It was less than a year ago when a wise (and good looking – ed.) writer opined on this very site about the possible ramifications of the recession-laden economy on the gaming industry. Since then, we’ve seen some notable mergers and closures within the ranks or publishers and developers, and the overall picture continues to be less than rosy. There’s a prediction on the table that June’s NPD figures (due out on July 16th) look to be disappointing again, with a call of software sales possibly declining as much as 23% over a year ago. Wii console sales have been gradually declining, while Xbox 360 and PS3 hardware sales, though more stable than the Wii, still trail Nintendo’s hardware by a metric ton.
The bottom line here is that this industry is in a rut now and is primed for a continued freefall given the obvious decision by gaming companies to ignore not only recent trends, but also the generally sad state of the economy. Despite repeated calls from retailers and publishers to drop hardware prices, nobody is blinking on the manufacturer end of things. Software companies aren’t helping things either by continuing to overprice their retail offerings and by stripping out features and functionalities that consumers used to get with game purchases a generation ago in favor of milking a secondary revenue stream by way of adding these features on later via downloadable content, or DLC. Instead of action, we’re seeing a lot of finger-pointing and posturing from companies, blaming problems on everything from the used game market to executive posturing to an almost blatant facepalm towards their constituents.
It’s almost as if the entire industry is so full of itself due to its fantastic run of popularity over the last couple of console generations that it forgot how things got so good in the first place.
If you look at console hardware, it’s been awhile since we’ve seen any notable downward movement in terms of price. While it can be understood that the Wii’s runaway success has been enough of a reason to keep the console price point where it’s been since launch, that doesn’t mean that a price cut should be completely out of the question. The last three months have seen a steep decline in sales for Wii hardware: March moved 601,000 units, April saw a decline to 340,000 units, and May only saw 290,000 units sold– which was the lowest number since January of 2008. The March through May pitfall has also affected Microsoft and Sony. The back-to-back 175,000 months for the 360 in April and May are two of the worst on record for Microsoft. As for Sony, the PlayStation 3 has never had a chance to succeed, primarily because the cost of the hardware is prohibitive.
The obvious way to stimulate sales and get the needle moving in a positive direction is to cut pricing. Sweetening console deals by throwing in games only works marginally well, especially at this point in time as disposable incomes are at a pretty low level. Sony is at the forefront of these price cut suggestions, despite their cries of not being able to afford it. If that’s the case and Sony wishes to focus on profitability, then they can expect the same dismal numbers every month… irregardless of the impressive library of exclusives that the PlayStation 3 has been putting together. Sure, I wouldn’t mind playing Uncharted 2 or Heavy Rain… but $400 or more for a console is too steep when you consider that gas prices are still high and there’s no job security out there for me to have $400 to drop on a piece of machinery. Sony can’t compete on just software alone. The hardware needs to be attainable so that everyone can play it, instead of still playing to Ken Kutaragi’s 2005 claim that people will want to work two jobs just to own one. People need those two jobs just to survive– not for a video game console. Microsoft needs to sweeten the deal on their end, too. $200 is great in that it’s less than a Wii, but there’s not enough on-board flash memory to make it viable for all of the Xbox 360′s functionalities and adding a (proprietary) hard drive is still too expensive. In Nintendo’s case, the declining sales figures speak for themselves. How much more profit does Nintendo need? It’s likely that even a $50 price cut would still garner profit for Nintendo on each Wii sold, and a $200 price point– along with upcoming ’09 releases like Wii Sports Resort, Wii Fit Plus, and New Super Mario Bros. Wii– should easily bolster sales closer to where they’ve been for the better part of the last year or so.
The problem facing video game software is two-fold. The more obvious issue is that software is expensive. In this generation of consoles, it’s been harder and harder for consumers to justify the 20% “next-gen tax” that Xbox 360 and PlayStation 3 owners are paying for most new games for their platforms. Aside from aesthetic upgrades, are this generation’s video games that much more advanced than they’ve been? It’s debatable, at best. If you add in Collector’s Edition inflation (like the just-announced Call of Duty: Modern Warfare 2 Prestige package, complete with night vision goggles), things get more expensive. Granted, you don’t have to buy these special editions, but we’re seeing some crazy pricing for premiums ranging in the $100+ range. The same concerns can be leveled at the music game genre, which continues to litter the landscape with plastic instruments that can run for as much as $250. With retailers still struggling to clear out older instruments, it’s surprising that Activision and MTV Games continue to flood the market with marginally improved instruments while creating larger trash runs for consumers in order to rid themselves of older or unused ones.
The more debatable– and controversial– problem with software lies with its ties to downloadable content. The promise of DLC was great when the idea came to fruition a few years ago, as the ability to add replay value to already-existing titles was a positive thing. Admittedly, we have seen several fantastic examples of DLC. Bethesda has continually added new content to Fallout 3 with several expansions. Rockstar came through with fantastic add-on content for Grand Theft Auto IV, and another expansion is expected later this year. These expansions came well after the games hit retail shelves and felt like they added to the gameplay experience. Unfortunately, the dark side of DLC is that it has now given publishers reason to start charging consumers for optional things that they would have received as part of the package in generations past. From Ace Combat 6 and Beautiful Katamari to Resident Evil 5 and NCAA Football 10, examples of DLC fleecing are becoming more rampant. Plane skins, Prince cousins, Versus modes, and game cheats all used to come with the purchase price of a game… but this is no longer the case. It’s almost as if publishers are holding back content purposely because they know that it can be sold as DLC later on. It’s a shameful practice that started with Oblivion‘s horse armor and has now proliferated into an almost expected and accepted practice. The nickel-and-diming of the average consumer will eventually take its toll.
Despite warnings from analysts, writers, retailers, and even angry consumers… it’s questionable as to whether we’ll see any major changes. Price cuts may come, but will they be too late? Perhaps we’ll see a regression in software pricing back towards what we’ve seen for the past couple of console generations, but even then, it’s likely that we’ll still be saddled with microtransactions in order to gain the same type of experience that we got from gaming before the the Xbox 360 and PlayStation 3 arrived. Even if gaming companies say that they hear what we’re saying, it’s doubtful that they are listening.
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