EA Believes That Making A Lot Of Money Is Less Important Than Keeping Games Expensive

from the really-now? dept

Mon, Jun 11th 2012 9:56am — Mike Masnick

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

133 Comments

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:Lobo Santo (profile), 11 Jun 2012 @ 10:01am

Well, you asked.
"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?"
Diamonds.

You're welcome.
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Anonymous Coward, 11 Jun 2012 @ 10:05am

This is why the Sims 3 is like fucking Zygna now. The quality of EA games is getting worse and more expensive. I'm mad, sims is my life!
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Anonymous Coward, 11 Jun 2012 @ 10:05am

EA is incapable of learning.
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sehlat (profile), 11 Jun 2012 @ 10:08am

Bottom Line vs. Top Line
EA only worries about the Bottom Line: what they get. The Top Line, what they give? Who cares?

Of course in the long run, the company's doomed with that approach.
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fogbugzd (profile), 11 Jun 2012 @ 10:10am

Unfortunately modern business standards don't require execs to know anything about basic economics or even business.
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Mitch Featherston, 11 Jun 2012 @ 10:11am

Goofball
Wouldn't want this guy giving my company advice.
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Beta (profile), 11 Jun 2012 @ 10:13am

simple psychology
I think we're looking at a conflict within a brain that evolved to understand the possession of tangible goods (berries, arrowheads, clothing) and also to grasp more abstract concepts (stories, skills, music, software). Any ape can grasp the first, but only human beings can grasp the second-- and not all human beings are good at it(*).

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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Nick (profile), 11 Jun 2012 @ 10:15am

It's because, despite the proof from valve and recent indie devs, selling cheaply at high volume can actually make you more money than selling as high as possible (the current price of 60 a pop for as long as possible).

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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Anonymous Coward, 11 Jun 2012 @ 10:16am

DeMartini is no fool. You are the fools.
DeMartini literally seems to be claiming that making less money is a better business strategy because it doesn't "cheapen your intellectual property."

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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Designerfx (profile), 11 Jun 2012 @ 10:20am

Re:
yep. Execs making shitloads because "average sale is $$ figure" (something obscenely high) even if "total sales is (smaller figure)".

That's about par for the course for EA/Bioware, something people have known for years.
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Glen, 11 Jun 2012 @ 10:24am

Could you make the case the they have learned this from "Crony Capitalism"? It seems to me than once you have Crony Capitalism leads to legalize price fixing and then to entitlement.
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Anonymous Coward, 11 Jun 2012 @ 10:31am

EA can yap all they want. All I know is that Valve is incredibly successful, but also incredibly smart: They are rumoured to be porting Steam to Linux.

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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Danny, 11 Jun 2012 @ 10:32am

So let me get this straight....
This guy is of the mind that it is better to sell 1 copy at $100 a pop than to sell 20 copies at $10 a pop in the name of making sure the IP doesn't cheapen?
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Anonymous Monkey (profile), 11 Jun 2012 @ 10:33am

Re: Well, you asked.
but ... "Diamonds are a girl's best friend!" ... or some hogwash like that ;)
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The Original Anonymous Coward (profile), 11 Jun 2012 @ 10:36am

Typical Salesman-speak
In the sales world they have been indoctrinated to think view at the world this way. Look at all the TV commercials that tell you that something has a value of $X but they will sell it to you in the next 15 minutes for $Y, a terrific savings of $Z!

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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The Original Anonymous Coward (profile), 11 Jun 2012 @ 10:40am

Re: Typical Salesman-speak
Oops - Typo in the first sentence. It should read "indoctrinated to view the world this way."
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Anonymous Coward, 11 Jun 2012 @ 10:43am

Profit margin �ber alles
Actually, it appears that this executive believes that maximizing profit margins is the only way to maximizing total profit.

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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Anonymous Coward, 11 Jun 2012 @ 10:43am

Re: Well, you asked.
Yes, but diamonds like fashion are things that only have aspirational value. The value for games comes from whether or not they are fun to play and that doesn't change with it's price tag. You only have to look at how much games are pirated to understand that concept.
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:Lobo Santo (profile), 11 Jun 2012 @ 10:44am

Re: Re: Typical Salesman-speak
I like "indoctrinated to think view at the world this way." It almost makes a better point.

