In Amsterdam last week, Nintendo revealed its international release schedule for its next generation 3D handheld gaming platform, the Nintendo 3DS, and announced a recommended retail price for America, USD $249.
Initial delight amongst local consumers at the low recommended price was quickly dashed. USD $249 is approximately NZD $325 – a veritable steal. However, Nintendo’s current generation handheld, the DSi, is still being sold here for NZD $329 and it seems unlikely that the new device will come in at the same price point as the old. Nintendo Australia followed the international announcement with a press release saying that regional pricing would be revealed at an invitational event in Sydney on the 8th of February.
In spite of our geographical proximity to both Japan and the US, New Zealand and Australia will be considered a part of the European region for both 3DS hardware and software. To that end, a solid estimate as to what we can expect to pay for the highly anticipated handheld is better divined from looking at pricing in the UK.
In the days following the announcement, Nintendo UK’s general manager, David Yarnton, cryptically said that retailers there were accepting pre-orders for the 3DS at GBP £229. Converting that figure at current rates comes to NZD $474.
In short, you can expect to receive coins as change from NZD $500 for a Nintendo 3DS.
Local gamers are right to wonder why we’re paying so much. After all, 3DS units ultimately destined for New Zealand will not (one hopes) be shipped from Japan to Europe before being loaded back onto the boat to make a return trip to the Pacific and our sunny shores. New Zealand is closer to Japan than New York.
Dwelling on it for a just moment quickly inflames another sore point for local gamers. Our US counterparts pay approximately USD $50-60 for a new game while we’re asked to put down as much as NZD $140. In decades gone by the lower value of the New Zealand dollar has made that an acceptable, transparent asking price. Counting on your fingers you could quickly ascertain the cost of the game and the cost of local distribution.
But the global economic environment has changed dramatically since then. The US dollar has never truly recovered from the global recession of 2008. Today, the New Zealand dollar sits at between 75 and 80 cents against the greenback. At that exchange rate and with a little room for the cost of distribution, Kiwis might expect to pay NZD $90 for a new console title.
Many look at that deficit and proffer it as a defence of software piracy: Games are not worth gambling NZD $120 on. Software piracy, the argument goes, will ultimately force game publishers to reach a compromise.
The music industry usually provides the case study. With the rise of Napster and other peer-to-peer file sharing services at the turn of the millennium, many consumers became accustomed to cheap (read: free) music and were no longer willing to pay the asking price at a bricks-and-mortar retailer. After much wailing and gnashing, the music industry embraced digital distribution and lowered its prices in that channel. The games industry, they reason, should follow.
But it’s an argument that only considers half the picture. If what Kiwis are asked to pay for a game has increased somewhat over the years, it’s well behind the skyrocketing costs of game production. As we alluded to in last week's editorial, the cost of creating a true triple-A videogame has gone from several million a decade ago to tens – even hundreds – of millions today. In that regard it’s remarkable we’re not paying more, and small wonder we’re presented with so many safe-bet sequels.
In fact, the only thing keeping retail prices out of step with spiralling production costs is the increasing number of people who buy games. The next time a new gamer commandeers an Apache and flies it directly into a control tower immediately after take-off, you might consider holding your tongue.
But it doesn’t explain why New Zealanders are burdened with what appears to be more than their fair share. The answer is fairly straightforward, if rather unsatisfying: Economies of scale. New Zealand (or Australia, for that matter) is a very small market. Even at NZD $120, most games sold here are only incidentally profitable for international publishers.
It's also a result of the convoluted supply chain that games must travel through to get into Kiwi gamers' hands. Most US-developed games do not come here directly from the States; they generally go through Australia, and Australia usually gets its stock from Europe. That means there's three extra levels of middlemen that gamers in New Zealand must pay for that our American counterparts do not.
It can lead to curious situations such as a game like Blood Drive – created in Wellington by Kiwi developer Sidhe – not being available in New Zealand. Publisher Activision probably correctly determined that a low-profile title such as Blood Drive couldn’t sell enough units in New Zealand to cover distribution costs and turn any consequential profit.
Frustrating as it is, you're going to be asked to pay an estimated NZD $500 (or more) for the 3DS because anything less wouldn't be worth Nintendo's consideration.
Even if their argument is speciously applied to justify an illegal activity, software pirates are right in one regard: The cost of games won’t come down until digital distribution becomes the norm.
Currently, publishers price their PC games by region on digital distribution services such as Steam in order to protect their local distribution partners and retailers who leverage the stocking of console titles against them. As Internet bandwidth improves and the gaming market evolves, however, it’s certain that both game distribution networks and retail outlets will one day join CD stores and become husks of their current selves.
Just as Napster and other services like it were shut down, online stores such as iTunes proved that consumers are still willing to pay for music as long as the service is good and the asking price isn’t conceited. Moreover, the newly low cost of music meant that consumers became more willing to take a punt on obscure or independent artists. We can expect the same positive effect in games.
Game publisher THQ has taken a half step in that direction. At its showcase event in New York last week, the company unveiled a new pricing strategy that asks less of consumers over the retail counter while promoting smaller digital transactions after purchase. Players will be able to pay a nominal fee for additional levels, weapons, vehicles and so on.
Of course, THQ could be establishing a dangerous precedent. Not only is it possible that the games could be shorter and less functional than other “full retail” games until consumers have spent the deficit (and then some) on downloadable features, the additional rigmarole could prove to be a source of frustration.
Nonetheless, it’s acknowledgement by a key industry player that we're approaching the cusp of radical change.