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Consoleation: Sounding the alarm

Peter Skerritt's picture

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Recent economic trends—notably rapid increases in fuel prices and associated price hikes in the general cost of living—should be something that the console video game industry starts taking seriously. Everything is getting more expensive at a most inopportune time for the domestic economy, and with the decline of disposable income, it's only a matter of time before pain is once again felt by the console gaming industry. Consumers are going to be forced to make tough choices in the coming weeks and months, and spending money is getting more scarce as we enter the second quarter of 2011. Many tax returns have already been spent, eliminating one way to fund sizable entertainment purchases.

We've been through this before; most notably during the gas price hikes of 2008. Back then, the industry was thought to be "recession-proof"… and yet developers were shuttered, publishers announced layoffs, and sales inevitably tumbled. Less than three years later, fuel prices are poised to not only eclipse the $4 per gallon barrier—but far exceed it. In fact, some localities are already dealing with prices above $4.50. Prices have jumped 20 cents per gallon in the last two weeks, and with oil prices poised to make a run at $115 this week and continue to rise, the trickle-down effect of these increases will be felt by consumers in a number of areas. Food prices are rising. Utility costs are likely to rise, especially heading into the summer months. Other costs of living are certain to be affected as well, and consumers will have to account for all of these increases while managing paychecks that aren't reflecting these trends.

This means that consumers, as they did back in 2008, will be forced to make sacrifices. There's no doubt that video games will be one of the major areas of decline. Software prices continue to be high, especially for being so far into the console generation. Hardware pricing has stalled, at least until probably June when Nintendo and Sony are expected to announce their price cuts, and the $250 price point of the 3DS is leading to a lot of caution now that the launch window is closing. Console game prices remain high, unlike iPhone/Android software, which is far more enticing for tight budgets.

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It's almost as if the console video gaming industry honestly believes that consumers can't live without their video game fix. It's a bad attitude to have, and it won't be long before even more damage is done to a business that was invincible five years ago. People within the industry need to wake up and recognize that there are steps that can and should be taken to ensure that the damage is lessened and that more people remain interested when the economy eventually recovers:

  1. Hardware price cuts: Waiting until June will be too late for any momentum shift for the Wii and PlayStation 3. These cuts need to happen sooner, even if it takes the sails out of E3 a little bit. Since it's likely that gas prices will be at their highest just before the big show, companies must make a preemptive strike and attempt to generate interest before the worst hits.

  2. Software price cuts: There needs to be a signal to move software pricing down, at least back towards the $50 level. More titles should be added to each console's respective "Greatest Hits" lines, which should sell at a uniform $20. In short, making the first move to cut prices will show consumers that console video games can be affordable, even during hard times. Digitally-distributed titles, especially ones that have been available at retail for longer than 12 months, need price drops to Greatest Hits levels, no matter how popular the IP is.

  3. Pre-owned game cease-fire: We all know how the industry feels about pre-owned games. We also know that, thanks to constant connectivity, it's now possible to use alternate revenue methods(such as Online Passes) to attempt to force consumers to contribute something to the publisher's bottom line. It's time for a cease-fire. Reward consumers who buy new instead of taking such a hardline "They're not our customer" stance and stripping out content. The industry needs to at least make an effort to understand that consumers aren't buying used to spite the industry; instead, they're buying used to save a bit of money so that they can continue to afford playing video games in some capacity.

Just like many consumers, the console video game industry is going to have to make some hard choices of its own if it wishes to remain relevant on a mainstream scale. While price cuts can initially hurt the bottom line and a temporary reprieve from the War on Used Games might seem like admitting defeat by some, taking these or similar steps would go a long way to rebuilding trust and faith from a consumer base that's gradually been eroding. If nothing is done and the industry continues down its path of self-centered greed and shortsightedness, a future of weak sales and a continuation of declining interest is all but assured.

The alarm bells are ringing. The time to respond is now.

Category Tags
Platform(s): Xbox 360   Wii   PS3   3DS   Nintendo DS   PSP   PC  
Articles: Editorials   Columns  
Topic(s): Business  

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What economics class did you take to come up with this stuff?

