EA Believes That Making A Lot Of Money Is Less Important Than Keeping Games Expensive
from the really-now? dept
One of the more bizarre things that we see in the debate over "piracy" is that when we ask people what's more important -- stopping piracy or making more money -- there are some who actually argue that stopping piracy is more important. I have to admit that I can't get my head around this concept, but apparently it extends even beyond the issue of "piracy" to the issue of pricing as well. vegetaman points us to an absolutely bizarre interview with the head of EA's Origin platform, David DeMartini, in which he's asked by GamesIndustry.biz how he feels about Valve's regular deep discounting of games, something we've discussed at length before. DeMartini is not impressed, claiming that it cheapens your intellectual property:We won't be doing that. Obviously they think it's the right thing to do after a certain amount of time. I just think it cheapens your intellectual property. I know both sides of it, I understand it. If you want to sell a whole bunch of units, that is certainly a way to do that, to sell a whole bunch of stuff at a low price. The gamemakers work incredibly hard to make this intellectual property, and we're not trying to be Target. We're trying to be Nordstrom. When I say that, I mean good value - we're trying to give you a fair price point, and occasionally there will be things that are on sale you could look for a discount, just don't look for 75 percent off going-out-of-business sales.Except that totally ignores the reality of the situation and suggests big trouble for the way EA does business. As Valve has made clear, when it does those deep discounts, the increase in sales greatly surpasses the revenue made prior to those discounts. That's not a "going out of business" sale. It's a "let's make a hell of a lot more money" sale.
I'm honestly at a complete loss here. DeMartini literally seems to be claiming that making less money is a better business strategy because it doesn't "cheapen your intellectual property." Apparently the man is entirely unfamiliar with price elasticity, and how lowering your price can lead to more revenue (something which most people think is a good thing). So here's a case where we aren't even talking about "piracy," but instead DeMartini's assessment of what games must be priced at -- and against what the market says is the profit maximizing price. In what world is it a smart business strategy to keep prices high if it's guaranteed to make you less money... all because you want some perceived "value" to be higher, even if fewer people want to buy it?
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Filed Under: david demartini, origin platform, price elasticity, pricing, video games
Companies: electronic arts, valve
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Well, you asked.
You're welcome.
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Re: Well, you asked.
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Re: Re: Well, you asked.
http://www.motivationals.org/demotivational-posters/demotivational-poster-13989.jpg
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Re: Well, you asked.
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Re: Well, you asked.
Kind of like how most mass entertainment was before the internet.
Not really all that surprising that monopolies want to keep their prices high, even if it means somewhat lower total profits. They would rather have a stagnant market where they don't need to compete, or one where they can ruthlessly destroy or buy out any competition that emerges, so they can sit back and continue raking in stable profits without really changing anything.
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Re: Well, you asked.
1) Diamonds are forever
2) They are limited goods by definition
None of the above applyes to software.
You're welcome.
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Re: Re: Well, you asked.
2) Diamonds are being manufactured.
You're welcome.
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Re: Re: Re: Well, you asked.
Unless you're talking about how all matter in the universe is slowly decaying, but you just have to wait trillions of years.
Not only manufactured, but even "better" than most natural ones. Not talking about "fake" diamonds either, but actual atomically perfect diamonds.
Cremate a loved one and have their carbon ashes turned into a diamond. Just costs a pretty penny.
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Re: Re: Re: Re: Well, you asked.
Though I don't know how limited a resource a diamond is in reality. I read in a few sources (Scientific American comes to mind) about some star remnants being highly compressed carbon. In essence, planet sized diamonds.
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Games aren't.
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I will always love frogger
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Re: Well, you asked.
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That's about par for the course for EA/Bioware, something people have known for years.
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Bottom Line vs. Top Line
Of course in the long run, the company's doomed with that approach.
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Profit margin über alles
How else do you explain this statement and the actions of many others in the media-based industries?
The presence (and popularity) of the so-called "app" software (including games) should be adequate proof this is not the case.
Of course, if he was running things in the MPAA (Sony, Universal, et.al), he be telling them to eschew the DVD and cable/satellite markets because it would cheapen the IP...
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Re: Profit margin über alles
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An economics refresher/crash course should be required of every professional that advances past a certain level in his or her career. Especially politicians.
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"law of large numbers" vs idiosyncratic return anyone? Normal distributions?