Maybe it just needs a slash: "indoctrinated to think/view the world this way."
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Aaron deOliveira, 11 Jun 2012 @ 10:48am

I imagine EA still has the experience of the NFL 2k series eating their lunch.

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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Jeremy2020 (profile), 11 Jun 2012 @ 10:48am

This is why I haven't played Mass Effect 3 and won't ever purchase it. I'd pirate it, but I have other games that have better word of mouth that I've purchased from Steam an dhave yet to play.

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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Josh in CharlotteNC (profile), 11 Jun 2012 @ 10:50am

Re: Well, you asked.
Until fairly recently, nearly all diamond production was controlled by a cartel.

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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Anonymous Coward, 11 Jun 2012 @ 10:51am

Well, the issue comes in that selling the games at too low a price will devalue the games.

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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Anonymous Coward, 11 Jun 2012 @ 10:52am

Re: Well, you asked.
Bad example.
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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Anonymous Coward, 11 Jun 2012 @ 10:52am

Re: Profit margin �ber alles
Yeah, he'd jump on the "micro-transaction" bandwagon, but thinks Dell already has the market cornered.
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Josh in CharlotteNC (profile), 11 Jun 2012 @ 10:54am

Re: simple psychology
(This is a form of cognitive dissonance, something even birds exhibit.)

You have a link or more details? That sounds fascinating and I'd love to read about it.
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Anonymous Coward, 11 Jun 2012 @ 10:55am

Re: simple psychology
(*) 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.

David Brin smiles and nods.
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The eejit (profile), 11 Jun 2012 @ 10:56am

DeMartini is a complete ass who may be out of a job before too long. He keeps inserting BF3 into his mouth. Remember that Steam has 9 figures worth of revenue each year.

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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Liz (profile), 11 Jun 2012 @ 11:00am

Re: Re: Well, you asked.
1) Carbon has a radioactive decay just like any other element.
2) Diamonds are being manufactured.

You're welcome.
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fogbugzd (profile), 11 Jun 2012 @ 11:01am

Each is in a trap. They think that creating games has to be outrageously expensive. When you invest tens of millions in a game you can't afford to take chances, so you go with proven franchises and genres. The lack of creativity in EA games opens the doer for creative and nimble competitors. In addition, a lot of the big EA games do not translate well to mobile platforms.
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Jeremy2020 (profile), 11 Jun 2012 @ 11:03am

Re:
I remember that happening. 2k Sports started putting out a better product so EA got an exclusive license with the NFL meaning 2k couldn't use actual player names which is a death knell for a sports game.
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That Anonymous Coward (profile), 11 Jun 2012 @ 11:04am

Re: Re: Well, you asked.
Except a cartel controlled the limit artificially, to keep the perceived value high.
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That Anonymous Coward (profile), 11 Jun 2012 @ 11:05am

Re: Re: Well, you asked.
Obligatory
http://www.motivationals.org/demotivational-posters/demotivational-poster-13989.jpg
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Just a thought, 11 Jun 2012 @ 11:07am

Just a thought
Naw, he's smart.
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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Rob, 11 Jun 2012 @ 11:07am

Re: Re: Well, you asked.
Diamonds are unstable at STP. They degrade once dug out of the ground. Flaws in the Hope diamond are getting bigger.
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Chuck Norris' Enemy (deceased) (profile), 11 Jun 2012 @ 11:10am

Re:
If only some well-established corporation could come up with a plan to directly compete with Valve...maybe even do things better and take back some customers. If only...
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Chuck Norris' Enemy (deceased) (profile), 11 Jun 2012 @ 11:10am

Re: Just a thought
Less support, too.
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izzitme101, 11 Jun 2012 @ 11:19am

Have to say, on seeing this article in particular, a few months back i was gameless, And a 'friend' (1) pointed me to a couple of free to play mmo's under ea's belt, and a few older games that i had been looking at anyway for a bit of fun.
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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AzureSky (profile), 11 Jun 2012 @ 11:20am

Re:
1. it dosnt take the kind of money EA or any of the major publishers dump into a game to make a good/amazing game, look at for example dungeon defenders, its not an AAA but its a blast.....one hell of alot of fun.....and is getting FAR better support then anything EA has put out in years.

