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Steve D [userpic]

It's 2007 and gamers still don't understand basic economics

December 31st, 2006 (11:27 am)

So here we go again.

Point the first: the price of an object is determined primarily by what the customer will pay. Not by the seller. The seller tries to set a price which allows him to make a profit but he is limited totally by what his market can and will pay.

This is NOT how the gaming market works: Company A creates product B which costs X dollars to produce. They estimate that if they sell 100,000 units at $Y each, they will have some money to take home at the end of the day. IE Y*10,000 - X = profit.

This is how it actually works. Company A produces product B at a cost of X. Customers will pay $Z a unit for it. If the company is lucky, they'll sell enough units so that Z*units sold > X. If it is, the company survives. If it isn't, the company goes broke.

Customers, being human beings, tend to want Z to remain steady, while the quality of game B goes up and up. If Company A makes product C, which is nowhere near as shiny as B, nobody will buy it because it doesn't look as good. Companies therefore have to convince customers to pay for the increasing cost of producing better and better Bs.

In roleplaying games, the price Z has been pre-determined at least part by history: games used to be very cheap indeed. It has also been set by the fact that the market in general does not value the written word. And finally, the target market is relatively poor and unwilling to tolerate large prices or large price jumps.

However, since around 1990, games have reinvented themselves from monochromatic saddle-stitched low-art textbooks into high-quality full-colour art books. This hugely increased the cost of production. Meanwhile, the set price of Z has only just kept pace with inflation. The result is that, in general, gamers are paying for books with WFRP v2 standards of presentation using a WFRP v1 price.

So what happens is this: Z remains relatively constant. The game sells about the same amount as always. But the cost X increases greatly. The company makes a loss.

Now, a very large company with a lot of infrastructure, advertising and product loyalty can hedge against this loss. Smaller, newer companies cannot. And there are about four companies large enough to do this hedging - Wizards, White Wolf, Mongoose, maybe Palladium depending on Kevin's mental state at the time. Smaller companies can, thankflly, rely on some loyalty and the collectible mindset to get them through. They can also take steps to reduce X, the cost of producing the game.

They can't reduce the cost of production, because people only buy shiny things. They can't really reduce print and distribution costs because those things have a stranglehold. So they skimp on everything else. They hire freelancers for prices that most other authors would laugh at. Thankfully, the industry is full of schmucks who like RPGs so much they happily work for peanuts. They do in-house editing. They don't draw a salary themselves sometimes. They divert whatever cash they can into pleasing the fans so that they can inch prices higher without losing sales. They sleep on the floor at GenCon, and drive their themselves with the books in their car rather than pay shipping.

Of course, game companies aren't roaming the streets begging for scraps. They're smart enough to charge enough to stay alive, although typically without enough cash to grow their business, ensure against unforseen disasters, or to expand the hobby in general.

HOWEVER, if a game ever dares to raise its price by $5 or $10, the customers accuse the company of being greedy, of trying to line their pockets so they can afford that diamond-studded swimming pool and the solid gold hum-vee. Yes, the company would like to do better. But better means "paying their employees a decent wage". It means "being a stronger force for the industry and hobby".

Accusing an RPG company of being greedy is like Scrooge accusing Bob Cratchit of greed for wanting an extra piece of coal on the fire. Here I am, working for chump change so that games can cost half as much as they should, and then you stand there and say "I'm sorry, you can't have five more cents a week, I need my cash to buy an X-Box". It's arrogant and it's extremely insulting. It devalues my work and my creativity and it devalues the industry and the product it creates. Plus it's entirely ignorant of the state of the industry and basic economic facts.

If you don't want to pay a price, don't pay it. But don't insult me by saying I'm trying to cheat you because I want to earn a living. Not, that is, unless you want me to punch you in the goolies.

Hereendeththelesson.

Comments

Posted by: Adrian Forest (dalziel_86)
Posted at: December 31st, 2006 02:24 am (UTC)

Unfortunately, the real questions is whom it is that doesn't understand basic economics. Is it the gamers who demand more for less, or game companies who stay in a business where the costs are just about always greater than the market price set by demand?

Posted by: Archangel (archangelonline)
Posted at: December 31st, 2006 02:27 am (UTC)

Hear, hear.

If it hasn't been already, that needs posting on one or two threads on RPG.net and other RPG forums.

There is a very real obnoxiousness about gamers who complain the people who take their disposable income at slightly higher prices than they want to pay. What seems to make it worse is that almost none of the whingers have the courage of their convictions (or even any sense of conviction, at times) and just buy the product anyway, whatever it happens to cost.

