From the Dallas Morning News:
Video game fans, start saving those pennies.
The cost of getting your game on is about to go up.
Retailers and game industry experts say that game publishers plan to use the new generation of consoles coming out soon to test whether gamers are willing to pay as much as $60 for many, if not most, new games.
It's getting more expensive to make games, experts say, and the launch of hardware platforms gives publishers the opportunity to introduce higher prices, as they have with the release of Sony Corp.'s PSP handheld system.
For more than a decade, the standard launch price for most games was $50, with higher price tags generally reserved for collector editions of the most anticipated titles.
"Prices for software for consoles – for the most part – remained static since video games were introduced to us back in the early '80s," said David Riley, who tracks game sales for market research firm NPD Group.
But as each generation of video game console technology has gotten more sophisticated, the cost of making games for those platforms has increased.
"Several years ago, you were talking $2 million" to create a game, said David Cole, an analyst with DFC Intelligence. "Then two years ago, a $3 million to $5 million average. Now you're looking at $5 million to $10 million, and you could even have $20 million to $30 million on some titles."
Until now, those escalating costs have been easily recouped.
The average gamer is 30, which translates into a much larger customer base than when games were marketed solely to teenagers.
In the first quarter, nearly 63 million video games, game consoles and accessories were sold in the U.S., up 18 percent from the first quarter of 2004.
Video and computer game software sales hit a record $7.3 billion in 2004. But development costs seem to be outpacing the rate at which new customers are being groomed.
Almost none of the big three hardware makers – Sony, Microsoft Corp and Nintendo Co. – are ready to say what software prices will be for their next consoles, others aren't as reluctant.
Changes expected
Dan DeMatteo, vice chairman and chief operating officer for Grapevine-based game retailer GameStop Corp., said he expects publishers to use the launch of the supercharged consoles as an excuse to tinker with software prices.
"You can change the paradigm if you start it with a new platform," he said.
Mr. DeMatteo said a small price increase for top-tier titles would be reasonable, given the rising development costs.
"I personally would like to see a standard $59.99 retail price point," he said.
Games have actually gotten cheaper, when adjusted for inflation. A $49.95 game in 1990 would retail for $73.87 nowadays.
Mr. Riley said higher gamer prices are almost assured.
"You've got these incredible engines coming out on the next-gen systems that are going to be able to just blow away the games that are out right now," he said. "But you have to have the developers, and you have to have the money to create them. So, yes, I think it goes without saying we're going to see a slight increase in prices."
Microsoft and Sony have remained mum on pricing for next-generation software, as have independent game publishers such as Electronic Arts and Activision.
Microsoft declined to comment for this story, but it is clearly looking to deepen the revenue stream of its gaming division.
At the Game Developers Conference in March, Microsoft said the next Xbox – expected to be called the Xbox 360 – will include a feature allowing gamers to buy and download in-game items for as little as 99 cents.
Sony has said even less about its next PlayStation system.
"Sony Computer Entertainment America has not made any announcements about next-gen hardware or software, and pricing structures have yet to be determined," a Sony spokesman said in a written statement. "More details about the next-gen system will be revealed at E3."
E3 is the Electronic Entertainment Expo, the annual video game convention extravaganza in Los Angeles where hardware and software makers show off their upcoming products. E3, which runs the third week of May this year, is expected to be the launching pad for the new consoles from Sony, Microsoft and Nintendo.
It's unknown whether any of the companies at E3 will reveal prices for next-generation games.
Nintendo seems to be leaning toward holding the line on game prices, though.
George Harrison, Nintendo's senior vice president of marketing, said that development costs have risen dramatically over the last several years.
"But having said that, we still believe that the best opening price point is $50," he said.
"The current pricing model is really what we're looking at, and that really gets down to how many software titles each consumer can buy in a year," Mr. Harrison added.
He noted that DVD movies cost about $20.
"We don't want to be too far away from that," he said.
Watching the trends
But Mr. Harrison said Nintendo is following what other game publishers do.
"We develop our pricing independently, but we certainly would watch the sales trends," he said.
Sony's new PSP handheld has already proved that there's some elasticity in the price gamers are willing to pay for their favorite titles.
Although portable games have traditionally not ventured past $40, many PSP games are selling for $50.
Mr. DeMatteo said the higher prices for PSP games have not resulted in slower sales.
If it's any consolation to gamers, most experts predict that many next-generation games will be released at current prices.
Also, the more expensive games will be discounted after a few months – even today's hottest blockbuster eventually lands in the bargain bin.
And if consumers aren't willing to pony up the extra cash, game publishers won't hesitate to backtrack.
"Consumers aren't stupid," Mr. Riley said. "There has to be a justification for a price increase. If consumers don't see it, they're not going to pay for it."