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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Glen, 11 Jun 2012 @ 11:21am

Re:
I'd still by Mass Effect 3 but after hearing that the gameplay of the previous 2 games didn't amount to a hill of beans, I don't care to buy it or even pirate it.
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clinton (profile), 11 Jun 2012 @ 11:22am

"I just think it cheapens your intellectual property."

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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Anonymous Coward, 11 Jun 2012 @ 11:24am

Re:
Unfortunately this is true for most occupations in the world right now.

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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Rikuo (profile), 11 Jun 2012 @ 11:24am

I'm a potential customer directly affected by this jackass's thinking. I'm in the mood to play The Sims 3, but the fact is, the damn game and all its expansions are just too expensive. This morning, I checked the price to get all of them from Amazon.co.uk and once shipping was factored in, it came to a grand total of �315! I then went out and checked the high street, but I still came to �200+ by buying instore.
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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Greg G (profile), 11 Jun 2012 @ 11:24am

You know EA's full of crap...
when they call it "intellectual property" instead of "games" or just simply "software."
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Designerfx (profile), 11 Jun 2012 @ 11:25am

missed another gem in the original:
check this out from the original article as well:

"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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Bengie, 11 Jun 2012 @ 11:33am

Re: Re: Re: Well, you asked.
Carbon isotopes have a decay rate, but they decay into another form of carbon, so the diamond still remains.

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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Anonymous Coward, 11 Jun 2012 @ 11:35am

What a great idea, I'm going to open an apple farm, and start selling Apples for $100 each, any less would be cheapening the value of my apples! Who cares if I won't sell more then a couple if I'm lucky, my apples will still be worth $100 each!
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Jeremy2020 (profile), 11 Jun 2012 @ 11:44am

A big thing that is missed is that people like me will buy a lot of those 75% sales and never play the games. There's a number of games (recently Crusader Kings II and its DLC) that I kinda sorta though maybe...possibly, but not really might want to play someday.

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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Rabbit80, 11 Jun 2012 @ 11:44am

Re: Well, you asked.
Diamonds are forever unlike EAs games which will cease to be as soon as the DRM servers are turned off!
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Anonymous Coward, 11 Jun 2012 @ 11:46am

Re: Well, you asked.
Diamond are forever.

Games aren't.
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Hothmonster, 11 Jun 2012 @ 11:48am

http://www.rockpapershotgun.com/2012/06/06/hmm-ea-on-steamorigin-mega-sales/
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Jeremy2020 (profile), 11 Jun 2012 @ 11:48am

Re: missed another gem in the original:
Good luck with that.
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Rich, 11 Jun 2012 @ 11:48am

Re: Re: Re: Well, you asked.
Carbon-14 decays into carbon-12, which is a stable element. Diamond is made of the latter.
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weneedhelp (profile), 11 Jun 2012 @ 11:49am

I just think it cheapens your intellectual property.
Where to go with that? I thought you sold games. And all this time I have been buying intellectual property when I thought I was buying games. Silly me.

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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Anonymous Coward, 11 Jun 2012 @ 11:51am

Re: Re: Well, you asked.
Dammit! Beat me to it.
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DOlz, 11 Jun 2012 @ 11:54am

Re: Re: Re: Well, you asked.
From Wikipedia: "However, owing to a very large kinetic energy barrier, diamonds are metastable; they will not decay into graphite under normal conditions." Since by definition STP would be normal conditions diamonds don't degrade at STP.
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Yakko Warner (profile), 11 Jun 2012 @ 11:56am

DLC! DLC!
They intend to make more money by raping those fewer customers for more dollars.