No thanks! I would rather recommend pure hardcore advanced statistics.
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Goofball
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simple psychology
When a modern person thinks about commerce in abstract things, the two mental functions come into conflict. In Mr. DeMartini's case, it appears that the primitive thinking prevails. There is actually a grain of sense in this: if consumers think in a primitive way, a marketing campaign that plays to it can make a lot of money; what makes a Rolex better than a less expensive fine watch? Basically the fact that it's more expensive. (This is a form of cognitive dissonance, something even birds exhibit.) It is plausible that consumers might lose respect (and desire) for games that were sold cheaply, simply because they were sold cheaply. But in this case the evidence is that most gamers don't, in fact, think that way.
(*) Someday we'll have to ask dolphins about it. If they're better at any kind of thinking than we are, I'll bet it has to do with commerce in memes.
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Re: simple psychology
You have a link or more details? That sounds fascinating and I'd love to read about it.
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Re: simple psychology
David Brin smiles and nods.
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But only if you are lucky. The unfortunate trend with the price of games today, is that gamers will now only very reluctantly let go of their money if they are very sure of the sale. Thus, most of the money only goes to the big marketed games, which only get the big advertising budgets as big AAA games, which never sell for less than 60.
We're at a place right now where a game company HAS to sell millions of a game AT this 60 a pop price point just to break even. Take the recent closure of 38 Studios, which sold a highly acclaimed new game, that sold over a million units at 60 per, but still ran out of money.
Companies are too scared to gamble with their lives by selling at a lower price point, and hoping that they sell more than double the units as a result. I think they just believe that only so many people will buy the game anyway, might as well sell it for as much as they can right off the bat.
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2. this thinking is why so many titles fail... look up the game jamestown, after steam sales the game eventually became self perpetuating at full price.....despite the deep discount it was up for during steam sales.
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There's just too much pressure to make a BIG splash, not a "I want to make a living" splash.
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the internet has lead to an environment where consumers will support far more creativity at 'i want to make a living' level than ever before... and are no long as supportive of the costs of the 'big splash' level stuff being the norm.
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With few exceptions, 60.00 games i pirate and may buy when the price goes down, but the 30.00 game that is allowing me to play beta till launch is the game ill put money towards.
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on the other hand, if i know you, like you, and have the option of selling the game second hand if you've managed to fail, i'll shell out full price for the new copy on release day (the fancy version if i can afford it) ... and if it's good i won't be selling it for years (if ever) at which point someone else buys that second hand copy of your OLD stuff, decides they like it, pokes around, decides they like You if you've managed not to stuff up since (being evil with DRM and such counts as stuffing up) and repeats the cycle.
personal experience also tells me that the more of an oddball the game is, the better the odds are that it will be spectacular rather than merely average, provided it first passes the 'not actually crap' line. but these games get no marketing, and thus don't sell so well, so get written off as no good. mean while crappy realism brown generic shooter clone 459 gets hyped to hell and back and makes heaps of sales... right up until the market is saturated...while costing a lot more to make... and pissing off the customers who actually care about how good their games are. (especially if you use DRM or strip out features...)
... .... ...
yeeeeeeah, i lost my point in the middle there somewhere.
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For instance, a lot of people went out to buy Skyrim or Diablo 3 at full price ($60).
I have 2 kids and a third on the way. Between family, work, and just every day life, I have a few hours a week to play, and not a huge budget to spend.
I could set aside a little here or there to save up for New AAA Release 2012, but in reality I would be able to get one game a year. Maybe 2.
Or I can wait a year or two, read reviews and user experiences to see which ones are worth buying. Wait for all the patching and bug fixes, and then pick it up for $10 on a steam sale... That's OK with me, because I also pick up 6-8 other games, and have enough to last me a long time.
Thanks to sales and bundles I have 20+ games that I have yet to try, and at my pace it'll be a long time before I finish them all. And in the mean time, there will be more sales and bundles...
This is why it's smart to do these huge sales. Lots of people will still buy it at full price, and the people that never would can pick it up late at a discount, and not have to pirate it to be able to afford it.
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Rolex can keep their products high, because it's Rolex. If Rolex had a product that was comparitively priced with Timex, it would devalue the name of the brand. Basically because people would see that price is corelated with quality. Video games don't work that way. A line of code doesn't change with the price of the game.
