 or less to both see the film in the theater and purchase a copy for home.

The next step to taking gaming to a wider audience is to slap some more realistic prices on them. Not trying to figure out more ways to milk the already dedicated consumers into paying upwards of $100 per game. The industry can't sustain itself without raising prices? Well the consumers can't sustain this hobby if 3 games are going to cost them more than the console they bought them for.

 

[Grampa Simpson]

I agree entirely. $30 is the perfect price point for games.

It always bugged me that a game with a $10 million budget like Gears of War was priced at $60 while a $200 million budget film costed $30 or less to both see the film in the theater and purchase a copy for home.

The next step to taking gaming to a wider audience is to slap some more realistic prices on them. Not trying to figure out more ways to milk the already dedicated consumers into paying upwards of $100 per game. The industry can't sustain itself without raising prices? Well the consumers can't sustain this hobby if 3 games are going to cost them more than the console they bought them for.

Isn't this what's happened with the price curve of anime in Japan. It's not a hobby that currently occupies my time, but back when it did, I always thought that $70 for a two or three episode tape was stupidly expensive and was driving the industry towards a complete niche audience. The last time I looked, that seemed to have been where it had gone. I dearly hope that same thing isn't happening the gaming industry in the US.

 

[charlequin]

Isn't this what's happened with the price curve of anime in Japan. It's not a hobby that currently occupies my time, but back when it did, I always thought that $70 for a two or three episode tape was stupidly expensive and was driving the industry towards a complete niche audience. The last time I looked, that seemed to have been where it had gone. I dearly hope that same thing isn't happening the gaming industry in the US.

Yep. It (really, basically everything about the current video game market) is also eerily similar to the problems with the comic book crash in the 90s.

 

[Bizzyb]

Sorry, but I still disagree. He says "things have to change" because the current model doesn't work.

Rubin:

Jason. I don't know if you heard, but we're in the middle of a global recession. There are tons of industries that aren't healthy right now. If you think new pricing models is the key to making everything better, you're living in fantasyland. This is absolutely moronic.

I agree things need to change, but not on the consumers end. They don't need to start charging us for shit that was free or changing how we pay for our gaming experiences. what NEEDS to happen is the cessation of something Nintendo tried to tell the industry 5 years ago what SHOULDN'T happen, and that's the continued creation of all of these multimillion dollar budgeted games.

The publishers have put Themselves in this predicament, and now they want to screw the consumers to get them out of it. Create LESS games, with higher quality and make some AA-AAA QUALITY efforts on the Wii (cheaper overall development) and if the game is actually good you can make a shit ton of profit, basically what Nintendo does with it's IPs, i.e. Mario Kart, Smash Bros, Zelda, etc.

But instead they do the opposite, i.e. make shit Wii games and get shit sales and make too many big budget HD games and pray one breaks through to recoup the millions lost on the other failures.

 

[gerg]

Exactly. Only the DLC method is a short-term salvation rather than an actual way to expand the marketplace and make it applicable for all developers and publishers. Nintendo's strategy, for example, succeeds in expanding the marketplace by head count - which is far more profitable and sustainable than the other option.

Perhaps this optimism is misplaced, but I remain faithful that the key to enabling developers to expand the marketplace is to simply make them more profitable. If expanded DLC and other such online schemes bring in greater revenue, thus transforming the industry from a net money-loser back to a net money-maker, then I am confident that the industry can expand on its own accord. When you're not focusing on simply making your business profitable as is, you can then focus on trying to expand it.

 

[MikeE21286]

What Rubin is saying is just silly and he's drinking the kool-aid. This may very well be where some form of gaming goes (maybe not the type of games we play), but the these are ideas are not original or ground-breaking (old shareware business model?). It's just him retelling a story that has been getting kicked around for awhile now.

 

[J-Rzez]

Rubin was great in the first segment, then goes and blows it totally here. No way, no how, will I pay to play "X-amount of time". It doesn't sound like a "MMO-esque" approach, it's just limiting our game time. There is a HUGE difference between WoW and the current CoD. Keep going with DLC route.

Then the pay to get ahead deal, while others that don't buy it have to work for it. GTFO.

"But more people will be able to play that couldn't afford $60". Yeah, that's taken care of already, it's called Gamefly. Though that may not work out ideally for devs.

 

[KJ_Wii]

There are three ways to increase profits:

1) Increase income by getting more revenue from your current customer base. Increase MSRP, extra paid DLC, in-game advertising, collector's edition all fall into this strategy. Most video game companies these days are stuck in this mode.

2) Increase income by expanding your customer base. Otherwise known as the current Nintendo strategy. Marketing efforts, lower prices, and game design choices all factor in here. Rubin's idea of piece-meal pricing could fall into this strategy as well, if executed appropriately.

3) Decrease costs directly. Pretty simple in concept, if you can manage it without also decreasing the quality (eliminate waste and inefficiencies, not as easy as it sounds). Most of the downloadable services are offering small developers this strategy, but it's not being seriously exercised by anyone in the industry as a whole.