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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TheBuzzSaw (profile), 11 Jun 2012 @ 11:56am

Ironic statement is ironic.
You know what else cheapens IP? Making it inaccessible. IP has far less value to me if I am unable to even obtain it. I have $60 games I stopped playing ages ago, and I have $10 games I still play all the time. Heck, I'm a huge League of Legends fan. Is its IP worth nothing because the game is free?

Honestly, EA, welcome to the world of economics.
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Rich, 11 Jun 2012 @ 11:58am

Re: missed another gem in the original:
I don't get your point. From a programming perspective, they are platforms.
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Haywood (profile), 11 Jun 2012 @ 12:01pm

Ea has jumped the shark anyhow
I used to look forward to their new releases, now it is so ho-hum. They used to get what people wanted, now you have to like what they want. I won't get into a lot of specifics, but Need for speed comes to mind. It used to be fun and action easily the best driving games ever. Now it is a strategy game with cars. The closest thing we have to what it used to be is the driving part of GTA.
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Liz (profile), 11 Jun 2012 @ 12:05pm

Re: Re: Re: Re: Well, you asked.
I was referencing general atomic decay, yes. "Forever" is a pretty long time after all. Not sure if diamond itself decays into graphite under the right circumstances. I only found one reference to that and the site didn't seem credible to me since it promoted creationism.

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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Beta (profile), 11 Jun 2012 @ 12:05pm

Re: Re: simple psychology
I was thinking of something I read years ago about an experiment with pigeons. Now that I look into it, I see that there's a new, simpler theory to explain the pigeons' behavior, but I'm not convinced (it looks a little like a distinction without a difference). Search for "Justification of Effort by Humans and Pigeons".
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Nick (profile), 11 Jun 2012 @ 12:17pm

Sure, it's possible to make a game that is self-sustaining, but it's not making big numbers. Seems the big companies like Activision can ONLY make games that have to make billions of dollars, and to make that, they need to sell millions of copies. To do that, they need to spend hundreds of millions on fancy graphics, hundreds of millions on advertising, hundreds of millions on franchising.

There's just too much pressure to make a BIG splash, not a "I want to make a living" splash.
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Mesonoxian Eve (profile), 11 Jun 2012 @ 12:18pm

What a shame his interview didn't get clipped like the games he sells.
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Anonymous Coward, 11 Jun 2012 @ 12:19pm

Part of the purpose of IP is to create income inequality. The rich wanna be so much richer than everyone else that they are willing to make everyone else poorer just to be relatively much richer.
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Silence8, 11 Jun 2012 @ 12:20pm

That's funny. When I hear people talking about EA online it's always with disdain. Whenever people talk about Valve/Gabe/Steam, it's 99% love for the company and all it does to cater to gamers. To me having people love your company is the value.

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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Anonymous Coward, 11 Jun 2012 @ 12:29pm

Sorry EA
I can't hear you from the sound of my FREE TeamFortress 2 game
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letherial (profile), 11 Jun 2012 @ 12:30pm

Re:
i disagree with your assessment simply because i am a gamer and dont react this way.

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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Anonymous Coward, 11 Jun 2012 @ 12:32pm

Hmm
What happened to Steam's revenue during non-sale times? I suspect a great many people began deferring their purchases of games until sale events. Why buy something for $50 if it's fairly likely to go on sale for 33% off in the next 90 days? I also suspect the success of the Steam sales has gone down with time. I significantly reduced my spending on Steam after realizing how many of those great bargains were never played.

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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Suspicion (profile), 11 Jun 2012 @ 12:34pm

There is a big difference between revenue and profit. Selling at a discount can provide an increase in revenue but that does NOT automatically equate to an increase in profit. I can sell a lot more of watermelons at $1 each than I can at $3 BUT if they cost me $2 each I can't make up the difference by selling in volume.
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Anonymous Coward, 11 Jun 2012 @ 12:36pm

In this world...
"In what world is it a smart business strategy to keep prices high if it's guaranteed to make you less money..."

In a world where Mickey Mouse is still covered by copyright.
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Anonymous Coward, 11 Jun 2012 @ 12:36pm

"In what world is it a smart business strategy to keep prices high if it's guaranteed to make you less money..."

