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PS Vita Digital Pricing: A Necessary Disappointment

by on February 25, 2012
 

PS Vita Digital Pricing:  A Necessary Disappointment PlayStation Vita is here and – almost as significant to the far future of the industry – Sony has updated the SEN store to provide day and date releases of Vita games online and in stores. Gamers have been given an extra option, an alternative to trudging down to the shops and picking the game up over the counter at Game or HMV. Predictably they have reacted with disappointment. Now, this is far from the vocal and shouted disappointment that sometimes reigns online, but it is a grumbling, frustrated, petulant disappointment nonetheless. It is being expressed as the deep sigh of people who expected a new technology to deliver a breakthrough moment, only for reality not to live up to the hype.

Vita download prices are being set within ten percent of the suggested box copy retail price in the UK, and with competition so hot, in many cases the download prices will initially be higher than the retail counterparts. With digital downloads often looked at as a pricing and convenience panacea, and smartphone App stores recalibrating what gamers consider good value, the prevailing opinion was destined to be negative.

However, it is because digital downloads are held in such esteem, that this disappointment was absolutely necessary.

Looking specifically at the Vita’s launch, Sony’s handheld is the first console to offer day and date releases for every online and boxed retail game. That the platform holder felt the need for boxed games at all should be our first clue that the world is simply not ready to support a digital download handheld console. We even have proof of this: the PSPGo. Sony’s utter failure with that digital-only PSP iteration is bound to be informing their decision on key aspects of PS Vita and its available software delivery methods. Equally, Sony will be learning lessons from the obvious counter-example to PSP Go; iPod, iOS and the iTunes App Store.

However we should be wary to not directly compare the two. For starters, the iTunes store was retrofitted into a piece of software (iTunes) that was on a vast number of computers throughout the world. Secondly, the App Store (and Apps themselves) were added to the 2.0 iOS release. Apple had built further onto iTunes’ huge user base, getting millions of iPhones and iPod touches into the market place before the release of their App store. Sony, from a Vita user base perspective, are starting from scratch. The type of application being sold on each is profoundly different. App store games are small and often cost less than a pound. It was easy to set up an iTunes account and buy Angry Birds, for no other reason than it takes as much consideration to buy a seventy pence App as it does to buy a Twix. Many people downloaded their first app as an experiment, a toe into the water, and it spiraled from there. Sony is pushing bigger games, bigger experiences and at a higher price point. Experimentation, guessing, buying games on a whim, will be far less likely.

Sony needs to get hardware into the marketplace and build a user base in as many ways as possible to compete in this new handheld environment. For that reason, the Japanese company need traditional retail as much, if not more, than retail needs them. Just as Sony learnt hard lessons with the PSPGo, so retail (specifically high street retail) is learning hard lessons in the face of a global downturn and the inevitable digital future. With Vita, Sony is taking one of their first steps into that world into that purely digital world. In the meanwhile, they have to play ball with the high street retailers.

In broad terms, when a high street specialist game retailer takes in stock of games to sell they have agreed one of two methods with publishers; to either buy copies of the game up front or to sell on consignment. Buying up front puts the onus on the retailer to not only market each game effectively so that it sells through at the highest possible price (ensuring that they retain their margin which is, of course, their profit), but to also accurately estimate the amount that they are going to be able to sell, avoiding situations where they have cash tied up in stock. The alternative (consignment) puts the responsibility of making the game a success onto the publisher and saves retailers being stuck with stock they can’t move (or that is too expensive, in marketing terms, to warrant selling at full price).

Whilst retailers won’t reveal the contracts they have with game publishers, neither situation is conducive to digital downloads being priced significantly cheaper than their retail equivalents. If game retailers sold on consignment then publishers wouldn’t undercut the high street retailer, because they carry the financial risk of games stocked in high street stores. If their digital marketplace were to cannibalise these sales, they would be stealing from the right hand to give something to the left. On the other hand, there is no way that the retailer would pay for boxed copies up front if they knew that the publisher was about to undercut them by a significant percentage and make them unable to compete. If the retailer did still buy game stock, they would market them as enthusiastically as a bachelor with herpes would market his genitals.

So Sony and the high street retailers (and the websites that stock boxed copies of their games) make a deal: stock our stuff, buy it from us at this price, sell it for around this, and we will only undercut you by a few percent and sow the seeds for future consoles. You make money, we make money. Retail price has nothing to do with the cost of a box, the cost of making the physical media that holds the game. This is a deal, a mutually agreeable situation. Both companies can make money, both can service their customers. At the moment, for Sony, it is particularly agreeable; the margin on digital downloads will be substantial at the prices they are charging.

However, consider the alternative. Sony needs Game, HMV, Dixons, Amazon…you name it, to sell their console. This is not a “nice to have” for Sony, it is a MUST HAVE. Without specialist (and even generalist) retailers selling Vita, the handheld will stall on the grid. Again, Sony isn’t shipping iPods, a product that sold millions before App stores were even a thing, they have to offer the retailer a little bit more than that. Sony needs Vita in shops and a huge part of that is being seen and supported in specialist retailers. Sony knows this. Retailers know this. They need each other. So they negotiate and from that negotiation comes the pricing structure you see today.

The future will look very different, of course. As pointless as it is, we can do some prognosticating.

Maybe one day digital downloads will take over, prices will drop, games will appear on our handhelds and sync to our home consoles and we’ll live happily ever after.

Or maybe owning games dies, and we stream and borrow games in much the same way that we borrow music.

Or maybe high street retail dies, the pre-owned market dies with it (no boxes means no re-selling, of course), monopoly download stores have total control over price on a console, prices remain high because there is no incentive to cut them and gamers are in much the same situation today only we have no choice over how we get games for their favourite platform.

In all likelihood, none of these eventualities come to pass. It will probably be a mix of all three as the world continues to adjust to the digital age.

However, in the meanwhile, don’t be disappointed by digital pricing. Accept that current pricing strategies and hardware configurations are an admission by the games industry that the digital market is not ready to sustain a download-only console producing AAA console experiences. If you want Vita to work, if you want to keep getting premium gaming experiences on handheld consoles, if you want to see a major platform holder (who will continue to shape the future of gaming) see return on their investment, then for now we are going to accept that digital marketplaces are not the online Edens that we want them to be, but they are what we need them to be right now.

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