Inflation
Amidst all the gaming sales this holiday season was a surprise. A most unwelcome one.
First was the surprise that the PC version of the Final Fantasy 7 Remake (FF7R) even came out. I was so giddy when the original news came out in 2015, but that giddiness has been tempered by years of self-restraint from not purchasing a PS4 to play just that game, and the constant endeavor to avoid spoilers. Somehow that avoidance must have led me to disregard news articles that the PC version was coming out. The fact that FF7R is an Epic exclusive also didn’t even register. But that’s because…
Secondly, seventy what-the-fuck dollars?!
I understand that FF7R is by no means the first to try to raise the hitherto $60 price ceiling of games. Many games of this new console generation are trying the same, including major franchises. It does seem a little weird that the PC port of a game that came out 1.5 years ago is trying to sell at a premium price though. Especially since one could purchase the PS5 version of the same PC bundle (main game + DLC) for $39.19 straight from the Playstation Store. That’s the winter sale price, of course, but there are cheaper options at GameStop and presumably other retailers.
I also understand that gaming companies have technically been raising prices this whole time via DLC and microtransactions and battle passes and deluxe editions and so on and so forth. Some have made the argument that it is because of the $60 price ceiling that game companies have employed black hat econ-psychologists to invent ever more pernicious means of eroding consumer surplus. That argument is, of course, ridiculous: they would simply do both, as they do today.
What I do not understand is gaming apologists suggesting inflation is the reason for $70 games.
Sometimes the apologists make the argument that games have not kept pace with inflation for years. One apt example is how Final Fantasy 6 (or 3 at the time) on the SNES retailed for $79.99 back in 1994. That is literally $150 in 2021 money. Thing is… gaming was NOT mainstream back in 1994; the market was tiny, and dominated by Japan. When you are comparable in size to model train enthusiasts, you pay model train enthusiast prices.
Gaming has been mainstream for decades now. Despite ever-increasing budgets and marketing costs, games remain a high-margin product. FF6 may have sold for $150 in today’s dollars, but FF7 sold three times as many copies for the equivalent of $100 by 2003*. So how does an “inflation” argument make sense there?
“The costs for making games have increased!” I mean… yes, but also no? Developers like to pretend that they need bleeding-edge graphics in order to sell games, but that is clearly not the case everywhere. For one thing, indie developers have been killing it with some of the best titles this decade with pixel graphics and small-group passion projects. Stardew Valley sold how many copies? Remember when Minecraft sold for $2 billion? Not everyone is a big winner, but the costs of game making has only increased in specific genres with specific designs. Do we really need individually articulated and dynamically moving ass-hair on our protagonists?
And that’s where the “iT’s iNfLaTiOn” folks really lose me: who gives a shit about these corporations? I wrote about this 8 years ago:
As a consumer, you are not responsible for a company’s business model. It is perfectly fine to want the developers to be paid for their work, or to wish the company continued success. But presuming some sort of moral imperative on the part of the consumer is not only impossible, it’s also intellectually dishonest. You and I have no control over how a game company is run, how much they pay their staff, what business terms they ink, or how they run their company. Nobody asked EA to spend $300+ million on SWTOR. Nobody told Curt Schilling to run 38 Studios into the ground. Literally nobody wanted THQ to make the tablet that bankrupted the studio.
Why should we take it as a given that PlayStation 5 games cost more to develop? A lot of things in the economy actually get cheaper over time, regardless of inflation. Things like… computers and software. Personnel costs may usually only trend upwards, but again, someone else made the decision to assign 300 people to a specific game instead of 250. Or to scrap everything and start over halfway through the project. And somehow these companies continue making money hand over fist without $70 default pricing. So I find it far more likely that the price increase is a literal cash grab in the same way the airline industry added billions in miscellaneous fees after their bailouts and “forgot” to remove them after they recovered. Basically, because they could. Some informal industry collusion helps.
In summation: fuck the move towards legitimizing $70 MSRP. That 14% price hike is not going to result in 14% better games with 14% deeper stories and 14% more fun. In fact, it’s probably the opposite in that you will just afford 14% fewer games. And unless you got a 6% raise in 2021, you are already eating a pay cut on top of that.
Oh well. Waited this long for FF7R, so I may as well wait some more.
Posted on January 6, 2022, in Commentary, Philosophy and tagged Consumer Surplus, Exclusive, Final Fantasy 7 Remake, Inflation, MSRP. Bookmark the permalink. 10 Comments.
In An Age 
For me it’s always been a price point. When you are looking for something to play you have a quiet voice in your head telling you,
That’s a good deal, certainly worth the price
Or
Hmmm, that’s a bit more than I really want to spend. Maybe I’ll look for something else
Back when Atari games were mostly $20, seeing that new must have title for $35 was too steep, and I’m sure I missed out on quite a few back in the day. But at the same time I may have picked up 4 for $10 each.
There’s and old phrase,
Looks like they priced themselves out of the market
With employees demanding higher pay and better benefits the cost has to get passed on, but with base rate inflation cutting into every day purchases, it may result in people giving that new title a pass, or hold out until it goes on sale.
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Indeed. I feel like this is happening within the movie industry, or more specifically with theaters. Movies themselves continue to break box office records (COVID notwithstanding) but the price of tickets has doubled since 1997. And yet AMC is on the brink of insolvency. Concession stand prices have been a joke for a while, but there comes a time when it simply makes no sense to go to the theater when tickets are $10-$20 apiece.
I dunno, I’ve heard that like 70% of a game’s profit is realized within the first few weeks of its release, so perhaps corporations have been leaving money on the table from those Day 1 Purchasers. That’s just not for me.
