Wednesday, June 9, 2010

How Has the Price of Madden Games Held Stable?

In the middle of last July, I preordered Madden NFL 10 for Wii, paying $46.99.

The Wii version was vastly inferior to the PS3 and X-Box versions, but that's another matter. As far as Wii football went, it was top of the line: new features and updated rosters. It was released right before the NFL season.

It is now the middle of June, 11 months later. The Super Bowl was played four months ago. A new version of Madden comes out in two months. There is probably less interest in football video gaming now, when football isn't in season.

Yet Madden NFL 10 still sells for ... $46.99.

Is anyone else surprised that the price hasn't dropped? Is Electronic Arts maximizing its profits with this price? People can evade the high price by buying used copies of the game or Madden games from prior years (Madden 09, for instance, is only $18.73).

Perhaps EA's stable-pricing policy encourages people to buy the game when it comes out, because they have seen year after year that the price isn't going to drop a few months later. These additional sales could more than offset the sales that EA is losing by not lowering its price in the interim months between seasons.

Can you think of any other goods that behave this way, with new versions coming out every year? What happens to the price of cars the month before the new models come out?

2 comments:

Millsy said...

I think the most interesting aspect there--and difference from the car market--is the cost of production. Once the R&D is done for the games (which at this point is probably very little), there's not much cost to printing onto a disc.

On the other hand, cars come with a lot more cost to build, if for no other reason than the materials in the car themselves. So why WOULDN'T they lower the price of Madden '10, given the cost is essentially zero.

I think your reasoning might be a good one: they don't want to let those 'high demand' buyers wait for the lower price. Now if they could somehow discriminate without worry of people changing their behavior, I imagine they would.

But I don't think there's much in the way of having the most updated version of the game become popular after the most recent season than before it. So if they lower the price, there's little cost to waiting...and the following year, buyers would simply buy 2011 after the season is over. But I'm speculating. Maybe everyone absolutely HAS TO HAVE IT right when it comes out.

Interesting issue here. And I can't think of another product that does something like this.

Greg Finley said...

Very good point about low marginal cost of production.

If it costs $2 to manufacture, ship, and stock a copy of the game, any price above that represents a profit. But EA doesn't want to sell a lot of 2010copies in June for $5, because it will hurt demand for the 2011 version.

It's also interesting to compare this to, say, iPhones. There is less perfect information about when new models come out. Also, each year's new Madden costs about the same as last year's Madden, while the iPhone is constantly dropping in price. The first iPhone started at $499 in 2007, and the new iPhone, which is vastly superior, starts at $199. I'm assuming the monthly bill is about the same for both.