Why Games Will Only Get Cheaper

One of the first MMOs, a game called Island of Kesmai, charged users $12 to play online. It featured a sprawling virtual fantasy world that let players explore, perform quests, and collect items, not unlike the D&D game it was based on. It was probably a lot of fun.

The game was text-based. It looked like this. It ran on CompuServe in the 1980s, which charged $12 per hour for their highest-tiered service, not per month. At that rate, a World of Warcraft player today would be paying over $700 a month, and that’s without taking inflation into account.

GTA IV cost $100 million dollars, 4 years, and the sanity of thousands of employees to create. It knocked you back 60 smackeroos (do people still say that?). For comparison, Street Fighter II retailed for $75 (roughly $120 today), was made by a team of 40 people, and almost certainly cost many times less than the entire budget of 1994 Best Picture Winner Street Fighter to create. That’s a pretty huge dissonance there.

Developers and publishers are looking for more of the pie

Take a look at this old ad. Although I would totally pay $75 for Sonic 2 even today, our generation is spoiled. We are getting way better games for way less money. Despite what some say, our favorite hobby is cheaper now than it’s ever been in history.

So now that we have that out of the way, what’s in it for the future? Unfortunately for us consumers, game companies have only recently realized that they are undercharging us. This is why we have seen an unprecedented amount of in-fighting between developers that make the games, publishers that ship the games, and retailers that stock them. Developers and publishers are looking for more of the pie, which has led to a mainstream market rife with Season Passes, online unlock codes, and paid DLC. This is all in an effort to take some of the presumed untapped profits from the used game market. But this is just the beginning. We barely escaped having an always-connected console that would block used games, with no promises about how that would benefit us gamers. And if you think, my naïve little flower, that the consumer won the war and publishers aren’t gonna try something like that ever again, please, please think again. Some type of console restrictions are inevitable.

Let’s be clear about one thing – no one really wants this. It’ll be a sad day when I can’t go to the store, pick out a shiny new game, and go home and huff the inside of the plastic box until I pass out. If you think about it, though, it’s everyone’s fault that this is happening. Consumers demand more substance from the newest games, but aren’t willing to pay more for the base product. Developers (and publishers) have to keep up by letting development (and marketing) budgets get so out of control that they have no choice but to offer DLC to make money. So you end up with a situation where games are sold in pieces in order to make it seem like the prices aren’t going up. GTA IV cost $90 for everything in-game, sold over three parts. But if they had charged that from the beginning there would be riots on the streets of Liberty City.

Let’s do a fun thought experiment and assume the worst possible scenario. Let’s say that come next console cycle (PS5 and Xbox Infinity) you won’t be able to buy any used games. (Hell, just because the new consoles don’t block used games, nothing is stopping publishers from doing something about it, right?) What’s the good news? Well, it’s that games are going to get even cheaper.

There’s an important legal term called the “first-sale doctrine.” This piece of trademark law guarantees that a consumer who buys a physical product has the legal right to resell that product, and that the act of doing so doesn’t violate copyright. So you are allowed to sell your vintage Power Rangers VHS collection on eBay if you want, and no one but Rita Repulsa can stop you. The negative side to this doctrine is that it hurts the consumers who only buy things new and keep them forever. The prices for them are artificially high because there is an inherent resale value included in the price. Imagine if the first-sale doctrine didn’t exist, like if reselling any of your possessions was illegal. Wouldn’t things be cheaper? We pay up front for the right to resell our stuff, in a way. It’s like a refundable tax. When you count something as an asset, it’s because you know that at any time you can exchange that thing for money.

What if we go all digital?

For example, it’s assumed that when you buy a brand new car, you will be able to recoup some of that money later when you sell it used, unless you’re the type to buy a new car and then drive it until it melts into a pile of rusty goo. Because of that understanding, the dealership is able to charge you more without ripping you off. Well, they probably still rip you off, but you get what I mean. A used game is an asset the same as a used car.

So think about it this way: If you didn’t care about keeping a collection and had the spare time, you could easily play brand new games for a fraction of the cost. Buy it new for $60, sell it used for $30 in a couple weeks. Even Gamestop will pay you that much, or more, soon after release, and they once offered me a quarter for the one sports game I ever bought. As the “new” price of the game goes down, so does the proportional “used” price, because the used amount is always included in the price. There’s an assumed value that’s getting tacked on.

So we have no more used games, and the prices go down. What if we go all digital? Well, we can look at the PC market to see that this has already resulted in huge price cuts. Without boxes and shipping, publishers have the freedom to cut out a lot of the middleman costs and provide the savings to you. Obviously, Steam represents the epitome of the “I’ll just buy this because it’s so cheap, even though I’ll never play it” style of marketing. But we are starting to see the fruition of new download services like Gamefly and Origin, whose competition will further reduce prices. Since you can’t really resell digital games, the resale value is also eliminated from the price (extension of the first-sale doctrine to digital goods is still a significantly debated area). Just look at the music market to see this transition in action. iTunes has made music so much cheaper by going all-digital. No longer are you forced to buy entire N’SYNC albums just for Dirty Pop. You have much more freedom to spend the money on what you want, in case tracks 2-12 are all trash.

Now, this style of discounting has yet to come to fruition on the console side (Seriously Microsoft? Red Dead came out like three years ago and you’re selling it On Demand for double the boxed price at Amazon), but I’m pretty confident that it’s due to the fact that physical games are still much more common on those platforms.

So our hypothetical future consoles are all-digital, with no way of reselling your games at an online yard sale. What’s next? The obvious conclusion here is our entertainment turning into streaming subscriptions. For an example of where we might be going, we can again look at other mediums, because they are a lot older than us and have more experience. For music, you can choose from Spotify, Rdio, Pandora or countless others, and in most cases you can use the services for free with ads. For TV and movies, nothing beats the value of Hulu Plus, but theres also Netflix, Amazon Video, and HBO Go (that is, if they ever separate it from your cable subscription). All of these services compete with each other to offer you the best bang for your buck, sometimes offering slightly different ways of listening, or even original programming. You get more for your money, and more choice, and more content. For the price of three seasons of Always Sunny on DVD, you can get months of unlimited viewing of hundreds of DVDs. It’s win, win, win.

The development bubble is going to burst unless alternative sources of revenue are scouted

Am I saying I can’t wait for the day when I don’t have a game collection I can show off to my friends? Am I super excited to have less control over the use of content that I “own”? No. The fact is: This has been happening in other industries and no one has really complained. We already don’t “own” most of our content. iTunes is the biggest music store in the world, and for years every one of the songs sold there had built-in DRM. And even when they didn’t, you couldn’t sell your mp3, because in reality you are just licensing the ability to listen to the song (a purchase on iTunes is an indefinite rental, if you think about it). Spotify was greeted with open arms when it finally launched in the U.S. And no one worries about paying $9 a month for Netflix because they see value in it, no matter how many Sharktopus sequels they make.

Some big changes are coming to the gaming industry. Maybe we’ll have subscription services, in which you get unlimited gaming for a reasonable fee. Maybe you’ll be forced to buy all your content digitally, a la carte. Most likely, there will be some kind of hybrid combination of all these things, like it is with music and movies. But one thing’s clear: The development bubble is going to burst unless alternative sources of revenue are scouted. These sweeping, ugly changes are coming. It’s inevitable. It’ll suck at first, but so did Steam. Let’s find the silver lining here. Sure we might not be swapping games with friends the same way in 10 years, but you should be glad GTA V isn’t gonna cost you a Benjamin-and-a-half.

Check out more from Chris at Cracked.com and at his blog, Laffington.com.