Price Pressures

But what if more expensive development isn't resulting in higher sales? Bluntly, in that case, you're doing it wrong. Either you need to rein in your development costs - and god knows there are plenty of cheaper platforms to develop for right now, ranging from the iPhone and the DS up to the Wii and digital distribution on PC - or you need to start looking hard at your product and business strategy. If you find yourself pushing prices up, you're making a schoolboy error. If development costs are rising and your customer base is stagnant or declining, up-front price rises, however tempting, will simply hasten the decline of the customer base and give you a nice shove on the path to insolvency.

Moreover, you can stop pointing to Modern Warfare 2 as your justification. Not only is the game not yet on shelves - so we don't yet know the impact of Activision's price hike - it's also a special case. It's probably high-profile enough that the supermarkets will hammer prices on it, as they did with FIFA. Moreover, it's probably the year's most anticipated top-flight multiplayer game, with a pre-built audience of millions who will pick it up in the first week to play online - and crucially, won't trade it in, thus choking off the second-hand market to some degree. Your game almost certainly doesn't have that. You can't compare your business model and audience profile to Modern Warfare 2's.

Besides, all of this talk about price hikes flies totally in the face of what we're actually seeing happen among consumers - where the perceived value of media in general, including games, is steadily dropping off rather than rising. Piracy doesn't help, obviously, and a whole generation of consumers now feels that paying significant money for a media product is ridiculous - which you can huff and puff about all you like, but it's not going to change how they think, and your business model needs to adapt to your consumers rather than vice versa. Blacksmiths probably huffed and puffed when car drivers decided that keeping horses wasn't really practical any more, and it didn't do them a damned bit of good.

It's not just piracy that's changing perceptions. Along with other types of media, more games and interactive experiences are going "free", be it ad-supported or "freemium" - from free-to-play MMOs to Facebook games - while other gaming experiences are hammering perceived value by being launched at miniscule price points. 30 quid for a PSP game or three quid for an iPhone game? Say what you like about relative quality, but most consumers, in the long term, are unlikely to decide that the PSP experience is worth a full order of magnitude more money than the iPhone one.

There are upward pressures on price, too, be it from publishers, retailers or even from platform holders whose digital distribution offerings bypass discounting and second-hand sales prices and charge pretty much full price for their products. In this, however, they don't seem so much to be shoring up prices, as simply to be totally out of step with where the industry - and more importantly, the industry's consumer audience - is going.

The tantalising prospect of higher prices on the horizon simply doesn't seem realistic. The industry must follow its consumers, not vice versa, and hiking prices will do little other than whittling down your audience to a receding hardcore while the rest seek their fun elsewhere. Instead, it's time to start thinking differently - exploring high volume, low-cost strategies, experimenting with cheaper development, and perhaps even thinking of revenues in terms of ARPU (Average Revenue Per User, commonly used by subscription services like cable TV or mobile phone networks) rather than up-front SRP figures. The pricing debate isn't going to go away, but it's about time it got realistic.