Tuesday, December 29, 2009

Buy fast, regret even faster

When the iPhone was lowered from $599 to $399 a few months after its release it caused a small outrage amongst its early customers. The new price made sure that more people can afford one. But everyone who bought it at the $599 price point felt like he was getting screwed by Apple. And of course quite a few who did have the new technical marvel also had a blog about technology where they could vent their anger.

Imagine walking past two stores. In our first scenario you see a car you've always wanted for $10.000. Then you walk past the next store and you see it priced at $12.000. You're happy, you did the smart thing! In the second scenario you see the car at $9.500. The next store has the car at $8.000. You're mad because you feel like you paid too much for the car. Even though you paid less in the second scenario you're not happy.

So I find it weird to see thee huge discounts on games these days. Here's a few examples:
  1. Dragon Age. I've bought Dragon Age a month ago for €35.49 at play.com. I was happy back then because it was listed at €55 in our own stores. Less then a month later however I can find it for less then €17 at amazon.co.uk. 
  2. Left 4 dead 2. This game has dropped to the same €17 at amazon.
  3. Torchlight. One month ago this game costed €15. Today you can buy it for €3.75 in the bargain of the day.

I'm well aware that prices drop all the time. But these price cuts are making me think three times before ordering a retail game. If the price is cut in half after only one month I can surely wait another month to buy the game.
There are better alternatives then this. The whole point in price drops is to segment the market. Some people want a game immediately and are willing to pay a bit more. Most gamers will be willing to pay a dollar for a top game. And everyone else is in between these two extremes. Dropping the price a bit at a time will make sure everyone buys it at their price point. Some people will be willing to buy it at €20. If the price lowers beneath that point you sold one. Once the price goes down to €5 just about everyone bought the game at their own price. Great system in theory. But if the prices drop so fast why would someone buy it at the maximum price?

Steam seemed to get it. They added their weekend deals. You only want to pay half the price? No problem, you can this weekend! Those who bought it at that price are happy, steam is happy with the extra income and those who bought the game a year ago won't mind the price cut as they're already playing the new, cool games.

Well, steam mostly seems to get it. Take a look at their new Christmas bargains. 9 December this year the compiled Monkey Island series were released at £35. These days you can buy those games, the Sam and Max games, the Strongbad games, Wallace and Grommit and the Bones games for... £35. The new Batman game is only three months old. And now you can buy that game plus the entire Ubisoft catalog for £5 less then for the price of Batman. Fun for most people and bad news for those who already bought these games.

Don't get me wrong, we all like cheap games. I love to see these huge bargain deals. Everyone will find something to extend their catalog in these deals. But I do have mixed feelings about the timings. Cutting your prices in half only months after a game release will make a lot of people feel ripped of. And that means that less people will buy your next game at full price, the moment you'll have to look good for your investors. To me it seems quite clear that the best strategy is to wait at least a month before you buy a game. You'll be saving tons of money.


  1. I think it's a good example of how the psycholoy of the market has changed but pricing patterns have not. It used to be that you could find enough customers who would be willing to pay for the instant grtification that came with being first. I think that is no longer the case. Less and less people are willing to buy into that mindset right now. So at some point inmt time pricing models have to catch up with reality.

  2. It seems that the pricing models have catched up for online distribution since the prices lower much faster.

    And that will cause people to be even less eager to buy first since waiting pays off.

    It's a vicious circle.