CAGs meet your nemesis: ARPU (no, not Apu)

ultrarobotninja

ultrarobotninja

CAGiversary!
Hey guys, I wrote a blog post on this but I wanted to bring it here so I could get your reactions to the subject:

I was listening to the gdc radio podcast the other day and N'Gai Croal (from the level up blog) was on as a guest. N'gai briefly talks about the pricing of the new console games.

According to Croal the cell phone industry uses a term called ARPU which stands for Avarage Revenue Per User, to refer to their goal of making a bigger profit out of their already existing costumers. Croal stated in the podcast that he has been able to observe this same business model in the video game industry, because big video game companies like EA and microsoft dont expect the number of gamers to rise dramatically. Since these companies aren't getting many new customers they seek instead to increase the ARPU in order to increase profits, in other words they seek to extract more money out of the already existing gamers. This has been manifested very clearly in such happenings as developers charging more and more for progressively less substantial downloadable content (which were once free) and the price increase of the latest video games from 50 dollars to 60. Furthermore, N'gai states that Microsoft and EA probed their customers when they released 60 dollars "special editions" of madden and halo 2 for the xbox 1, and when they saw that gamers offered no resistance in buying them they decided to increase their prices permanently.

I don't know about you guys but I find all that stuff extremely alarming, specially considered that 70 dollars special edition games are quite common these days. Worst of all are the extra ridiculous special editions, Halo 3 has a the legendary edition priced at 130 dollars and the new grand theft auto hast that 90 dollar collectors edition . I mean, the last thing I want to see are 70-90 dollar games next generation, the prices need to lower not rise!
 
Well, gamers control their own destiny here. Last generation, gamers were willing to pay for special editions. But, now special editions are so prevelant and not rare that gamers migtht be getting fed up (see the EB/GS thread in the gamers deals forum, where they are complaining about how FFXII limited edition was actually more prevelant than the non normal edition one).

Remember, you aren't forced to get the special editions. No one is forcing you, if you want Halo 3, to get anything other than the normal one. If you want it, fine, but don't complain about the price.

Plus, this is nothing new. Consumers always want the cheapest prices they can get and retailers/companies always want to extract as much as they can out of you. Usually, this forces companies to produce exactly what customers are willing to pay for. Though, if consumers are stupid, they'll get burned, and end up paying $30 for a GTA bad that isn't worth $5.

So, just be watchful consumers and only pay for what is really worth it, and this won't be a bad thing for CAG's.
 
You as a consumer help dictate the price of games. You vote with your dollars.

Right now EA's 'ARPU' for me is $0, and that aint gonna change.

People need to stop lining up at midnight to buy the newest NFL Roster Update '0X.

Do you reeeeally need a ghey Master Chief head to put on your shelf?

Or a GTA footlocker & duffel bag??

Of course, Im preaching to the choir here, this is CAG after all. ;)
 
Yeah, I agree with you guys but I suspect we might represent the minority. I mean think of the horse armor incident, people bitched and moaned but in the end bathesda still sold a bucket load of it (heard it in a podcast somewhere), also the infamous guitar hero tracks, or even lumines people always cry and complain but in the end it always ends up selling well and nothing gets changed.
 
The point of the article isn't about anything other than the "special editions" companies are putting out, which 90% of the time have nothing special about them, and probably cost pennies extra to manufacture.

Everybody who rushes out to grab onto any "special edition" they can find for $70 at release is just setting up the industry to say "Hey, they have no problem paying $70 now, let's just charge $70 for every game!", because that is exactly what they did this gen.

The more outlandish things like the GTA special edition and the Halo 3 special editions aren't for the fans, they are to see how far they can raise the MSRP on games and if fans will still buy them.

If the $60 special editions of Madden and Halo 2 failed, according to the article games would probably still be $50 MSRP.

The way things are going the prices will never lower, as gamers gladly shell out $70 for special editions, and would probably shell out $70 for regular editions in the future as well.
 