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Dynasty Warriors is decent or better, yet every iteration gets crap scores, in a large part because it's regularly assigned to reviewers who openly admit to hating that sort of game and when that's NOT the case it doesn't get it's review scores boosted (as many games do)... this would at least appear to largely because Koei/Omega-force don't throw money and advertising at the magazines (digital and paper).
also, ever notice how none of those ratings systems ever seem to score anything below the half way mark unless it's basically unplayable... and that's worth 40% or equivalent?
reviews are useful, but the 'scores' are generally a load of crap. (and they're usually based on pre-release versions of games, on more powerful than average or otherwise optimised machines most consumers don't have when that's an issue, and ignore most of the bugs because, well, it's not the release version yet, is it?)
.... yeah, pet rant there. sorry.
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So, there is something to be said for Valve training customers to buy everything even if you don't care about it or intend to play it. That seems like something that might hurt in the long run.
Good Old Games/GOG.com, one of Steam's few competitors, seems to have a similar viewpoint: http://www.penny-arcade.com/report/editorial-article/how-valve-devalued-video-games-and-why-thats-go od-news-for-developers-and-p ... but take that with a grain of sand because while GOG's prices never seem to drop to the lowest of Valve's lows, their average prices seem a bit lower than valve's non-sale price.
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DeMartini is no fool. You are the fools.
And as long as such businesses can operate as a cartel using bribery to control the government, who in turn uses your hard-earned tax money to finance their enforcement of obsolete business models, nothing will change.
Do you get it yet?
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Re: DeMartini is no fool. You are the fools.
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Linux is starving for big budget games, and, as we've seen from the Humble Indie Bundles, Linux users aren't afraid to spend lots of cash on games. This could be a huge move for Valve. As for EA, their inflexibility will be their undoing.
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So let me get this straight....
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Re: So let me get this straight....
Then again, perhaps they're right - for people in marketing. They should talk to some engineers some time (ie the guys who actually make the stuff they sell)... as if marketing would ever talk to engineering... *sigh*
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Typical Salesman-speak
It doesn't matter if the item isn't "worth" $X to me. They tell me it is. Is the latest PC video game "worth" $49.99? Maybe not if there is a similar one selling for $29.99.
Using EA's analogy, if I can buy a pair of shoes at Target that meets my needs and feel really comfy, why would I pay double at Nordstroms? Other than the feeling of being superior than the folks who shop at Target, or heaven forbid, Walmart? Hahahaha...
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Maybe it just needs a slash: "indoctrinated to think/view the world this way."
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Re: Typical Salesman-speak
"Get this extrusion-molded piece of plastic, made in china and get another one FREEEEEE! An Original value of $150 now for only $19.95"
god, I wouldn't want those utterly shitty products if they even came with a hot-tub full of hookers and coke.
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Re: Typical Salesman-speak
Video games are NOT essentials, but recreation and leisure activities. Going to the movies at IMAX, or buying a Blu-Ray DVD, or a plasma TV, or a video game, or ANY of that stuff is NON-ESSENTIAL. Stop blaming entertainment companies because you can't afford the leisure activities you want. I want to go on trip to Hawaii. We all want stuff. Just deal with it like a grown, mature adult.
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http://en.wikipedia.org/wiki/NFL_2K
http://n4g.com/news/504781/nfl-2k13-comes-one-step- closer-to-reality-with-take-two-sales
2k was successful from 2002-2004 then they got squeezed out.
EA is ultimatly arguing the "but how do we make 100 million dollar movies/games with lower prices?"
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The funny thing is, that they initially had SWTOR prepped to require Origin and backed off when the clamor reached a crescendo.
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second one gave up a lot of what made it good to make the shooter-y bits better... which it did in such a way as to make the over all game worse AND make it harder to go back to playing the first one (drastically different controls). also, many stupid decisions with the story-line.
i never got the Mako hate.... the Mako was fun. silly physics, but fun. (climbing mountains in it particularly :D)
though it amused me when my sniper rifle with HE rounds was better at taking down the biggest geth than the Mako's gun was. ('course, Mako had better shields/armour/health so could actually take a hit, where a near miss would seriously mess with you on foot...)
3... i've heard enough about the fail of the ending and have a low enough opinion of EA that, in light of how 2 turned out, i don't even consider parting with my money for it. it just holds no interest for me.