In a world where Mickey Mouse is still covered by copyright.
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Anonymous Coward, 11 Jun 2012 @ 1:08pm

Origin sucks therefore what he says is invalid.
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Anonymous Coward, 11 Jun 2012 @ 1:09pm

Re:
Your watermelon analogy would work, but for one fatal flaw. It doesn't cost $2 per watermelon. You bought an infinite amount of watermelons, for a hefty down payment, and maybe $.05 per melon. Need to sell more $1 melons than $3 melons to reach the break even point, but that's the only real hurdle.
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Anonymous Coward, 11 Jun 2012 @ 1:17pm

Re:
I haven't paid full price for a single sims 3 expansion (nor the base game) and I have them all except the superstar one (forget the name). They are on sale everytime I turn around.

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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Anonymous Coward, 11 Jun 2012 @ 1:25pm

Re: Well, you asked.
But with diamonds they restrict their availability to make more money, not to make less.
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Anonymous Coward, 11 Jun 2012 @ 1:28pm

Re:
I haven't paid full price for a single sims 3 expansion (nor the base game) and I have them all except the superstar one (forget the name). They are on sale everytime I turn around.

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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John Fenderson (profile), 11 Jun 2012 @ 1:31pm

EA Failure
When I say that, I mean good value - we're trying to give you a fair price point

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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Anonymous Coward, 11 Jun 2012 @ 1:34pm

Re:
This a thousand times.

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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Rich, 11 Jun 2012 @ 1:34pm

Re: Re: Re: Re: Re: Well, you asked.
http://en.wikipedia.org/wiki/Stable_isotope
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AndyD273 (profile), 11 Jun 2012 @ 1:36pm

Re:
You're missing something here, and that's different demographics.

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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Rich, 11 Jun 2012 @ 1:38pm

Re: Re: Re: Re: Re: Well, you asked.
Isotope decay into more stable isotopes, they don't change into different forms of the same isotope.
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Anonymous Coward, 11 Jun 2012 @ 1:39pm

Re:
From what I read about The Sims 3 and its entourage, you spend more time trying to fix it than play it. The releases are buggy, the patches break more than they patch, the patches are forced through the launcher, etc.
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John Fenderson (profile), 11 Jun 2012 @ 1:43pm

Re:
Well, the issue comes in that selling the games at too low a price will devalue the games.

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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pointvector, 11 Jun 2012 @ 1:45pm

Re:
A very valid argument. However, I only play games after they have been reviewed and scored. I don't play anything that gets less than a 90%. So if a game gets above that, I buy it...period. You can spend a billion dollars advertising your game, but that means nothing if it's garbage. A good game sells itself. I don't really care what the price is, or if it's made by a popular studio. I will say, that if a game is good, but doesn't meet my standards, I will buy it when it goes on sale. This guy is just nuts.

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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Jeremy2020 (profile), 11 Jun 2012 @ 1:46pm

Re: Hmm
Valve is fairly open about the success/failure of Steam. They said they made way more in the short time that Team Fortress went f2p than they did when they charged for the game and they have more people playing.

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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methinks, 11 Jun 2012 @ 2:00pm

that EA is mad that valve is more then likely the last company thaqt actually cares about what the customer wants and wants to get sanctimonius with it.
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Prashanth (profile), 11 Jun 2012 @ 2:06pm

Convincing themselves
Apparently, EA has convinced itself that it makes a boutique product. While this argument can be reasonably used by, say, Rolls-Royce to show why keeping the product expensive would help the brand, for EA this is utter nonsense.
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Anonymous Coward, 11 Jun 2012 @ 2:20pm

Re: Re:
Reading and experiencing are two different things.

