Can console gaming survive a $10 price increase?
We are but a few months away from the supposed release of the next-gen series of consoles, and everyone is talking about how much they will cost. Which will be cheaper? PlayStation 5 or Xbox Series X? Will Sony pull the blunder of $599 again as they did with PlayStation 3? What hidden costs will be associated with these new consoles in terms of peripherals that are essentially necessary for a full experience?
But there’s another price that we haven’t been talking about until recently: the price of games. This might actually be the biggest economic change in the next generation of gaming.
2K Games recently announced the price for NBA 2K21 on next-generation consoles, and to the surprise of the gaming community, it came in a $70, a whole $10 more than we are used to. This has led a lot of people to theorize that all next-gen games will be at a $70 price point.
It’s been a long time since the price of games increased, or rather, it’s been a long time since the price of games were standardized. Around 2005-2006, with the introduction of PlayStation 3 and Xbox 360, we began to see games hit shelves at a $60 price point, no matter how big or small they were. Before that, we saw a lot of $50 games, but it was also not uncommon for games to be lower or higher-priced, depending on how much went into creating them.
Four years ago we talked about how the $60 game was dying, and that we would very likely end up paying something like $70 for games in the future.
In short, the price of game development has gone up, but the price of a game has stayed the same. The price has stayed the same because it helps both publishers and retailers. This way retailers don’t have to try to undercut each other on the price to sell games, while publishers get a guaranteed cut of money from each sale, and don’t have to worry about game stores carrying less stock of more expensive games. It’s essentially legal price-fixing.
So how did we make up that extra price? DLC. Games started to be planned with DLC from the get-go. The profits from this DLC could then make up extra operating costs. This became so common that some games like Street Fighter X Tekken shipped with DLC on the disk! This enraged gamers and quickly put an end to the practice, but if you think game companies haven’t been developing DLC well before your favorite games release and factoring DLC sales into their budget along the way, you are deluding yourself.
Some would claim that the practice of making up extra profits by DLC eventually turned toxic through things like microtransactions. This “games as service” model sees gamers pumping tons of money into games they want for power or aesthetics. Some countries have even ruled that loot boxes are technically a form of gambling.
DLC didn’t work, microtransactions didn’t work, so where do we go next? Well, we have two options. We can make smaller games with smaller budgets and keep the price where it is, or continue to make bigger games and increase the price.
2K Games may just be showing which option the gaming industry is going with.
This was going to be an unpopular but necessary move, but it’s particularly bad right now. With the COVID-19 pandemic still around and not looking like it’s going to go away any time soon, unemployment is higher than ever, which means expendable income is lower than ever.
While, yes, the video game industry has seen a spike in sales during the pandemic (because what’s a better past time when you are forced to stay at home than video games?) this isn’t necessarily going to be a spike that maintains itself as time goes on, especially if next-gen consoles are also more expensive than the last gen. Gaming is already a luxury product and luxury products are not really going to be a priority as this crisis continues.
It’s not just the worst time to introduce the $70 price tag, it may also have been done in the worst way. The NBA 2K line of games has come under fire for their own versions of microtransactions and DLC over the years, and if they still have these on top of the $70 price tag, that’s going to sour a lot of users.
This is also a time of “forward compatibility” when a lot of companies are promising that a game purchased on a current gen console will play on a next-gen console if they trade up. This creates three scenarios. One, 2K Games is an outlier. Two, 2K Games is not an outlier and current gen games will also cost $70, which will make people who haven’t traded up more hesitant to buy games. Three, current gen games will still cost $60 while next-gen games will cost $70, which will make games with forward compatibility (which NBA 2K21 doesn’t have) seem like a better value.
And then there are all these other price factors to worry about. Nintendo fairly frequently undercuts its competitors on prices. Will this make even MORE people turn to Switch? PC games stayed at $50 longer than their console counterparts. Will this make more people turn to PC? We also previously talked about how increasing the price point of games will force smaller studios out of the competition. This may not affect 2K since they make AAA games, but lots of other smaller studios might struggle to sell games at a $70 price point when they could have sold games at a $60 price point more easily. Yes, there is the indie sphere where costs of games vary wildly, but there is a major leap from indie prices to, say, AA prices of a game with major production values but not meant to chase blockbuster money.
When we ask if console gaming will “survive” we’re not suggesting that people will never buy consoles again and PlayStation 5 and Xbox Series X will disappear off the face of the earth. What we’re asking, is whether or not this $70 price increase is sustainable? Will it chase people out of gaming who no longer have the ability to pay for the hobby? Or will it chase people out due to perceived price gouging? Will it cause people to search for gaming in other spheres where the price might be cheaper?
We’re not saying that a $70 price tag will kill console gaming. What we’re curious about is: will this price tag stick? Because from an economic standpoint it seems inevitable, but even an inevitable price tag is unfeasible if people simply won’t buy your product. And if people won’t buy games at $70, what then? Do we actually make games smaller and more manageable, and what would that look like?
Guess only time will tell.