Tuesday, March 22, 2011

The pricing dilemma

There is a fair bit of talk on the pricing of things, self-publishing. In pretty much every entertainment industry from games, books, music to movies.

In some areas there are the great perceived villains, be they the RCAA/publishers or the software pirates(depending on which side one may be on). Then there are the products themselves.

Recently with shakeups from self-publishing, and bands releasing albums for donations or movies being released to bittorrent officially, things are clearly changing. For the consumer this certainly seems to be for the better. I really want to believe this is the case but somewhere down in my mind I have a niggling feel that SOMETHING is wrong.

Let me elaborate. Today I read this blog http://jakonrath.blogspot.com/2011/03/ebooks-and-self-publishing-dialog.html regarding self-publishing and cutting the costs of books down. I also read this little entry http://2dboy.com/2011/02/08/ipad-launch/ which basically details how charging less made them more.

Undercutting?
This isn't really all that complicated a concept, nor is it advanced. As far as I can see, it is plain old undercutting. It is economically viable so long as others aren't also doing it since it places the undercutter at a significant price advantage, which can clearly push a lot more sales.

but what happens when others follow suit?
Some people buy both games for the price they might have used for just one of them a bit earlier.
Others will likely still only buy the product they wanted as the monetary cost was never a disincentive.

Still, more product should be bought... Probably. And the developers cut of profits should be significantly greater, always a good thing.

Market glut
I'd say there are at least three buying models for various people.
- Those that budget entertainment purchases based on disposable income and will inevitably spend to that limit, choosing the best perceived value they can.
- Those that budget the amount of time they will spend on entertainment, that are not overly affected by the cost so long as it is not ridiculous.
- Those that have no particular budgetary concerns and simply buy anything beyond a perceived value threshold.

Now of these three, I see the first group buying around the same amount of stuff, as they still have the same maximum budget. So undercutting will only displace spending between various people.
The second group was never overly concerned about the pricing, and thus will spend less as they are more time limited than anything else. I myself probably belong to this group so I may be overestimating their numbers?
The third group is the only one likely to increase spending as more items past their cost/performance threshold are available with a decrease in cost.

A lot of people will be able to get all the "entertainment" they need at a lower total cost, and will then shift their extra spending to other sectors, be they larger houses, food, whatever. Great for consumers so far.

Consequences

Some of the entertainment industries are already pretty tough competition with many artists/authors more or less doing it out of their love for the subject matter. The vast majority of actors are doing poorly with a small minority at the top, and the games industry is notorious for crunch hours and working conditions that could at best be considered "poor" compared to other IT sectors. And this could likely make it worse.

If lowered prices were to result in a market glut where the new standard for sales is priced to sell loads, but everyone follows suit, more people will move to the time limited sector and the initially artificially inflated numbers will deflate somewhere between their starting point and inflated point, with sales going down. With a perception of "xyz should only cost this much", returning to the old model can't happen, and the only way to go is to decrease production values, resulting in shoddy product.

What I'm getting at
I'm inevitably going to be a minority here, but I do rather enjoy games, and I like good games with a lot of effort put into them. While I got a few train rides of entertainment from world of goo and angry birds, they have hardly captivated me in the way recent great games like fallout, baldurs gate, gta3 and whatnot have done.

I just don't want the competition to kill off innovation entirely, and hope I'm not the only one that feels this way. Only time will tell how this goes