Posted by: AnarchAngel (anarchangel23)
Posted at: December 31st, 2006 03:09 am (UTC)

It has been posted, many times.

Posted by: Steve D (d_fuses)
Posted at: December 31st, 2006 03:22 am (UTC)

And will again, and again, and again. And gamers will never, ever listen.

Posted by: Ilan (kinra)
Posted at: December 31st, 2006 05:24 am (UTC)

No, we won't. But there are times when things really are cash-grabs (yearly price hikes from Games Workshop on plastic boxes with identical components win no friends).

That GW ill-will might carry over to BI products, maybe?

Posted by: Archangel (archangelonline)
Posted at: December 31st, 2006 10:52 am (UTC)

It does win friends, actually, because, despite the constant whinging about it, the whingers still buy, and there's more each year.

Games Workshop have every right to charge what they want - they're a business with an interest in making profits. Much of this money can then be put back into producing new models etc. - and I think the quality has been rising, year-on-year.

The joy of all this is that RPGs and wargames and so on are a luxury item.

No one needs a box of Space Marines or a copy of Warhammer Fantasy Roleplay, so the money that gets spent on them is whatever spare cash us poor suckers have lying around.

It's always a choice, and we choose to support Games Workshop (or whoever) in their marketing choices by paying more for their products. We say to Games Workshop, by placing our cash on the counter, that we agree with their strategy of price hikes.

We should be voting with our feet, but we don't. We just grumble and keep on going as we were before. (Kind of like the state of modern democracy, now I think about it.)

there's a reason I italicised the word 'disposable'

Posted by: Archangel (archangelonline)
Posted at: December 31st, 2006 10:57 am (UTC)

Ignore that last half-sentence, I didn't realise it was still there when I posted.

Posted by: Ilan (kinra)
Posted at: December 31st, 2006 03:26 pm (UTC)

Got it, but I do take exception to your use of the term "we". Games Workshop's absolute top-selling items are the reasonably-priced ones: Skull Pass, Macragge, and the LotR boxed sets which, for the price of a computer game, give you a complete playable board game for two players.

A lot of people buy this and then stop.

And these are at reasonable prices, the sorts of price point that used to be occupied by Space Hulk or Necromunda, and with commensurate contents.

I suspect that these products are loss-leaders, to some degree, but from what I've heard from redshirts in-store, that's what people are buying, and happily, suggesting (to me) that they're voting, with their dollars, for the reasonably-priced items.

Posted by: chaosandtwocats (chaosandtwocats)
Posted at: December 31st, 2006 07:20 am (UTC)

I really admire a company who feels so strongly about their product they'll risk their own necks to supply it.

Gamers as a rule are an ungrateful bunch of bastards whose belief of their own "intellectual" edge makes them feel that everything they want want should be handed out to them on a gold platter; that role-playing companies should be grateful that they are patronised by them. Before anyone wants to protest this I've heard the bastards say so. These denizens whose social skills ceased to develope after school just 'cause some other loser said "Hey man, I totally understand where you are coming from. It's so hard to be smart and alone".

I am SO sick of gamer ego. Being opinionated is NOT the same as being smart.

I say to those guilty, those who complain, those who say "Aw butt...", those who can't appreciate a good point whether they disagree with it or not:
"Fuck off, get out of my hobby. Oh and stop de-valuing my man's work. He works his ass of for you bastards."

Posted by: one_horse_town (one_horse_town)
Posted at: December 31st, 2006 12:05 pm (UTC)

Irrespective of the reasons why, some people are genuinely priced out of buying gaming material by hikes in prices, especially if the publishing schedule is regular. Not everybody earns a decent wage in the workplace, even people who do not work as freelancers on RPGs!

I'm in the odd position of being in both camps at once. As Steve pointed out, freelancing rates are hardly good, add a poor working wage to that and i can't afford gaming material for the line that i actually work on. I have to pick and choose what i pick up (much like a lot of the people that Steve is railing against) and increases in price do not help the situation.

I agree with the basis of Steve's point here. There's a point beyond which sales start generating cash for the RPG company and rising prices lowers the point at which this starts. However, there's little point in getting antsy with people who find these rises difficult to swallow. People will chatter about reasons why and some will equate it with corporate greed. I think in the case of BI stuff, this is people thinking in terms of the reputation of the parent company (whether derserved or not), not the actual publisher.

The proof will be in the pudding. If revenue increases after the new pricing comes in, then we'll know that sales haven't been effected. If revenue stays the same or drops, then we'll know that the price increases have really put people off.