I seriously don't get your doomsaying here. Console games price dropping from the price level they've been set at since 2005 because of a temporary gas price problem? That's something you do on the retail level, not at the MSRB level. Do you see DVD prices suddenly bottoming out every time gas goes up? Movie theater prices? Book prices? Sports ticket prices? Concert prices? Huh, NONE of those markets go Chicken Little like you're suggesting here and they all survive, or suffer from unrelated causes (pricing is not the reason book stores are having trouble). If a specific GameStop or Best Buy is worried about their sales, they can slash prices or do a special sale to drive interest. It's not the game developers' job to suddenly turn themselves into the airline industry and price themselves out of business.

Let's get real here, sales will be slow in the summer because nobody releases anything in the summer. But stuff like LA Noire will sell and sell well. Pokemon Black/White will sell gangbusters regardless of what gas prices are. The market is not so simplistic that gamers will go "Dang, gas is slightly more expensive? Ima NEVER BUY GAMES AGAIN." Good games will drive high sales, so-so games will live and die by marketing and word of mouth (Homefront being a prime example of a meh game selling way above its pay grade).

Heck, let's continue to be real. The market is doomed huh? Nintendo is suffering because they're not having their amazing string of best sales ever that they had since the Wii launch. Let's not confuse this with doing objectively poorly, they're simply doing LESS WELL than the best they've ever done in the history of their company. Oh no~

Microsoft is turning its first ever profits from the gaming division, are you seriously going to argue that they're doing worse than never having a profitable quarter last generation?

And Sony has nearly caught up with the 360 install base after a huge wave of publicity and pricing problems and despite a one year head start for MS. Where in all of that do you see the market destroying itself?

egoism?

@2 when will you stop arguing with the 60$ price tag? What was the last game that really costs so much? That is a recommended price tag that actually never has to be payed. Portal 2 costs 35$. And it has been released some days ago.

Quote:

In short, making the first move to cut prices will show consumers that console video games can be affordable, even during hard times.

Exactly, in short. The deal is to say it costs 60 while it never costs so much so the customer gets the feeling of having made a super deal.
Secondly once you lower the prices, increasing it again to a level were you can finance big budget games gamers want is hard. So in the long term publishers are imo good advised if they dive through recession without fucking up their future. (again mentioning that 60 is a fantasy of critics like you)

@3

Quote:

so that they can continue to afford playing video games in some capacity.

Why should they do that?
"They're not our customer"! Should they provide the pb-links themselves so also those gamers could afford playing games to some capacity? They release games for those who pay them for that, not for those who play them!
And be serious: Which game was really stripped out of content in the past so you could not enjoy to some capacity?

4$ per gallon is a joke.
The cheaper gas stations here offer a liter for 1,3€, i.e. currently about 7,7$ for a gallon if the conversions i found are correct.
20 and above would be good prices, when we want to save our planet and again decentralize mass production of everything which is then transported hundreds of miles.
It is stupid to continue that crime on our planet by burning those fossil resourceful at laughable prices.

Let it go?

IMO, the subject of "How the world's problems affect video game buyers" is perhaps better served by a yearly summation of trends article? As a weekly, it seems more to me an exercise in bitching and pushing anti-corporate hot buttons. I don't get enough feeling of concern, or playfulness, in the writing- and those are ESSENTIAL qualities for bitter pill editorials.

Going to play devil's advocate

Going to play a bit of devil's advocate for a second here. At the core of his post the author does have a valid point. Admittedly it is overblown, but in one sentence, the post is saying that in a time where consumers disposable income is diminishing due partially to things like increased gas prices but more importantly also because the longer we go in a depression the more people start feeling insecure about their savings and even if they don't have to, will start saving more and more because the fear of being laid off will get bigger and bigger.

That's about as far as it goes though...really all that will happen the more this scenario plays out, spending will go down and it will be the sub-par companies that go down first with the companies who truly earn our money still staying in the game. In nature forest fires are necessary to effectively kill off the weak and already dead trees and then they leave room and fertile soil for new healthy trees to start growing. The same thing happens in any industry when there is a tough depression, the weak and already dead companies go under leaving room when the fire is done (ie when the recession is over) for new companies to innovate and grow. Might as well have just said lets vote with our wallets for the companies who really are worth keeping around and let the useless ones die a happy fast death so that new innovators can come into the business.

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