How Game Prices Are Shooting Higher

How Game Prices Are Shooting Higher

When Microsoft and Sony announced that $60 games would be common in the next generation, many wondered if this could be sustainable. Would consumers wear it? Next-Gen has the evidence that $60 is here to stay. Oodles of stats and graphs inside…
 

Now, 20-odd months on from the Xbox 360′s launch and half a year into the PlayStation 3′s life, we ask how the $60 game experiment is going. Are consumers buying those higher priced games?

We’ve analyzed prices of the top selling games for the past three years, with a special focus on the last 12 months, to get an idea of whether those more expensive games are selling well.

Our conclusions are as follows…

  1. Prior to 2007, the average prices for the top 20 games was around $40-$43.
  2. During the first half of 2007, prices for the top 20 games has been around $46-$49, without including Guitar Hero II. With Guitar Hero II, included prices are measurably above $50.
  3. As the Xbox 360 library expands, it will claim more and more high-priced games in the top 20 list.
  4. As Wii games replace PlayStation 2 games in the charts, it will keep the floor of console game prices right at $50.
  5. The last two points will together force the average price of top selling games well above $50 in the near future.
  6. The only downward pressure on average game prices is coming from the Nintendo DS.

So are consumers buying those $60 games? Yes, they are, and at an increasing pace. Here’s the detailed evidence…

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How Average Prices Have Increased

For our first graph we’ve taken the average retail price (ARP) of the top selling games from each month, irrespective of how many units each game sold. This gives equal weight to both the #1 and #10 game in a month, even if #1 actually sold fivefold more games than #10.

Later in this article, we will analyze pricing with respect to the volume of units sold. While a $50 game that sells 600,000 units and a $60 game which sells 500,000 units will generate the same revenue, the latter will generally increase the average price of the top 10 more than the former.

In the following graph, we’ve taken this (volume-less) consumer’s view of the top 10 games from each month starting with June 2004.

Keep in mind two events as you analyze these graphs:

  • The Xbox 360 launched in November 2005.
  • The PlayStation 3 and Nintendo Wii launched in November 2006.

There is one other key event — the release of high-ticket package Guitar Heroe II — which we will note eventually, but let’s consider just these for the moment.

2004 & 2005

Starting with the last seven months in 2004 (red), the average price is remarkably stable around an average value of $42. While there is more volatility in this average throughout 2005 (green), there is a distinct jump in prices for September, October, and November. Only one of these months corresponds to the launch window of the Xbox 360.

So, what happened in September and October 2005 to drive prices so high? Both were filled with brand new $50 releases on the PlayStation 2, Xbox, and GameCube with a few token Nintendo DS games to keep the average down. That jump stands out because the top 10 was balanced between six games under $35 and the $50 versions of Madden NFL 06 resulting in a lower average price.

Some part of the further increase in November 2005 can be attributed to the launch of the Xbox 360. The top 10 that month included three $60 Xbox 360 games and the average price crept over $48. In December, when no Xbox 360 game made the top 10 and Madden NFL 2006 got a price cut on the PlayStation 2, the price dropped back down closer to $42.

2006 & 2007

The average prices for 2006 (yellow) hit a minimum in June, when several budget and handheld games were released, and then began a mostly upward trend through the end of the year — and into the beginning of 2007 (blue).

What drove the increase? The big jump in November was from the dual release of Gears of War for the Xbox 360 and Guitar Hero II for the PlayStation 2. While Gears of War is a legitimate part of the $60 question, it seems inappropriate to consider Guitar Hero II, whose $80 price tag includes both hardware and software. Shortly we’ll take a look at average prices without Guitar Hero II.

Prices in 2007 are distinctly higher, hovering around the $54 mark. While Guitar Hero II — both the $80 PS2 and $90 Xbox 360 versions — is a factor, more $60 games are making it into the top 10, driving up the average price. When we remove Guitar Hero II from the calculation later, we’ll be able to isolate this trend more clearly.