[quote name='Roufuss']The point of the article isn't about anything other than the "special editions" companies are putting out, which 90% of the time have nothing special about them, and probably cost pennies extra to manufacture.

Everybody who rushes out to grab onto any "special edition" they can find for $70 at release is just sitting up the industry to say "Hey, they have no problem paying $70 now, let's just charge $70 for every game!", because that is exactly what they did this gen.

The more outlandish things like the GTA special edition and the Halo 3 special editions aren't for the fans, they are to see how far they can raise the MSRP on games and if fans will still buy them.

If the $60 special editions of Madden and Halo 2 failed, according to the article games would probably still be $50 MSRP.

The way things are going the prices will never lower, as gamers gladly shell out $70 for special editions, and would probably shell out $70 for regular editions in the future as well.[/QUOTE]
See, I'm not sure if I agree with that. I'd have to see some numbers on how many people buy the special edition vs. how many buy the regular edition. I work at Gamestop, and I've worked pretty much every big launch for last couple years. I can safely say in my store that the ratio of SEs to regular editions sold is very small. Even big launches like Madden, we might have sold 1 SE for every 20 regulars. The only exception I can think of is Final Fantasy XII because we had so few regulars compared to the SE, not to mention cutting off reserves on the regular like two weeks before the game came out.

Not saying I'm right, I'm just saying from my personal experience it doesn't seem like people are buying these SEs in droves.
 
[quote name='Rei no Otaku']The only exception I can think of is Final Fantasy XII because we had so few regulars compared to the SE, not to mention cutting off reserves on the regular like two weeks before the game came out.

Not saying I'm right, I'm just saying from my personal experience it doesn't seem like people are buying these SEs in droves.[/quote]

I expect the strategy of cutting "regular game" supply to continue.

It will become the equivelent of flying coach.

Being someone who can wait for a price drop and who doesn't enjoy online play, the only way this affects me is if
A) Games start distributing a significant portion of content in downloadable format only
B) Games require patches to work correctly, and the patch server goes down after a limited time period

I'm particularly concerned about B)
 
Im guilty of buying SEs, but I have to say I agree with the concern :) ... The companies are looking at how much we are willing to pay for games and even the next gen consoles. So if you can afford a 90 SE then buy it. Then when games come out to be 100 for reg ed , dont be surprised ...we are all really going to need CAG for our video game deals. Lol
 
cochesecochese, all I wanted is to start a discussion on the subject and see if others shared the concern.

By the way, thanks for all the responses guys,
what pisses me off is that microsoft said their first party games where going to be 50 dollars, then they said gears of war was a flagship tittle or something so they made it 60, NOW they have released shadowrun (an online only game) for 60 dollars... I mean come on! it seems to me that its a matter of time before they try to pull some other rip off move like up the prices of games or try to start charging premiums for the so called flagship titles.
 
Frankly I don't see special editions as a problem. To be honest I'm happy to see more franchise specific products available on this side of the globe. Japan always gets the cool stuff.

The problem in my mind stems from digital distribution. While I love the convenience, I really see a largely exploitable market. I believe CheapyD mentioned it briefly on a cagcast, but DLC rarely goes on sale. I can only imagine when we eventually get to "paperless media" the problems that will arise in terms of end user costs.

In theory it would be cheaper when you take out distribution costs, but it also eliminates any competition in sales and reselling. Companies can cut costs and increase revenue by keeping prices stagnant.
 
Doesn't really effect me because I usually wait for a game to hit $19.99 and then swoop in when I can find a nice price for it (around $10-$14). Of course, there is always clearances and e-tailer website glitches. I'm just not that hard up for a game over $15 most of the time. Sure, this means I might be a six months to a year behind everyone else, but I'll have more games for the money.
 
