$60 video games? Do the math, says Zelnick
How do entertainment retailers come up with the prices they charge? Why is a movie theater ticket $10, a music CD $15, a rental DVD $3-$5 and a top video game $60?
We asked Strauss Zelnick, executive chairman of game publisher Take-Two. He says it’s simple math, based upon the value of that experience.
Prices are determined by the marketplace — if folks stopped buying stuff, prices would fall, etc. (Think gasoline). Balance that with cost. A game like Halo or Grand Theft Auto takes years to develop and costs as much to make as a Hollywood film.
Here’s Zelnick in his own words:
The reason the consumer is willing to pay $60 for front-line product is because they are going to get 20-plus hours of game play out of that product.
The price per hour is pretty stable across media. For example, a motion picture: You have two hours of experience in the theater, a very high-quality experience, zero catalog value. So what’s that worth? I guess about $5 an hour (on a per capita basis). If you apply that to a video rental, also zero catalog value, there’s multiple people watching typically, it’s a lower quality experience, that’s how you get a video rental of three bucks. Recorded music, you will listen to the album (up to 10 times — or hours — on average). The same equation applies.
What’s driving that front-line price point is the perceived quality of the experience, times the number of hours you are going to have that, so that the price per quality hour of the experience, times the hours, plus catalog value. And I understand why that number would be, for the sake of argument, $60, versus for sake of argument, $15 for an album, versus $3 for a video rental, versus 10 to see a front line movie.
They are not so far off.
So it’s not that we came up with that price point out of the blue. If we came up with it out of the blue, we wouldn’t be selling anything at that price point.
For the record, the industry walks the walk. Take-Two’s Grand Theft Auto has sold more than 10 million units in less than a year. And other huge industry sellers such as Metal Gear Solid, Fable, Halo, Madden NFL, Rock Band and Guitar Hero? Most have sold more than a million copies — at $60 a pop, or more.
I admit that I’ve bought $5 DVDs, cheered, and watched them only once. I’ve also paid $60 for games, grumbled about it, and played them for months. Now I’m thinking about buying Rock Band 2 ($189) or Guitar Hero: World Tour (also $189) for the holidays. (grumble grumble grumble)
So what do you think? Are video games fairly priced?
(Photos: Screenshot from Amazon.com; Zelnick, Reuters)