(HE rounds in shotguns and sniper rifles in ME1 were just all kinds of awesome. hiding in cover, Mr. Geth? nope. cover is falling and squishing you. MWAHAHAHAHA! oh, my shotgun over heated in one shot? oh well, doesn't really matter when the Entire Room is Dead, now, does it? MWAHAHAHAHAHA!)
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When the games are devalued, Valve will undercut all the little guys and establish a monopoly.
Then Valve will jack up the prices, because they're the only player in town.
And there is absolutely nothing that can stop this apocalypse, other than adhering to the $60 price point. Any other approach is tantamount to suicide.
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This makes no sense, unless by "too low a price" you mean "at a loss".
What is too low of a price? In my marketing classes, I was taught that the correct price is the one that maximizes revenue. This is not a judgement call, it can be computed. If Valve can cause revenue to increase by lowering the price point, then that means the price point was not correctly set in the first place.
That's different than a sale price, where the price is intentionally set lower than where revenue would be maximized.
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hard to tell.
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It's funny, because in the same interview, he talk about how Origin is playing the long-game, whereas Steam play the short-term boost. And yet....Steam paved the way for Origin: without them, there'd be no Origin to begin with.
It was amusing watching someone trash Steam for not giving fee-free service to Indies on Neoseeker, and one of the regular posters just beat them down with references and citations.
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Just a thought
The fewer titles he sells, the fewer servers he has to buy to handle all of the DRM requests. Therefore, he must maximize profits by selling games for high prices and limiting his player base thus limiting his infrastructure.
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Re: Just a thought
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Obviously i went to origin first, but i dont think theres anything there more than a year old, except the battlefield stuff.
Turned out i couldn't actually get any old ea games from anywhere, but in this case, i couldn't even be bothered to get pirate copies, and didnt even look to see if they were available.
I looked on steam, then went to gog.com and got a couple of dead cheap older games that i remember having fun with way back when they were first released.
EA's loss.
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It's not the price of your games that cheapen IP you muppet, but things like the EULA for Origin, in fact for me EA has a negative value due to this alone. Their loss, I would buy FIFA every year if it wasn't for that.
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The only ones responsible for cheapening EA's IP are EA. Their lack of support and polish for games they have already sold is CHRONIC.
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Yeah, I love the Sims series, but I don't love it that much. Why are expansions in the same price point as full standalone games? Why is a PC game released THREE YEARS AGO still in the €45+ range?
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I feel your pain, and felt the same way when I went to buy them, but I waited till the next time they were on sale to pick them up.
What pissed me off even more though was not being able to buy the steam version of Pets, when it was on sale without having to rebuy the base game to play it.
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I feel your pain, and felt the same way when I went to buy them, but I waited till the next time they were on sale to pick them up.
What pissed me off even more though was not being able to buy the steam version of Pets, when it was on sale without having to rebuy the base game to play it.
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I played sims 3 longer than any single player game ever and never had those issues, but I did read about them.
Of course I didn't buy expansions on day one, didn't install patches the second they were available, and I keep my windows installation fresh and clean with bi monthly HDD wipes and reinstalls.
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It's a broke-ass game with some nice ideas in it, but not worth my time or money anymore.
YMMV.
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I love sandbox games.
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You know EA's full of crap...
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missed another gem in the original:
"Origin has the opportunity, being platform-agnostic, to be that centerpiece, to be that hub. "
He thinks Xbox/PS3 is a platform such as windows. Just wait till he discovers that mobile devices have EA games on them, and linux!
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Re: missed another gem in the original:
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Re: missed another gem in the original:
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I bought it for the $13 with the DLC. It will likely sit like a hundred or so other games that I will never touch. So basically, I just gave them $13 for nothing.
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I just think it cheapens your intellectual property.
You'd rather sell 1 100 dollar game rather than 10 20dollar games? Really?
To hell with making money as long as we dont cheapen our intellectual property. Sounds so bassakwards.
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DLC! DLC!
Seriously, what do you expect when the company opens their E3 press conference with "Welcome to Download 2012!" and the question, "Remember when the game you bought was the game you got?"
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Ironic statement is ironic.
Honestly, EA, welcome to the world of economics.
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Ea has jumped the shark anyhow
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I value a company a lot more when they don't treat their customers like crap.
