Monday Musings: The Price Is Right?

The price of games is a popular topic of discussion round these parts. Whether it’s on my Ask Me Stuff posts, in the various reader emails I receive, or seen in the comments you make every day, it’s clear a lot of you feel you’re paying too much for your games. But is this really the case? Are games more expensive in Australia than elsewhere in the world? Let’s take a closer look at the issue.

The average recommended retail price for a new release console game in Australia is approximately $100. Sure, some Xbox 360 and PS3 games come in above that, and Wii games tend to be priced a little lower, but on the whole $100 is a good basis for comparison. (And I surely can’t the only one who remembers the days of $150 SNES and N64 cartridges?)

Bear in mind that while you can easily shop around to find new release games for less than their recommended retail price, these discounts are set by the individual retailer rather than the game’s publisher. The only sensible way to examine industry-wide game pricing is by focusing on the RRP.

In the US, the average new release retail price for Xbox 360 and PS3 games is US$60, and US$50 for many PC and Wii titles. In the UK, it’s £45, although again there are variations of £5 above or below that price point.

Based on the exchange rate at the time of writing, the average US price converts to about $80 and the average UK price to about $90. So, yes, today it would seem that we’re paying $10-20 more than our overseas friends.

But currencies fluctuate like crazy. It wasn’t that long ago that, based solely on exchange rates, UK game prices would translate to well over AU$100 and we were paying twice what a US consumer would pay for the same game. Sometimes we win; sometimes we lose.

Yet the fact remains: our games are still 100 bucks, regardless of how the dollar is faring against foreign currencies. They were 100 bucks a few years ago; they’re 100 bucks today. They’re not suddenly more expensive because the dollar conversion is unfavourable.

It seems silly to me to judge this issue by looking solely at something as variable as exchange rates. The issue of pricing is much broader than that.

For a start, a publisher such as, for example, Activision may well be a global corporation, but its Australian office is running its own business. It needs to operate within local market conditions, often facing specific distribution costs and retail challenges that aren’t readily comparable across territories.

Economies of scale come into play here, an important factor to consider when you’re trying to compare two markets of such vastly different populations as Australia and the United States. Transportation costs play a part, too, and you can see why it’s always going to cost a publisher more money to move stock to and around Australia than it would to ship the same game into UK stores.

It may surprise you to learn that publishers in Australia all purchase stock from their global head office. And they do it in the currency of that head office. Ubisoft Australia, for example, effectively buys stock from Ubisoft France and they’re charged for that stock in Euros. The same goes for every other local branch of an overseas publisher.

The legacy of our PAL heritage means that some Australian publishers report to European headquarters and see their finances recorded in Euros or British Pounds. Others deal in US dollars, while a few will need to convert everything to Japanese Yen.

Suddenly you’re looking at four different currencies that affect the games business in this country. Imagine if every fluctuation in those four exchange rates were to be factored into our game prices and applied on a weekly or monthly basis. It’s just not practical.

The result? Publishers have – at least over the last couple of console generations – settled on this $100 figure that accommodates the good and the bad. For every period where that price point is seeing widening profit margins for them, there’s another period where things start to get uncomfortably tight. One needs only look at what happened to Red Ant to see the tragic effect the latter can have over even a short period of time.

My advice to anyone thinking they’re being “ripped off” over the price of games in Australia is to stop the futile comparisons with separate overseas markets and start comparing prices within our market. Shop around and you’ll find you’ll rarely have to pay recommended retail price for the latest games. You might even start thinking they’re pretty good value for money.

Next Monday I’ll tackle the price of digitally distributed games. Between now and then I’d love to hear your thoughts on the issue of game pricing and any questions you might have around digital distribution.

Monday Musings is a regular column designed to get you thinking and talking about game design or an industry topic. I’ll be tackling a specific subject each Monday, so email me if you have any suggestions.