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Forums - Gaming - Can somebody breakdown the $60 price tag for a game and explain why in most cases physical copies are the same price as digital ones?

oniyide on 03 June 2013
pokoko said:
It's not price fixing unless there is a communicated agreement. If everyone does the same thing simply because that's how things settle out, then it's fine. Everyone charging $60 for a new game, for example.

The answer to the first part of your question, about why digital games cost full price, is simply that the market seems willing to pay it. That's all. Capitalism in pure form. Bringing ethics into it really doesn't serve a purpose. In an ideal scenario, the consumer base wouldn't support full price, but that doesn't appear to be the case.

The second question, however, seems to imply that digital and retail should have the same cost structure over time, which really doesn't make a lot of sense. The two things are very different and there is no real reason why digital prices should fall like retail prices. Retailers have money tied up in inventory, money which they need to roll over into more inventory. In any retail business, almost everything you make goes right back into stock. That's your life's blood. In that sense, old, slow-moving stock is wasted money, as it could serve you better if invested into another product. Likewise, it's taking up space, both on shelves and in storage, that could be used for product with better flow. With that in mind, it makes sense to liquidate old stock. Sometimes a retailer can ship back unsold product, if there is a lot, but it's more likely that the manufacturer will given them credit against it, so they can sell it at a cheaper price-point. After that, stock of that product will be kept to levels that mirror demand, which can be easily tracked and automatically adjusted. If those items aren't moving at all, then they won't be stocked, so it is necessary to given them a price that results in sell-through. Inventory equates to money invested and requires money to maintain.

None of this is true of digital, at least to any real degree.

In my opinion, the better digital structure would be a lower initial price, then the publisher could use some kind of model that drops the price a tier as demand diminishes. Trying to match it to what retail is doing just seems artificial and impractical. They might already do the second part, but they're going to need a clear message from consumers before they do the first part.

Sony actually does something like this with their Vita games, the digital versions cost about 5 bucks less than the physical ones at launch, not sure what they do when the price of retail drops though, im not a fan of buying games, especially full ones digitally.



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AnthonyW86 on 03 June 2013
Goatseye said:
AnthonyW86 said:
kowenicki said:
 


yes, its illegal.

I don't think so. They are just not going to offer new games cheaper digitaly than the retail copy's because they know retailers would go insane. It's pretty much the same with going digital, like with the PSP go.

What are you trying to say is that consumers are not getting better deals because publishers don't want a quarrel with the retailers. And they're purposely keeping the digital prices up so them and the retailers can profit.

"Price fixing is a conspiracy between business competitors to set their prices to buy or sell goods or services at a certain price point. This benefits all businesses or individuals that are on the same side of the market and involved in the conspiracy, as prices are either set high, stabilized, discounted, or fixed."- Free Advice: Law.

-http://business-law.freeadvice.com/business-law/trade_regulation/price_fixing.htm

Retailers and publishers are not competitors. Price fixing would be if Nintendo, Sony and Microsoft would sit down and agree to not sell their next gen consoles under $600, or to increase royalty's on software together so publishers don't have a choice but to pay them.



Goatseye on 03 June 2013
pokoko said:
It's not price fixing unless there is a communicated agreement. If everyone does the same thing simply because that's how things settle out, then it's fine. Everyone charging $60 for a new game, for example.

The answer to the first part of your question, about why digital games cost full price, is simply that the market seems willing to pay it. That's all. Capitalism in pure form. Bringing ethics into it really doesn't serve a purpose. In an ideal scenario, the consumer base wouldn't support full price, but that doesn't appear to be the case.

The second question, however, seems to imply that digital and retail should have the same cost structure over time, which really doesn't make a lot of sense. The two things are very different and there is no real reason why digital prices should fall like retail prices. Retailers have money tied up in inventory, money which they need to roll over into more inventory. In any retail business, almost everything you make goes right back into stock. That's your life's blood. In that sense, old, slow-moving stock is wasted money, as it could serve you better if invested into another product. Likewise, it's taking up space, both on shelves and in storage, that could be used for product with better flow. With that in mind, it makes sense to liquidate old stock. Sometimes a retailer can ship back unsold product, if there is a lot, but it's more likely that the manufacturer will given them credit against it, so they can sell it at a cheaper price-point. After that, stock of that product will be kept to levels that mirror demand, which can be easily tracked and automatically adjusted. If those items aren't moving at all, then they won't be stocked, so it is necessary to given them a price that results in sell-through. Inventory equates to money invested and requires money to maintain.

None of this is true of digital, at least to any real degree.