The problem, of course, is that following any one path usually negatively impacts the other two. For most publishers currently following #1, extra paid DLC without extra content alienates customers, as does simply raising prices, and frankly I'm not sure there's much more money that can be squeezed from the current core market without rapidly bleeding consumers much more than they already are.

Most of the attempts at #2 have either resulted in decreased income (people who normally pay for a $60 game end up quitting after the first $10 installment, or lower prices not being made up for by increased sales) or increased costs (massive marketing campaigns). Only Nintendo really seems to be pulling this one off successfully, mostly through front-end game design and business decisions backed up by strong marketing campaigns.

And of course, for #3, the industry has set the standards so high that lowering costs usually results in lower quality and fewer customers being interested in the product, or a necessary lower price that just ends up bringing in less revenue overall, offsetting the cost difference. Nintendo has been able to execute this strategy to some extent with titles like Brain Age in conjunction with bringing in new customers and changing the standards by which such games are judged. And, as someone else mentioned earlier some lesser-developed countries have been able to put out quality titles at very low costs and see some modest successes out of that.

Most business strategies seem to have these companies focusing on a particular element (most blatantly #1) while ignoring the negative secondary effects of their decisions on the other elements.

 

[avatar299]

I agree entirely. $30 is the perfect price point for games.

It always bugged me that a game with a $10 million budget like Gears of War was priced at $60 while a $200 million budget film costed $30 or less to both see the film in the theater and purchase a copy for home.

The next step to taking gaming to a wider audience is to slap some more realistic prices on them. Not trying to figure out more ways to milk the already dedicated consumers into paying upwards of $100 per game. The industry can't sustain itself without raising prices? Well the consumers can't sustain this hobby if 3 games are going to cost them more than the console they bought them for.

They are nothing alike. Movies are sold as new 5 times over. Videogames, if they are lucky get one shot.

Isn't this what's happened with the price curve of anime in Japan. It's not a hobby that currently occupies my time, but back when it did, I always thought that $70 for a two or three episode tape was stupidly expensive and was driving the industry towards a complete niche audience. The last time I looked, that seemed to have been where it had gone. I dearly hope that same thing isn't happening the gaming industry in the US.

The problem with Anime isn't price, its content. Many anime DVDs are around 2 hours. Most games often have 5x as much value.

Everyone is going with this "make less games, lower the costs, etc etc " BS as if that is anything but a stop gap. Lets assume a large publisher like THQ does this, shall we? After they lay-off more than half their workforce, and allocate all their resources to 1 or 2 games a year, what happens if one fails? What happens if they aren't able to make a return to their investors? THQ will have to make sure that game is amazing, hence spending more money on one game, and increasing the risk of failure.

You all bitch about the blockbuster model, and then turn around and suggest they follow the blockbuster model more devoutly

The truth of the matter is you are going to have to pay more, and be more wise in how you spend things.

 

[Dan Yo]

They are nothing alike. Movies are sold as new 5 times over. Videogames, if they are lucky get one shot.

Huh? The vast majority of profit comes from box office and DVD. Again, the consumer can do both and still spend roughly half or less the price of a new video game.

 

[Doorman]

Huh? The vast majority of profit comes from box office and DVD. Again, the consumer can do both and still spend roughly half or less the price of a new video game.

Well, just off the top of my head, a movie will come out in the theaters, see a DVD release, come out on digital distribution channels (video on demand, PS3/360 downloads, etc.), get shown on premium movie channels (HBO, Stars, etc.), come out for major network television, and finally come to the smaller specialized channels like cable. And while each iteration of the release sees diminishing returns compared to the first two, the movie still does make money each time the movie is redistributed to the next medium down the list.

Games, on the other hand, will see a retail release (which unless you're a Mega-franchise or published by Nintendo, typically means the bulk of your sales will come within a month or three and then drop off notably) and if they're lucky maybe a digital re-relase down the line (a la XBLA classics or the virtual console). That's really all they get.

And anyway, you can say that games are markedly more expensive than movies because you're getting far more content than you would in any film, but even with that in mind there comes a point where the price of entry is too much for people to easily jump in. When you can find a movie matinee ticket for seven bucks, you don't think too hard about whether or not you'll seriously enjoy the movie for that entire two hours. On the other hand, it's hard to impulse-buy when you're asked to drop sixty bucks. I'd love to see some industry insider's graph, trying to work out exactly what the curve is for price vs. volume of games sold, because they must have arrived at $60 for the price of an HD game for some reason, but it doesn't seem to be working in their favor right now.

 

[SolidSnakex]

Episode 3

HD: http://www.gametrailers.com/episode/bonusround/403?ch=3&sd=1_hd
SD: http://www.gametrailers.com/episode/bonusround/403?ch=3&sd=1

 

[Cesar]

Best bonus round in months.
Jason Rubin really seems to know what he's talking about. He at least generates some discussion between the panel.