Why are game prices so different - Evolution of Gaming Industry

The Video games industry is one of the still growing industries nowadays, It is also one of the most profitable, when you compare to the similar industries of music, DVDs and others similar. In some images of this hub you will find that the evolution in the last years is making the Games industries the most profitable industry in its similar industries.

Yield Management which leads to Pricing Discrimination is one of the reasons for such an increase in Revenues, and that is the focus of this Hub, taking a look first at the video game industry. A closer look at its revenues and you will find that there are lots of ways that this industry can grow, even if a crisis come.

According to some news, the video game industry is worth almost $50 billion with an annual growth over 5%.

The main game publishers are Nintendo, Electronic Art, Activision Blizzard, Ubisoft, Take Two and Sony

As you can see in the picture below, the two biggest markets in 2009 fell in 2010. Both Console Games and Boxed PC/Mac Games fell more than 15%, but they are still responsible for more than 50% of the Revenues in the US.

This numbers are explained by the natural evolution of technology, that is the reason for the increases of over 50% in the Social Networks games, and for the downloaded PC/Mac games. Even games for mobile devices grew almost 50%. It is also notable that 2010 was a turning point for PC/Mac Games in the US, since the revenues from the Downloads were greater than the Boxed.

It also significant the difference between the Revenues and the hours played. Although Console Games are one of the most important revenues for the Gaming Industry, it is not the most played games. In the future that may be an important factor for the increase in Revenues due to advertisements, which will lead to an increase in revenues in games, such as the Casual Game Portals.

In the graphic below you can see the increase in the Games Industry in the UK Market. There is also a significant decrease in the Music and DVD industry revenues.

After a look at the Video game industry, let's see who is spending the money and how the industry is moving to maximize their Profits.

It is notorious that the game prices get lower as the time passes by. This is one of the best ways of increasing revenues, since you can have different prices for the different levels of fans.

The real fans will want to buy the game as soon as it goes out and they are willing to offer more money for the game. After some weeks, the price can be lowered in order to achieve more sales, by getting more buyers, these later consumer will want to pay less and does not care about getting the game as soon as possible.

There is also an exception. On the launching days, there can be a promotion that lower the price by $5(example). These promotion will lead to a loss of potential revenue by the bigger fans, in the other hand, the revenue will be bigger since a lower price and the effect of a promotion will greatly increase the sales in the first days. The first days are also important because that's when the marketing is taking effect, after some time, the game will turn in "just one more" in the shelves.

Example:

Pro Evolution Soccer is a football game series that every year releases a new game to be sold.

If you check the Prices(without discounts) at Amazon between the actual version and the old one, there will be a difference of $20.

As the evolution of technology continues, the increase in the Download sales leads to the decrease in the Boxed. However that is not a problem to the Game Publishers, and has a great advantage when controlling the prices.

This evolution in the Video Games Industry leads to a global market where the price can be defined globally, the game can be bought anywhere in the world and the release date can be the same in all countries. That way revenues can be more controlled, since there is no risk of having different prices between markets and unbalanced stocks in the local stores.

The download system has also a big advantage, there will be no "Out of Stock", the game will always be available and the Revenues won't have a maximum limit.

You can find many games for free in the Casual Games section. Even being a type of game that is the most played (hours/player), the revenues are not the biggest. The reason is simple, due to the simplicity of the games and the competition that exists, offering to the user a free game is a way to have more players, and more players will lead to more revenues from the advertisers.

In conclusion the reason for the wide range of free games is the revenues that can be achieved by the advertisers. Even if the game publishers wanted to charge $1 for each user, there would be an increase in the costs(due to bureaucracy) and the loss of clients would lead to a strong reduction on the advertisement revenues.