In my opinion, the better digital structure would be a lower initial price, then the publisher could use some kind of model that drops the price a tier as demand diminishes. Trying to match it to what retail is doing just seems artificial and impractical. They might already do the second part, but they're going to need a clear message from consumers before they do the first part.

So do you believe people are flocking to get MW3 on XBL? After almost 3 years of keeping the price at $59, people don't need a communicated agreement to know that MS is saying go buy it at a retailer.

You explained the price and demand relation well but you forgot to say that with the prices high on digital barely nobody will download a game they can get much cheaper at their local store. If MS was looking for profit they would've cut the prices on the mediums to maximize their profit and probably bring in higher revenue compared to the physical medium. So this doesn't benefit MS tha much, so who benefits from this?



Zappykins on 03 June 2013

Microsoft is probably restricted by agreements with Activision over matching whatever prices they set. Amazon probably has much better flexibility on their deals, and could be doing some sale incentive.

Or I would think Microsoft would match the price.



 

Really not sure I see any point of Consol over PC's since Kinect, Wii and other alternative ways to play have been abandoned. 

Top 50 'most fun' game list coming soon!

 

Tell me a funny joke!
pokoko on 03 June 2013
Goatseye said:
pokoko said:
It's not price fixing unless there is a communicated agreement. If everyone does the same thing simply because that's how things settle out, then it's fine. Everyone charging $60 for a new game, for example.

The answer to the first part of your question, about why digital games cost full price, is simply that the market seems willing to pay it. That's all. Capitalism in pure form. Bringing ethics into it really doesn't serve a purpose. In an ideal scenario, the consumer base wouldn't support full price, but that doesn't appear to be the case.

The second question, however, seems to imply that digital and retail should have the same cost structure over time, which really doesn't make a lot of sense. The two things are very different and there is no real reason why digital prices should fall like retail prices. Retailers have money tied up in inventory, money which they need to roll over into more inventory. In any retail business, almost everything you make goes right back into stock. That's your life's blood. In that sense, old, slow-moving stock is wasted money, as it could serve you better if invested into another product. Likewise, it's taking up space, both on shelves and in storage, that could be used for product with better flow. With that in mind, it makes sense to liquidate old stock. Sometimes a retailer can ship back unsold product, if there is a lot, but it's more likely that the manufacturer will given them credit against it, so they can sell it at a cheaper price-point. After that, stock of that product will be kept to levels that mirror demand, which can be easily tracked and automatically adjusted. If those items aren't moving at all, then they won't be stocked, so it is necessary to given them a price that results in sell-through. Inventory equates to money invested and requires money to maintain.

None of this is true of digital, at least to any real degree.

In my opinion, the better digital structure would be a lower initial price, then the publisher could use some kind of model that drops the price a tier as demand diminishes. Trying to match it to what retail is doing just seems artificial and impractical. They might already do the second part, but they're going to need a clear message from consumers before they do the first part.

So do you believe people are flocking to get MW3 on XBL? After almost 3 years of keeping the price at $59, people don't need a communicated agreement to know that MS is saying go buy it at a retailer.

You explained the price and demand relation well but you forgot to say that with the prices high on digital barely nobody will download a game they can get much cheaper at their local store. If MS was looking for profit they would've cut the prices on the mediums to maximize their profit and probably bring in higher revenue compared to the physical medium. So this doesn't benefit MS tha much, so who benefits from this?

I'm a bit confused.  MW3 is Modern Warfare 3, right?  The price would be Activision's call, not Microsoft's.  Also, I have no idea how many copies they sell digitally, but I would imagine it's significant and only going up.



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Heavenly_King on 03 June 2013
Goatseye said:

I have trouble reasoning and coming up with an answer for the same price tag between physical copy of a game and a digital one.

And why does the price of games tend to stay higher in digital form for longer than physical form?

ex:Modern Warfare 3 is still $59.00 on XBL and on Amazon it goes for $33.72 new free shipping.

http://marketplace.xbox.com/en-US/Product/Modern-Warfare-3/66acd000-77fe-1000-9115-d802415608cb

http://www.amazon.com/Call-Duty-Modern-Warfare-Xbox-360/dp/B00503E8S2/ref=sr_1_1?ie=UTF8&qid=1370282053&sr=8-1&keywords=modern+warfare+3#replacementWidget

because on digital the publishers still control the prices, while in physical; the store control the prices.   XBL/PSN dont put prices depending on what their respective platform holders want.



Open World-Survival-Game Days Gone

Goatseye on 03 June 2013
pokoko said:
Goatseye said:
pokoko said:
It's not price fixing unless there is a communicated agreement. If everyone does the same thing simply because that's how things settle out, then it's fine. Everyone charging $60 for a new game, for example.