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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Anonymous Coward, 11 Jun 2012 @ 2:32pm

Re: Well, you asked.
So, we have scientists making "counterfeit" diamonds in labs now. I'm surprised some copyright lawyer hasn't tried to jump in on this yet.
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Anonymous Coward, 11 Jun 2012 @ 2:39pm

This is really about game publishers and the big three console manufacturers wanting to keep the prices of digital games high so as not to compete with retail sales, but cheap digital games on Steam and iOS are making it harder and harder for them to do so.
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Anonymous Coward, 11 Jun 2012 @ 3:16pm

Stay out of Ubuntu Software!
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Suspicion (profile), 11 Jun 2012 @ 3:32pm

Re: Re:
The flaw is not in the logic; it's taking the pricing example literally. Increased revenue (due to unit volume) is not an AUTOMATIC increase in profit. The cost savings of producing something in larger quantities may be (and usually is) less than the dollars given up due to discount pricing. Example A: Build 10 units for $1 each and sell each for $10 = profit of $90. Example B: Build 20 units for $0.75 and sell each for $3 = profit of $45. I am sure there are numerous scenarios that could also prove that the right mix of cost savings versus price discounting would result in higher profits. The point of my original comment is that we need to be careful in assuming that discounting will ALWAYS result in a better business model.
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Anonymous Coward, 11 Jun 2012 @ 4:07pm

Re: Re:
Having watched the crash course on economics from Yale, I think the problems are a lot deeper. Some of the fundamental mathematical concepts in economic risk management are getting horribly misrepresented to a point where the errors in their use, screws the view of the world.

"law of large numbers" vs idiosyncratic return anyone? Normal distributions?

No thanks! I would rather recommend pure hardcore advanced statistics.
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vegetaman (profile), 11 Jun 2012 @ 4:26pm

I'm confused.
Really, I am confused by this. I am a very casual gamer these days, so I pick stuff up from Steam or Amazon when they go on sale in the $5-$10 range (basically, an electronic step up from the bargain bin gaming I used to do). So apparently EA just doesn't want my business at all, because people like me who don't want to pay $60 for a game [and will go without, instead] would just cheapen their IP if they had to put it on sale to make us buy it -- because it'd be like going out of business. Or something. How the hell does this business model even make sense with digital goods?
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Michael Kohne, 11 Jun 2012 @ 4:57pm

The stock market?
Perhaps the fact that they are publicly traded is swaying his thinking? Remember that most stock market players these days are after higher stock values right now, not good, solid, long term business plans. This guy may think that keeping prices higher will look better to the market, irrespective of what it does for the company even medium-term.
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OldGeezer (profile), 11 Jun 2012 @ 5:34pm

This seems to be the same reasoning the music industry uses in charging such high prices for licensing that DVD's will never be released for so many great old TV shows. When "Married with Children" was released the cost was so high for the song "Love and Marriage" that they replaced it with a kind of "sounds like" instrumental on most seasons. We are talking about a 50 year old song! They would rather charge so much that it means no sale at all than to charge a price that is market driven. On the series that are released, how many more sales would they make if prices for the DVD's could be low enough that many more people would buy them? I remember when movies first were released to VCR the price for one film was usually $100 or more. Remember, this was 1980's dollars! They eventually learned that few would pay that.
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Greevar (profile), 11 Jun 2012 @ 5:58pm

Re: Re: Well, you asked.
They are if you properly break the DRM and archive them.
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Alana (profile), 11 Jun 2012 @ 6:12pm

Re:
This, times a thousand.
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Anonymous Coward, 11 Jun 2012 @ 6:16pm

Re: DeMartini is no fool. You are the fools.
Shame there's no "cynical" button - I'll have to make do with "insightful" instead...
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Anonymous Coward, 11 Jun 2012 @ 6:24pm

Re: So let me get this straight....
People who work in marketing seem to think that "having an idea" is something tremendously complex and difficult, which must deserve huge amounts of kudos and compensation.

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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Anonymous Coward, 11 Jun 2012 @ 6:30pm

Re: Re: Re:
I gave up on the base game TS3, it was a never-ending series of teeth-grinding routing problems, jaw-dropping "WHY?"s of increasing volume, and then crashes or lockups or inexplicable data loss - all right out of the box and on a comp that could easily handle it.

