Video Game Price Wars

[TurboPascal]

Just thought this interseting especially to folks around this forum:

http://www.cnbc.com/id/34242403/

By: Julia Boorstin
CNBC Correspondent


GameStop's stock is falling as Wal-Mart cuts prices on video games.
The mega retailer's press release says that it's "declaring 'Game On' as it lowers prices up to 20% on 25 video games. GameStop was already suffering from concerns that video game sales during the first holiday shopping weekend, Wal-Mart's cost cutting move is yet another blow. It also puts pressure on Best Buy, another top game retailer.

But is a price war good or bad for game makers?


John Ricitello, CEO of Electronic Arts was on CNBC today and weighed in on the issue. He said that it's always good for consumers when retailers are competing for market share. And it could be great for EA if low prices get new customers hooked.

But on the down side, it could also lead Wal-Mart and Best Buy to put pressure on Electronic Arts and Activision Blizzard to cut prices. As a retailer you want consumers to have good reason to grab your games off shelves, but you also don't want to see your margins slashed. We'll see how games hold up over the holiday season, there were double digit declines in in game sales in the first half of the year. Can lower prices and special packages be just what it takes to rev up the industry? Or is this a new normal of lower prices?

 

[Richard Kain]

The only way to compensate for lowering prices is to lower production costs. I'm thinking the days of shooting for blockbuster releases are coming to an end. A lot of the industry is going to transition into producing lower-cost games that they can afford to sell at a lower price-point. You can't produce a game for twenty million, and then sell it for twenty dollars a pop. But if you only spend 100,000 or so, twenty dollars a copy is perfectly reasonable.

 

[torifile]

But this isn't about lowering costs of games it's about walmart lowering prices to squeeze the competition. Walmart would be taking a loss in order to put the hurt on GS and Best Buy. In order for that to work, they actually need games to remain priced higher.

 

[Josef]

What I find funny is that it has always been my experience that Wal-Mart has the worst prices for games.

 

[rlse9]

[quote name='Josef']What I find funny is that it has always been my experience that Wal-Mart has the worst prices for games.[/QUOTE]
I agree, I've almost never bought games there because they rarely have good deals. The only time I can remember buying a game at Wal-Mart was when I had a friend who worked in electronics who called me to let me know that they had a copy of one of the Medal of Honor games for Gamecube that the plastic wrapping had come off of so it was only $10.

Then again, the prices at Gamestop are usually as bad if not worse, so maybe Gamestop should be worried.

 

[TurboPascal]

There is a limit that Walmart can lower prices with Video Games. Unlike TVs where they can get features taken off to get a certain price, it is hard to take content out of a game to make it cheaper.

You see with Gamestop to keep the price high they try to add content -- what they add I believe is dubious at best, but that is what they are going to try to do.

The future is probably Download-on-demand games similar to what we are now seeing with movies.

I never buy new games because I believe the launch prices is too high. I cannot see spending 52+ on a game. I usually wait and purchase them used -- and that is the direction that Walmart is going as well -- with selling used games -- and this is where the real price wars will be between GameFly, GameStop and Walmart and I guess Amazon too.

I also believe we will have smaller games -- which does not mean they will be bad if you look at some of the great XBLA games and soon PSN and even the Wii will get Wii native DLC games soon.

I did not see any moves from Gamestop because hey will sell mostly used games. I did see Amazon move to match Walmart but that is about it unless there is some killer deal as we get closer to Xmas.