The answer to the first part of your question, about why digital games cost full price, is simply that the market seems willing to pay it. That's all. Capitalism in pure form. Bringing ethics into it really doesn't serve a purpose. In an ideal scenario, the consumer base wouldn't support full price, but that doesn't appear to be the case.

The second question, however, seems to imply that digital and retail should have the same cost structure over time, which really doesn't make a lot of sense. The two things are very different and there is no real reason why digital prices should fall like retail prices. Retailers have money tied up in inventory, money which they need to roll over into more inventory. In any retail business, almost everything you make goes right back into stock. That's your life's blood. In that sense, old, slow-moving stock is wasted money, as it could serve you better if invested into another product. Likewise, it's taking up space, both on shelves and in storage, that could be used for product with better flow. With that in mind, it makes sense to liquidate old stock. Sometimes a retailer can ship back unsold product, if there is a lot, but it's more likely that the manufacturer will given them credit against it, so they can sell it at a cheaper price-point. After that, stock of that product will be kept to levels that mirror demand, which can be easily tracked and automatically adjusted. If those items aren't moving at all, then they won't be stocked, so it is necessary to given them a price that results in sell-through. Inventory equates to money invested and requires money to maintain.

None of this is true of digital, at least to any real degree.

In my opinion, the better digital structure would be a lower initial price, then the publisher could use some kind of model that drops the price a tier as demand diminishes. Trying to match it to what retail is doing just seems artificial and impractical. They might already do the second part, but they're going to need a clear message from consumers before they do the first part.

So do you believe people are flocking to get MW3 on XBL? After almost 3 years of keeping the price at $59, people don't need a communicated agreement to know that MS is saying go buy it at a retailer.

You explained the price and demand relation well but you forgot to say that with the prices high on digital barely nobody will download a game they can get much cheaper at their local store. If MS was looking for profit they would've cut the prices on the mediums to maximize their profit and probably bring in higher revenue compared to the physical medium. So this doesn't benefit MS tha much, so who benefits from this?

I'm a bit confused.  MW3 is Modern Warfare 3, right?  The price would be Activision's call, not Microsoft's.  Also, I have no idea how many copies they sell digitally, but I would imagine it's significant and only going up.

Thinking about it now you're right about the Activision call. But after almost 3 years, a new Black Ops on market since last November and COD: Ghosts being advertised for holidays you'd think a $5 price cut out of $59 would make sense.



Goatseye on 03 June 2013
Heavenly_King said:
Goatseye said:

I have trouble reasoning and coming up with an answer for the same price tag between physical copy of a game and a digital one.

And why does the price of games tend to stay higher in digital form for longer than physical form?

ex:Modern Warfare 3 is still $59.00 on XBL and on Amazon it goes for $33.72 new free shipping.

http://marketplace.xbox.com/en-US/Product/Modern-Warfare-3/66acd000-77fe-1000-9115-d802415608cb

http://www.amazon.com/Call-Duty-Modern-Warfare-Xbox-360/dp/B00503E8S2/ref=sr_1_1?ie=UTF8&qid=1370282053&sr=8-1&keywords=modern+warfare+3#replacementWidget

because on digital the publishers still control the prices, while in physical; the store control the prices.   XBL/PSN dont put prices depending on what their respective platform holders want.

Just read up on that. And it makes the future seem grim when you think that everybody is going for all digital sales in the near future.



prayformojo on 03 June 2013

I think it has to do with retail push back. Wal-Mart wouldn't be too happy if Sony released MGS5 digitally for $29.99 because then they'd either have to compete and lose profit margins, or just not sell the game. Sony doesn't want them to boycott software, so it's a sticky spot for all involved.



foodfather on 04 June 2013
Goatseye said:

I have trouble reasoning and coming up with an answer for the same price tag between physical copy of a game and a digital one.

And why does the price of games tend to stay higher in digital form for longer than physical form?

 

This is how retail sales work; 

Reorder Quantity example.

Company (EA) makes 5000 units of a game available to retailer (amazon). Company ships 2000 units to the retailer. The retailer will agree that once enough of these initial 2000 units have been sold in a given time period (2 weeks), and around 250 units are remaining, the retailer will make more orders for the remaining 2000 units.

However, after the 2 weeks, if they have not sold 1750, say they sell 1500 units, leaving 500 units unsold, the retailer will strike another deal with the company, to put give the game a price cut, in order to move the remaining units so the retailer and put in the rest of the order.

Outside of flash deals and promotions, there is honestly absolutely no need for digital releases to be put on sale because there is no need to house physical copies. But also at the sale time, there is no reason for them to be remotely close to the retail price. If a retail game is priced at $65, no manner of accounting can justify the digital copy being worth anything over $45, outside of greed ofc...