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I’m sure someone in marketing has sat down and looked at potential sales in the first two months of a title’s release, factored in all cost to develop, future costs for bug fixes, and what ever profit margin. X divided by Y = game retail cost. Then the store adds their costs. The downside is if things become too costly, and sales projections are not met, then a lot of people are out of a job.
Movies? Absolutely. I recall years ago being able to go to AMC on a Friday after work, getting a 5 o’clock show ticket, popcorn and a soda for $5. I saw at least 52 movies a year, probably closer to 75. When prices started climbing higher, I cut back to twice a month, then once a month for a big movie, to not at all. In the past several years I have gone to the movies 3 times. For the Warcraft movie, I saw Thor Ragnaros, because a friend wanted to see it, and Law Abiding Citizen, because my brother in laws nephew was in it. Prior to that? Maybe the 3 lord of the rings movies. But that’s about it. I have a 57” tv, and more films than I could ever watch with Netflix, Amazon Prime, and Everything on demand. Why would I spend $50+ for my wife and I to see a movie in a theater.
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I wouldn’t argue that gaming is *more* mainstream now than in the 90s but unless you’re very particular about your definition of “mainstream”, gaming was surely already mainstream in the 80s, let alone the 90s. I don’t think there would have been anything like as many model railway sets sold in the UK in the 1980s as there were ZX Spectrum home computers.
The real difference is that in the 80s and 90s most middle-aged adults probably didn’t play video games. Now they do.
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I was in high school during the mid-90s and you were absolutely a “nerd” apparently deserving of ridicule for being excited about anything videogame related. Especially if you enjoyed RPGs. That started to shift with FF7 and the PlayStation era in general, before blowing away entirely by the time the XBox came on the scene.
Just look at this chart. There was a worldwide revenue peak in 1993 followed by a decline until basically 2001. It’s actually worse than that considering the chart doesn’t account for inflation, but you get the idea.
That said, I suppose gatekeeping “mainstream” based on personal anecdotes is a bit silly.
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It’s really hard to pin down how much a game “should” cost, given that the marginal cost of each copy is basically zero, but the up-front development cost ranges from “a lot of money” to “a staggeringly huge amount of money”.
Add in the number of people playing free-to-play games with microtransactions, and it’s absolute chaos. What should a regular box game cost? I have no idea. The last one I bought was, I think, Guild Wars 2, just under ten years ago.
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I actually prefer the chaos of “price discovery” as it removes the mystique and presumptions of certain price points. When market leaders decided that $60 was the price for AAA games, other companies followed suit in an effort to avoid the implication that their game was worth less. And on the flip side, consumers understandably started having expectations as to what their $60 should get them.
Luckily, the indie movement came along and started expanding the realm of game pricing in a positive direction – both for game makers and consumers. Slay the Spire would fail at $60, but at $25? Sounds about right.
The chaos also helps in the microtransaction department. What is a MMO server transfer worth? Sure as shit ain’t the $25 Blizzard charges, and I’m glad other MMOs explored different (lower) prices.
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FF6 on the SNES costing $80 is a point against the “games should cost more” argument. High prices of SNES games were driven by format costs, i.e. the cartridges were expensive, and one factor which led to the dominance of optical disk formats was the very low costs of the disks themselves. In other words the market reacted against the higher prices and they were quickly brought back down to Earth. FF7 remake exists primarily as a digital download, so manufacturing and material costs are approaching zero.
This is one of those things people on the internet argue about that make no sense to me though. The price ceiling on a videogame is just what the market is willing to bear. There’s nothing wrong or bad about making an expensive videogame and charging more than $60 for it, but the market might reject it and it might end up a financial failure as a result. That’s a risk for the companies to gauge. My only involvement is in whether I am actually willing to pay the price, and all the arguments about inflation or higher costs of voice acting don’t have any impact on that.
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The price ceiling on a videogame is just what the market is willing to bear.
Yes and no.
In an abstract Econ theory sort of way, it’s true that price ceilings are what the market is willing to bear. But in reality, you don’t see the sort of price discovery and experimentation with traditional game releases. GTA5 didn’t release at $80. Nothing is priced at $45. There is a sense of expectation and prestige that gets attached to the $60 level that makes these companies want to avoid the implication that their game is worth “less.” Which is exactly what happens when a newly released game gets a 50% off sale two months later. “Game X is dying!” Maybe. Or maybe they priced the game wrong.
I have extreme doubts that $60 (or now $70) is the precise intersection between Supply and Demand. It was likely arbitrarily chosen and maintained out of informal collusion.
Regardless, I personally argue about this stuff because I picked up the Consumer Surplus axe a decade ago and have been grinding it ever since. Specifically for these very exchanges, to point out how this is all a negative even if you don’t personally buy games at MSRP, or use microtransactions, etc.
See, it’s very possible that the market can bear paying an extra $10. That’s great for that specific company – free money and all – but that’s ten less dollars in a gamer’s entertainment budget. Which could have been spent on an indie game that ends up being your favorite, or spent supporting the continued development of a F2P game you enjoy, and so on and so forth. Higher prices suck more of the oxygen out of the room, and diminishes the Consumer Surplus of everyone involved. I want people to know it’s okay to care about maximizing your Consumer Surplus and NOT care about the company’s bottom line. Those companies will be fine, they don’t care about you, and are just as likely to go bankrupt from dumb decisions than having a slightly less profitable Q3.
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If you think $70 price in US is stupid, consider that in Russia it costs $75 with average salary being $714 per month and median — $424. I wonder how it’d perform in sales here.
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