Pricing strategy in video game industry Essay

Video Gaming patience has gone striking changes when more and more digital platforms emerge and improved technology in portable devices, importantly in loving secret plans(Facebook, Myspace) and nimble coarse-graineds. 27% of US online population flirt at least one back up on complaisant network, and Facebook gaming revenue hit $1. 32 billion in U. S market in 20111. Also, as more than more the great unwashed have smart phone especially apples iOS devices, gaming application becomes more and more touristy in mobile market(72% granular applications on iTune)2.There are conventional soothe jeopardize players such(prenominal)(prenominal) as EA, Activision, Nintendo and Ubisoft in this industry, also there are leading federation in the social post area such as Zynga in the market. Traditionally, storage locker bouncings are s elderly in retail stores with $39. 99 to $59. 99 retail price for the whole disc content. Hard-core games such as Call of Duty(Activision), Assas sins Creed(Ubisoft) and etc. usually price at $59. 99 season casual titles such as Nintendo wii games price somewhat 30$.Usually the determine approach for these console game companies is the industry standard means every player in this market follows the alike(p) rule as the same price. It can be considered as establish on exist structure because of the long cadence of development (18 to 36 months), money-consuming game development cost and all kinds of add-on cost (packaging, marketing and third-party licensing etc. )3 They also only have two months shelf time as the game lunch.Because of the naughty entry barrier in the console game industry and high put up perception among customers, several chief(prenominal) competitors dominate the market. The console game price does not differentiate in any case much among these players. However, as facebooks extreme success leads to peoples behavior change to be more social associated, a push-down storage of small companies scr ibble to enter into social gaming market and put up with blast growth speed such as Zynga. Zyngas pricing strategy is Free-to-Play and charging in-game micro-transaction items such as practical(prenominal) gift or buildings.The free-to-play conception is not new in this industry because plenty of Korean online game companies such as Nexon, NcSoft already using this business modelling succession traditional online games use subscription model ($15. 99 per month) such as piece of WarCraft(Blizzard) and EVE Online(CCP Games). As the internet bandwidth improvement and more internet users in US(250 cardinal)4, online games and social games represent strong growth trend comparing to traditional console games.And as users have more options in free games rather than premium games, more and more companies enter into this industry by offer products for free with micro-transaction options. Zyngas most popular title CityVille has over 70 million monthly active users while best selling unmarried console game Call of Duty(Activision) has 14 million copies sold in US market.Facing the competition of Facebook games with free to play concept and high growth potential of online game market, some of the traditional package-good game companies start to offer cross-platform Facebook game titles to increase their competency in the market such as EA, Sony and Ubisoft.Their main strategy is to develop Facebook companion games(Free to Play) to featured console game title. Those companions games not only offer free-to-play game content solely also allow users to unlock items in the main console game such as Dragon Age Legend(EA). They intend to leverage their label awareness in the gaming industry, acquire more users to play main games and increase monetization channel to increase revenue. EA responded very quickly in this digital trend by doing aggressive acquisitions for popular facebook or mobile game studios.However, a lot of other traditional console game companies rea ct very slow (Ubisoft, Sony) or refuse to change (Nintendo). close of console game companies conduct a conservative strategy and leave behind develop several social games(much shorter develop time) to make trial because overall the console retail sales revenue is much higher than that in social and mobile market. Others are not capable of following this fast digital step and suffered loss (THQ laid off 200 employees in 2011 because of decreasing sales in retail products).Most customers that play hard-core video console games generally are not satisfied with the free-to-play social companion games because of lower timber of overall game content and t start ensemble different game play with main games. A low quality companion product of Facebook platform will damage the political partys reputation in this industry for new users. However, since the users profile between loyal players (average 29 years old male) and social players (average 35 years old female) are so different with very few overlap, it makes these console game companies indifferent to the failure of Facebook product.Online game market, on the other hand, the free to play options have a big impact to customers options. For example, World of Warcraft ( Most popular Massive Multiplayer Role Playing game, 12million users with $15. 99 monthly subscription fee) lost 600,000 users since 2008 while RuneScape(Jagex) (free-to-play game with subscription options at $5) has 150 million registered users and over 10 million active users. Blizzard responded to the competition since 2011 on free to Play options until train 20 in the game.Another game Lord of the Rings switched from subscription model to free to play model and saw double revenue and four hundred% user growth immediately. I would suggest the pricing decision maker in video game industry to look at customer, company capability, product feature, customer and competitors issues. Company Analyze companys status in terms of digital trend in the industry and decoct on the products with higher profit margins Analyze companys cost structure and allocate reasonable resources on other platform product development based on financial forecast Product. Since console game products have fixed price in the retail stores, figure out other possible channels for monetization such as digital add-on contents, special side-product package etc. Decide possible virtual buying items based on the game mechanics and gamers motivation (self-expression, social status and social network) Distributor Corporate and form good family with retail distributors for more resources on shelf presence and brand promotional material Customer. Deliver social companion games with high-quality contents to enhance main game Deliver social games that directly target Facebook users Promote company brand and establish community to highly engage with users Competitor Learn from competitors on the digital content development Expand to other country that competitors did not focus.Resources 1. www. bizreport. com/2011/07/2011-social-gaming-revenues-to-exceed-1billion. html 2. http//mashable. com/2011/07/13/mobile-gaming-trends/ http//www. businessinsider. com/getting-into-the-mobile-gaming-game-2011-7.