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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Anonymous Coward, 11 Jun 2012 @ 6:49pm

Re:
It's not just EA - if the response to Diablo 3 is anything to go by, there's a huge demand for let's say $10-$25 single-player games which don't need a permanent internet connection. If EA/Activision et al don't want to sell to these people, more room for indie developers in the market...
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Anonymous Coward, 11 Jun 2012 @ 7:03pm

VHS was priced to rent. They didn't really want regular people owning movies in the early days of the VCR. There was an extreme outcry when DVD came out and was "priced to own" and some wanted to go back to the "priced to rent" model.

Thankfully cooler heads prevailed and the "priced to rent" model died.
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Anonymous Coward, 11 Jun 2012 @ 7:10pm

Re: Re: Re: Re:
Yeah, I'm glad my mileage did vary, cause it was one of the most fun games I've ever played. Especially once I turned it into The Sims:Harvest Moon and started Fockers Farms with my alien farmer family.

I love sandbox games.
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LDoBe (profile), 11 Jun 2012 @ 8:34pm

Re: Re: Well, you asked.
"Most games aren't" FTFY

I will always love frogger
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LDoBe (profile), 11 Jun 2012 @ 8:48pm

Re: Typical Salesman-speak
Oh my god those commercials.

"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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G Thompson (profile), 11 Jun 2012 @ 9:17pm

Hypocrisy in action
Is this the same EA Origin who are currently discounting most games by 50% due to their 1st Anniversary?

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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DataShade (profile), 11 Jun 2012 @ 9:25pm

Re:
I can't find the blog entry I was looking for, but I think it was on Kill Ten Rats or maybe Player Versus Developer; someone did some data mining on achievements on Steam and found that a lot of the high-selling 'indie' games ended up with a low completion percentage - way lower than other games - and a pretty high rate, among bundled games, of players who never earned any of the achievements - something which is pretty much only possible if you've played the game less than five minutes or not at all.

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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Anonymous Coward, 11 Jun 2012 @ 10:41pm

Re:
Aside from the [citation needed] for your Valve-undercutting-all-the-little-guys claim (EA is one of the little guys? You serious?), your point is silly. If it ever gets to that point people will move on when the pricing for entertainment becomes too expensive. The same way people moved from music and movies to video games.
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Chargone (profile), 11 Jun 2012 @ 10:45pm

Re: Re: Re: Well, you asked.
the tendency for machines that actually run them to crap out and then be irreplaceable due to obsolescence kinda kills them after a while too, actually.
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Chargone (profile), 11 Jun 2012 @ 11:08pm

Re: Re: Re:
a competent team of statisticians and historians will teach you far more in the way of useful stuff about economics than any number of economists. (they're more likely to be right, too.)
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Chargone (profile), 11 Jun 2012 @ 11:13pm

Re:
that last line is basically the underlying problem with the content industry in general, i think.

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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Chargone (profile), 11 Jun 2012 @ 11:20pm

Re: Re:
also: second hand market: if i don't like you, but want your game legit, i'm going to buy it second hand. that said, if i don't KNOW you, i'm going to do the same thing.

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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Chargone (profile), 11 Jun 2012 @ 11:26pm

Re: Re:
you realize most of those scores come down more to how much advertising the publisher pays for than how good the game is, right?

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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Chargone (profile), 11 Jun 2012 @ 11:30pm

Re: Re: Typical Salesman-speak
to be fair, at that point you're paying for the hookers and getting the other stuff free, i think.
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Chargone (profile), 11 Jun 2012 @ 11:37pm

Re: Re:
ehh, the first game was great if you didn't go into it expecting your normal shooter. it was an RPG with shooter-y combat mechanics.

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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Chargone (profile), 11 Jun 2012 @ 11:37pm

Re: Re: Re:
ok, i'm exagerating about the shotgun... but the enemies did take longer to recover from the blast (if they survived) than the shotgun did to cool down.
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Chargone (profile), 11 Jun 2012 @ 11:39pm

Re: Re:
... i Think the guy's mocking the EA guy, maybe?

hard to tell.
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Chargone (profile), 11 Jun 2012 @ 11:50pm

Re: Re: Hmm
CKII takes a little getting used to and paradox often takes several patches to fix all the problems in their games (those things are damn complex, actually)... though it should be noted that they have a history of making sure those patches do keep coming until it's fixed. (the original CK is an exception. stuff happened when it was in development that wasn't their fault but left them holding the ball resulting in a rush job that Worked, but had issues they couldn't really fix. was still fun though.)