If all games are $49, you will have limited sales. Put a game on sale for a day or two at 75% off, and people will grab a copy because it's impulse buy priced. A few days later after they've played it, they're now (if the game is good) recommending it to all their friends, who many may buy it at full price, where they may not have bought it at all.
Wouldn't you like to have 1000 people talking about your games, rather than the 10 who could afford it at regular price.
I see people tweeting, blogging etc. every time there's a big Steam sale.
Oh, and...
3 days left on the Humble Indie Bundle! HURRY!!
https://www.humblebundle.com
Take THAT EA!!!
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Sorry EA
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Hmm
I'm not sure how large the Origin store is since I will NEVER install that garbage on any machine I own. I wonder if they won't run sales because they simply don't have the user base and cannot make the same kind of volume promises to publishers that Steam can.
I do think there is some validity to holding firm on the price but doing so will boost piracy rates for infinite goods. If a title will be $60 no matter what then people are going to want to try it out first. "You reap what you sow," and too many people have been burned by a publisher like EA after spending $60 on a complete turd of a game.
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Re: Hmm
As far as revenue, Steam's keeps going up. There are games I don't buy like Crusader King's II at $40, but just bought on sale for $13. The point being, I would never have purchased the game at $40 or even $30...maybe..at $20. I would have thought about it..., but $13...I bought it in an instant and I may never actually get around to playing it.
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Re: Re: Hmm
but yeah, once you get used to it CKII is really really good. well, if you're into the whole Grand Strategy thing at all.
fully expanded EUIII is crazy good too.
HOI3... well, i've not shelled out for the expansions, but i just couldn't get into that one. they've added a lot of features that are awesome that have made for a more interesting game to tell stories about, and perhaps made it a better simulation... and lots of things work better... but the over all result has come out as a less fun game, for me. i'm told the expansions address some of these issues, but i've consistantly had other things to spend my money on rather than gambling on that one.
but yeah, point is: if you're into Grand Stratagy, give yourself a few partial playthroughs to get a hang of the mechanics and CK2 is brilliant.
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even if you sell them on physical media, the physical media in no way justify the current price points, even once you take shipping into account.
so that's not really an issue.
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In this world...
In a world where Mickey Mouse is still covered by copyright.
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In a world where Mickey Mouse is still covered by copyright.
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EA Failure
And obviously, they are failing at giving a fair price point. If the price point were actually "fair" (in a marketing sense), then it would already be at the point that maximizes revenue. If lowering the price increases revenue, then the price is incorrectly set.
I think where he's getting confused is that he believes that EA gets to say what the "value" of the game is. They don't. Only the consumers can make that call.
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it's a publisher too, these days.
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Convincing themselves
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I'm confused.
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The stock market?
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Thankfully cooler heads prevailed and the "priced to rent" model died.
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Hypocrisy in action
Found at http://store.origin.com/store/eaapac/en_AU/home
1st Anniversary - 50% Off Storewide! 1 June 2012 to 15 June 2012.
And these are not just OLD games.. Battlefield 3 (PC) is now half price.
So does that mean the IP on Battlefield 3 etc is now cheapened by EA? Does DICE know about this? IDIOTS!
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Regarding the value of a work
Which is more valuable?
A game that sells a million copies at $2 each, or a game that sells 50,000 copies at $10 each?
The value of a work is how much money it brings in, not the price of each copy.
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If the same product (or type of product, eg video games) had originally been priced at the sale price (as in video games have always been priced at $50 instead of $60), setting another sale price would produce similar results which would again indicate that the new sale price is the correct market price.
I'm not suggesting that the CEO of EA is correct but using the example of a sale price vs normal market sales doesn't make sense. New release games that come out on Valve are the same as Target's prices but even if they weren't, Valve's figures wouldn't indicate the proper price point b/c consumers would still be buying at a discounted rate. Valve uses discounts as their competitive advantage. If game makers did lower the price by $10 and games were now $50, Valve would just offer a discount on top of that to continue to draw customers in.
In the end the only thing that matters is that the game makers can charge whatever they want for their product and if they are happy with the amount of money they are making, they will not lower their prices. The only thing that will motivate them to lower prices is if they need more sales and they believe lowered prices will achieve that. If you're not happy with the price, don't buy it. You could always rent it or borrow it or resort to illegal means (assuming the first two options don't become illegal as well).
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