I know! Those damn dlcs never drop, maybe because the don't have to have clearances to make room for more. I remebember I got sin episode 1 for pc for 8 bucks at cc but ever since the initial price drop from 20 to 15 its price has stayed consistant for almost a year on steam
 
[quote name='Surferflames']
I believe CheapyD mentioned it briefly on a cagcast, but DLC rarely goes on sale. I can only imagine when we eventually get to "paperless media" the problems that will arise in terms of end user costs.

In theory it would be cheaper when you take out distribution costs, but it also eliminates any competition in sales and reselling. Companies can cut costs and increase revenue by keeping prices stagnant.[/quote]

The fact the digital distribution eliminates the used market is what kills it for me. When you pay $50 or more for a game, at least you know you can get $20 or so back one day if you decide to sell it, or trade it in. Digitaly purchased content is essentially worthless the momemt you get it.

And to top it off, the content isnt even tied to you, its tied to your console. Whats gonna happen in a few years when all the launch era ps3's and Wii's start dying? Are you just gonna be SOL for all that content you downloaded?

And for the Xbox 360, I wonder whats gonna happen when MMORPG's start hitting the console? Will we be expected to pay a monthly fee to play on top of the yearly live membership?
 
And for the Xbox 360, I wonder whats gonna happen when MMORPG's start hitting the console? Will we be expected to pay a monthly fee to play on top of the yearly live membership?
Click to expand...
Yes. As a FFXI player, I've been paying that game's fees on top of Live. But I should clarify that for FFXI you can still use the free silver account and just pay the game's fees without paying Live's.
 
[quote name='Puffa469']The fact the digital distribution eliminates the used market is what kills it for me. When you pay $50 or more for a game, at least you know you can get $20 or so back one day if you decide to sell it, or trade it in. Digitaly purchased content is essentially worthless the momemt you get it.

And to top it off, the content isnt even tied to you, its tied to your console. Whats gonna happen in a few years when all the launch era ps3's and Wii's start dying? Are you just gonna be SOL for all that content you downloaded?

And for the Xbox 360, I wonder whats gonna happen when MMORPG's start hitting the console? Will we be expected to pay a monthly fee to play on top of the yearly live membership?[/quote]
Digital distribution also hurt the family owned game stores. You make an excellent point about the next next gen issue. I guess companies will have to make this gen's content free next gen, if not all the extra crap we pay to download goes to waste. Those will be interesting times...
 
[quote name='camoor']I expect the strategy of cutting "regular game" supply to continue.

It will become the equivelent of flying coach.

Being someone who can wait for a price drop and who doesn't enjoy online play, the only way this affects me is if
A) Games start distributing a significant portion of content in downloadable format only
B) Games require patches to work correctly, and the patch server goes down after a limited time period

I'm particularly concerned about B)[/quote]

(B) would be a HORRENDOUS action, but no doubt that would be the straw that broke the camel's back, as people would be outraged at having been sold, arguably ON PURPOSE, a flawed piece of software and being required to download patches, possibly for more money.

I am in your same boat - I am happy to wait for price drops or even better, just scan craigslist for early adopters (aka suckers) who bought games on release day and found they didn't like them (or stole them sealed) and decided to sell them. I've picked up many brand new, unopened games, particularly recently with PS3 games, for half of retail or less, at most a month or two after release.

I just offer to pay them a couple of bucks more than EB/Gamestop would, and cash in face them.
 
[quote name='ultrarobotninja']cochesecochese, all I wanted is to start a discussion on the subject and see if others shared the concern.

By the way, thanks for all the responses guys,
what pisses me off is that microsoft said their first party games where going to be 50 dollars, then they said gears of war was a flagship tittle or something so they made it 60, NOW they have released shadowrun (an online only game) for 60 dollars... I mean come on! it seems to me that its a matter of time before they try to pull some other rip off move like up the prices of games or try to start charging premiums for the so called flagship titles.[/quote]

*COUGH COUGH* like the $500 "special" version of Vista...I'm surprised they don't just come out with the "fuck you" version of Halo 3 - $100 for the basic and you only get 1/3 of the content and tons of glitches and crashes.
 
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