Wednesday, August 17, 2005

That's not "fair" play

The gaming industry is heading in the same direction that the DVD industry is .. they're pricing themselves out of the legal market and well into illegal bootlegged markets.

Why don't people like to pay 21 dollars for a DVD? Because it cost the company right around 15 cents to get it made in China. Add to that, company overheads in marketing and supply chain management to get DVD inventories into stores and you're looking at around a dollar or two per DVD. Okay so that's a 1500 to 1900 percent profit per copy of DVD sold. Now that broadband has become popular, people are not just sharing illegal music files which are around 5MB per song. They're heading into sharing illegal movies which are around 4 GB for a complete DVD print. Therein lies the reason why I don't buy brand new audio CDs or buy brand new DVDs off of the retail shelf. I cannot want music or video so bad that I will pay retail for it. It has to either come used from ebay/amazon or other sites where sellers are selling it for far less than retail. Or another option is the 99 cent song downloads where I am paying a dollar for a song that I'm going to listen for at least a few years. I am not going to pay $16.99 for a CD of which I only like 5 songs or $21.99 for a DVD.

Anyway, my point was that the gaming industry is heading there too. The newest rage in gaming consoles, the XBOX 360 will cost $299.99 or $399.99 depending on whether you want bells and whistles. As an icing on the cake, game manufacturers have said that the average cost of a game you can play on this machine is going to be $59.99 (Look somewhere in the middle of that article). That's 10 dollars more than the cost of a game playable on the previous generation XBOX. So $59.99 per copy of a game.

So parents buying this for kids are going to shell out at least the following:

$299.99 for the gaming console
$119.98 for two "starter" games
$25.19 6% tax (ignore this if buying amazon etc)

That adds up to $445.16 for the kid's Christmas present this year. Think about that for a minute. If you make over a 100K per year (jointly or by yourself) that's not too much money to spend on your child's Christmas present. Now here's a quote from the US Senate Committee on Appropriations (The text below is from this link, just search for it):

"Today, the average full-time, year-round worker earns $44,579, 15.7 percent of full-time, year-round workers earn over $65,000 and 4.2 percent earn over $100,000."

Do you see how the price of the gaming console with two starter games comes hideously close to 1 percent of the average gross income? A person with $44,579 income probably gets a net of around $35K.

Now suddenly this gaming console looks damningly expensive. It looked good when we started looking at someone who nets $100K per year. Not so hot looking for someone who nets only $35K and needs to pay all the rent, utilities, kids education, entertainment and recreation bills that they already have to deal with.

But .... and here's where all this math goes to hell....people WILL pay for it. They will go there and for the sake of their children whom they dearly love (or just want them out of their way), most people will buy this for the prices advertised in retail. It boggles my mind that people do not consider what a rip-off this is. It also boggles my mind that people do not think that children today will survive peer pressure and find alternative means of entertainment than this 450 dollar present that, instead of paying for itself, will continue to cost more as your nagging child wants more and newer 60 dollar games.


Blogger Will said...

But wait--it gets worse. How will those people possibly afford such an expense. Well, they'll put it on credit of course. Probably at between 10 and 15 percent interest and make only the monthly minimum in payments stretching them out for years.

And all for a console that will be going for $199.99 by the next Christmas and the games will be $19.99 in the bargain bin at Wal-Mart.

Dude. It totally pays to wait.

6:54 PM  

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