Casual Game Price Elasticity

There was a question on the IGDA casual game mailing list today about casual game pricing - essentially, is $20 the correct price point for a casual game?  As a reference point, XBox 360 games are $60, most current gen console, handheld and PC titles are $40-$50, Game Boy Advance games are $30, and mobile games are $5-$8.  RealArcade is generally given credit for commercially launching this Try Before You Buy $20 category, and pricing has remained pretty consistent at $20 (just checked the top games at top sites).  On the other hand, iWin has made the point that their Family Feud game has sold well at $29.95 (currently top download at iWin) while Microsoft has just introduced a set of casual games on XBox 360 Arcade with prices between $5 and $10 - so who's right?

Similar to the ongoing debate about music download pricing, this is a price elasticity debate - if we increase prices, will the resulting revenue be high enough to offset what we assume would be fewer purchases?  If we lower prices, will the resulting increase in purchases make up for the lower revenue per purchase?  And does it even make sense to focus on this model rather than on subscriptions (Real and Shockwave) or on advertising supported games?  And should pricing generally relate to the cost of the game production, or is it solely related to the perceived value?

I'm personally surprised that there has been so little experimentation in this arena - the pricing strategy for casual games has been effectively frozen for the past few years while the overall market has significantly expanded, and while most production budgets have doubled or tripled.  Distributors have run limited tests of lowered pricing, but then have moved back up to $20, primarily because the developers prefer it at that level and because none of the distributors seem to have the data or market clout to justify changing the prices.  I would have expected a more multi-tiered pricing strategy by this point, as you see in more mature markets such as retail (CDs, DVD's, etc.), with new release front-line titles giving way to mid-price titles 6 months later, followed by a move to budget line after that period.  But this is one of those sectors where popular games such as Diner Dash or Zuma continue to sell for months or even years, so there is less incentive to lower the prices to stimulate demand.

So the answer is that the larger players seem to keep pricing at $20, so you would assume it's the correct price in a rational market - merely lowering a few games to $10 or $15 may not be enough to create a sub-category that attracts enough attention, so no one does it, and few players feel strong enough to price higher than $20, unless they have a well known brand - the familiarity of a $20 price and a 10MB size seems to hold the market in place.  Where you see discounting is in the subscription plans which attract heavier users of multiple games, or you see the really large sites use ad-supported web games that are free to users.  Given all of these factors, I'd say we'll see $20 pricing remain the norm until we see the effects of XBox 360 Live Arcade pricing, or until we see a strong entrant hit the market with much lower prices - but if prices are going to go anywhere across the board, I believe we'll see them go down due to a slow-down in the marketplace growth and an potential over-supply of similar content.

Comments

[Cheap Louis Vuitton Bags]

Maybe I've never made enough money to worry about status, or I took my cue from parents who never defined themselves by what they bought. But it seems to me that the pursuit of identity and status through material goods can be costly -- and not only to our bank accounts. When we compete this way, we alienate ourselves from others and base our self-worth on something extrinsic.

[Air Yeezy Sale]

Gods determine what you're going to be. -- Julius Erving

[BlemAbell]

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