December 15, 2006

Economics Of $20 Price Point

There's been a lot of speculation on the net lately regarding the status of a certain product I've been known to be associated with. I'm not going to say anything one way or another regarding said product, the number of departures over the last few months, or the sales figures of said title. As I'm no longer associated with the company in question, it isn't my place to say anything one way or another regarding any of the previous items. That said, there is one misconception that I want to talk about, and that is sales expectations at the $20 price point.

There are generally three price-point ranges that PC games tend to start out at. There is the premium price-point, which is $49.99-$59.99, the mid-range price-point, which is $29.99-$39.99, and the budget price-point, which is $19.99 and under. The three major price-point ranges have very unique sales curves.

The high-end games start high, sell heavy for the first month or two, then start having tiered price drops. If they sold well, they'll drop to mid-range and get reprinted, otherwise, they drop to budget for a sell-off. Most are gone from shelves after six months unless they're being reprinted.

Mid-range games tend to keep their price-point for a longer period of time, but they have a lower margin per unit. Generally, they'll keep their price-point for about four to six months before a price drop to the bargain price-point. Nine to ten months is usually the outside.

Games that start at the budget price-point rarely have that up-front "oomph." They're "investment titles." They have extremely low margins per unit, but they stay on shelves for an extremely long time. Most games with a budget price point sell slightly heavier up front, but then fall into a steady unit sales per week. In other words, they result in a steady income flow to even out a relatively unstable sales category.

As a result, the initial sales on a budget price-point won't "wow" anybody, but the game will stay on shelves for as long as the per-week sales are relatively level. As long as weekly sales worldwide are over 1,000 units a week, that title isn't going anywhere for at least a year. If the unit sales remain steady up to the end of the year, it will usually get repackaged in a cheaper jewel-case SKU for $9.99 and stick around for even longer. I can still go into Wal-Mart and Target and purchase budget price-point games that were released five years ago. The games are there because they still sell.

Now, does this mean that a certain title is going away? Not my place to say. I can say that I was doing some work related to it prior to my untimely departure, but not what you might think.

And with that, I wash my hands of the title in question. You want more information? Convince certain people that silence isn't a viable PR strategy.


Kevin said...

Since when is the word 'silence' in your vocabulary. I would think that now it's 'behind' you you could and would be even more free to shed light on some injustices and maybe even stupidity.

Anonymous said...

Mike's still bound by the NDA he signed at Ritual, so he can't say shit, at least not without legal ramifications and a bad ref.