Posted by: Steve D (d_fuses)
Posted at: January 1st, 2007 07:27 am (UTC)

I have absolutely no problem with people going "dammit, game X costs too much for my wallet, guess I'll have to give it a miss, which is a damn shame for me and them".

What pisses me off is when that turns into some kind of conspiracy by the evil industry fatcats to bleed the working man dry. That's when you start getting a) insane and b) insulting.

Posted by: littlestkobold (littlestkobold)
Posted at: December 31st, 2006 01:19 pm (UTC)

Here here!

Posted by: ((Anonymous))
Posted at: January 2nd, 2007 03:43 pm (UTC)
Yoshi

It's me who wrote the word "greedy" on BI forums... ;)

I don't think it's reasonable to make such huge affair from one word... which is quite *accurate*. I don't suspect BI folks have anything to say regarding the prices. It's GW decision and they are greedy people, since it's business. The shareholders want to earn. They operate in a niche market and their miniatures are expensive even now... so do RPG books... they, even now, are little more expensive than those of WotC etc. (compare price and page count). And that's ok. We love WFRP, we buy the books, though they are not cheap. But when you increase the price that's already high, something is wrong. You increase it when you know that hard-fans will buy the book. That's not kind.

If WFRP is to compete with other RPGs it must be affordable.

I'm a kind of a collector. If they maintain the current price/page count ("Night's Dark Masters being an exception :( (, I will buy and buy and buy...

I really admire you, SteveD, as I stated many times on the BI forums. Firstly, because you have skills and commitment. Secondly, because you work for peanuts. Thirdly, because you speak up and answers our questions.

I hope that will help You chill out. ;)

Posted by: Steve D (d_fuses)
Posted at: January 2nd, 2007 05:05 pm (UTC)
Re: Yoshi

Hey Yoshi. I appreciate your candour and your kindness - this wasn't a shot at you, and I thank you for not taking it personally!

As to your points, I work for BI and I don't know how they set their prices, so be careful of what you presume. And you cannot use WotC as some kind of industry standard - larger companies can afford keeping their prices down. Of course, the smaller companies have to do the same to stay competitive, but I'm willing to pay a few extra bucks to get fresh fruit from my local greengrocer rather than go to my supermarket, because I'm motivated by more than price. Nobody else has to be, of course.

And finally, and most importantly, the price is not high because it is above the WotC price. It might be relatively high, but my whole point is that the price is not even close to what it could be, if it wasn't for historical and market forces. To put it another way, if a book costs $5 more than it used to, but it's always been half price, is it really a problem?

That's how I see it. Regardless, I hope you like Night's Dark Masters, and thanks for the praise!

Posted by: ((Anonymous))
Posted at: January 2nd, 2007 05:55 pm (UTC)
Re: Yoshi

I'm not only comparing to WotC books, but generally. EXALTED, 160pg, 25$. KotG, Renegade Crowns, 128pg 30$... but a hardback, so OK. (and better content for me, since it's... grim world of perilous adventures). But...

Night's Dark Masters 144 pg, softback, 35$. 10$ up, 16 pages up... and no hardback.
There is a difference. :( And on amazon.com Tome of Salvation is claimed to cost 50$ (I hope it's a mistake).

That is what bothers me. (and typos ;) )

I can afford that prices and even higher, money is not a problem for me, *but I do know many people who would simply abandon the setting and move on to sth different and cheaper*. And I would like WFRP to increase the numebrs of players - that should be the main goal for BI (if they are to decide, of course, but I doubt that). Maybe GW wants WFRP to be a niche product, not a system to challange its rivals like Exalted, D&D (impossible to beat, because there are crowds of children who think "RPG = kill a monster, roll some dice").

P.S. GW had a very bad financial year 2006, so maybe that's why they want to raise the prices.


P.S.2 That's no doubt I would like Your next book, because I like vampires. :)

Posted by: Steve D (d_fuses)
Posted at: January 3rd, 2007 04:11 am (UTC)
Re: Yoshi

Hey we all want more people gaming. But I'd settle for three quarters of the same amount, all paying double...

Posted by: ((Anonymous))
Posted at: January 3rd, 2007 11:43 pm (UTC)
Re: Yoshi

Steve,

it's hardly surprising when gamers-as-consumers whinge. They're a more prevalent minority than most but have always been about. It's why I only ever wanted to write those few DP9 products; I was doing it for lve/to put back to the game I played. It had naught to do with 'forging a career'.

Gamers can be a really stingy mob. It's why I pursued and continue to pursue creative dollars elsewhere.

- Cash mountains are in organisations SA.

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