Video Games Are the Last Bastion of Premium Priced Consumer Software
What if I told you that there is a market out there that routinely sells software for over $50 and has a large, thriving market that is happy to pay that amount? If you come from the worlds of mobile and desktop software, you'd probably think that's crazy talk. Most apps will get laughed out of the room if they have the gal to come to market for $10, let alone $50!
And yet here I am, a PlayStation 4 owner who is looking at Dark Souls III (April 12), Ratchet & Clank (April 12), Uncharted 4: A Thief's End (May 10), Mirror's Edge Catalyst (May 24), Overwatch (May 24), and No Man's Sky (June 21) all coming out in the next 3 months that I really want to get. If these are all $60 games, that would set me back $360 by mid summer, and it's not even the end of the year when most blockbuster games come out! That's more than I've spent on the App Store in probably the last 5 years combined1!
So how does the video game industry do it? How are they able to see software at a price many times more expensive than anything you see on mobile and desktop?
The console video game market has been growing for many years, and continues to do very well despite all the people who seem to think that phone games will completely doom consoles. Still, the growing market has had some slowdowns in the past. The 2004-2005 era had a downturn in game sales, and the industry did not respond by dropping prices everywhere and devaluing their content. No, they addressed the problems their market had (underpowered, aging hardware was a big one) and were able to bounce back.
Incidentally the average selling price for a premiere video game in 2004 was $49.99 MSRP. By 2006 it was $59.99 MSRP, and we're still at that price today. Since then, annual video game sales have risen considerably.
Creating more value
It's easy to suggest that many video games are unoriginal or that certain developers are lazy, but as a whole video games have gotten much better over the past couple decades. At a basic level, the technology driving games has improved immensely. The PlayStation 4 and Xbox One are worlds more powerful than their predecessors, and the games we have today are marvels in terms of the fidelity they allow. Here's a screenshot of the upcoming Uncharted 4:
It's absolutely amazing that this is possible at all, let alone on a game console that costs about half as much as the iPhone you're reading this article on2.
But it's more than just graphical prowess that is making games more valuable than before. Storytelling as improved, with games like The Last of Us, Firewatch, Gone Home, The Witcher, Life is Strange, and (again) Uncharted being standout examples of great stories being told through the medium.
Online multiplayer gams have also meant that people get more value from games over the long run. Call of Duty, Battlefield, Destiny, and The Division are all games with a finite about of content, but near infinite gameplay opportunities when you add in their online components. Games used to have a defined start, middle, and end, but now many games don't have a hard ending and can keep you playing for much longer.
Video games are a weird beast for the tech press to cover. My normal line on them is that they just don't understand games and they constantly underestimate them. But I think there are things the general tech world could learn from video games when it comes to pricing software. There seems to be a consensus that people just won't pay for software anymore, and I don't think that's true. Video games are software, and people are dropping a ton of money on them. Maybe this is a market the tech world may want to pay a little more attention.