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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Chargone (profile), 11 Jun 2012 @ 11:53pm

Re: Re: Re:
price per unit of digital goods gets closer to zero the more you sell. (once you get past the initial hurdle of server load, which is a per customer thing and INCREDIBLY unlikely to make it more profitable to have less customers by itself.)

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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Chargone (profile), 11 Jun 2012 @ 11:54pm

Re:
ehh, Paradox usually does a decent job of that too... though it's not a corporation... privately owned... think it has a single owner, actually.

it's a publisher too, these days.
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Stig Rudeholm (profile), 12 Jun 2012 @ 2:46am

Regarding the value of a work
(I haven't read all the comments, so apologies if this has already been said.)

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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OldGeezer (profile), 12 Jun 2012 @ 3:57am

Re:
My point exactly. By finally reluctantly lowering the price they made probably hundreds of millions if not billions of dollars. They are acting against their own and the artist's interest. Songs that have not been hits for years are not making anyone much money. A few "best of" box sets is about it. To price them so high that they will earn nothing from DVD sales is ridiculous. Instead many will pirate marginal quality TV rips who would gladly pay for DVDs.
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Anonymous Coward, 12 Jun 2012 @ 5:15am

Re:
you seem to have rose colored glasses on, I have been on steam since day one, when it was finally forced upon us, no one liked it, we all hated it, no one wanted it, it broke our games and forced things upon people who had never actually bought the game and were playing a pirated version etc... to buy the game, or get banned, time makes you forget these things
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Anonymous Coward, 12 Jun 2012 @ 7:06am

Re: Re:
There is of course the problem that most mainstream economics is completely bunk. Just read Steve Keens Debunking economics for a clear layout on just how bad knowledge of economics is /amongst economists/.
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Greevar (profile), 12 Jun 2012 @ 7:38am

Re: Re: Re: Re: Well, you asked.
Technology marches on. Therefore, emulation. Gaming consoles are just a hardware-based DRM system.
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Anonymous Coward, 12 Jun 2012 @ 10:17am

It may have something to do with the cost of support for these games. If they sell fewer copies at a higher price, then they still make a lot of revenue but don't have to spend as much on support. If they sell tons and tons of copies at a very low price, their support costs go way up relative to the revenue they bring in.
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DCX2, 12 Jun 2012 @ 11:34am

Re: Re:
Torchlight!
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Brent (profile), 12 Jun 2012 @ 1:19pm

Valve takes advantage of the 'Sale Mentality' which is 'buy it now while its cheaper than original price' and works b/c people believe either the product will no longer be available after the sale or that the price will return to 'normal' after a certain point. While it seems like the market is indicating that the sale price is the correct price point for this product (or type of product if applied to an entire industry like video games), the sale price only succeeded b/c of the initial mentality.

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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Brent (profile), 18 Jun 2012 @ 8:11am

Just saw this article, not sure if Techdirt is aware: http://www.geek.com/articles/games/ea-turns-hypocrite-discounts-games-on-origin-up-to-87-5-percent-2 0120618/
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Valveman (profile), 2 Jul 2012 @ 12:17am

make game cheaper... I only buy game when they have great discount, otherwise I wouldn't buy it.
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lana (profile), 10 Sep 2012 @ 4:13pm

Re: Typical Salesman-speak
Look, then take your butt to Walmart. Just because you can't afford Nordstrom doesn't mean nobody else can. If you can't afford EA games then go somewhere else or don't play games. Or stick to 99 cent mobile games, but for god's sake, stop whinning and moaning. Your complaints for "fair price" would be better directed at high food prices, or rising cost of gas, because those are essentials-we have to have food and gas.

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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