The price of Pizza and Games

Miscellaneous Topics
#1

Remembered and inspired by this:

And this:

I have always thought to myself that there is a big difference between selling something that has a high percentage of material cost & material production cost in it (Pizza) vs. something that has a very low percentage of material cost & production in it, but a very very high “research” cost in it.

That’s the problem:
The Pizza costs 20$, why? Because it took ingredients and time and work to make.
The Game costs 10$, why? Because (probably) 100k other people buy that game.

If you want to copy the Pizza you need to do the work too and you need to have the ingredients too, but if you want to copy the game, you simply need to press Ctrl+C and Ctrl+V.
The developer did some ammount of work, say he worked what was worth 20k$. If he only sells his game to one person, the minimum price would be 20k$. If he sold it to 2k people, it would be 10$, if he sold it to 20k people it would only be 1$.
The Pizza man has the same problem. He needs to buy a factory and machines, but it’s in comparison (to the cost of distributing the pizza) cheap.

I bet there is expert terminology for that kind of problem or the kinds of products and I bet someone else has written a book about this or something. I haven’t stumbled upon something yet, though, but I don’t know how to search for it neither. It’s just something I noticed once and thought about once in a while…

#2

Kinda true as an idea, but if you can get more money out of a game because people want to have it even at that price, well, would you not take that money?
What I say is pretty obvious, but it’s also the point: value depends on how much people are willing to pay, and does not depend on the material/time invested (well, also, but only within that span).

#3

In a free and open market, price is a result of supply vs. demand. The affect of costs associated with making the product are secondary. But that doesn’t stop manufacturers or fear-mongers from invoking the classic “they’ll just pass the costs on to consumers” when some measure or another that will potentially lower a profit margin is proposed.

I say “secondary” because the costs don’t directly affect demand, or what a consumer is willing to pay. But if the prospect of reduced profits ends up causing some manufacturers to drop a product altogether, then that does affect the supply. In other words, the ability of the producer to “pass on costs” is limited, despite the political/rhetorical threats. They can try to do so, but risk losing significant market share, unless there is a monopoly or oligopoly, in which case you have bigger problems that need to be addressed!

Given that software can be reproduced so easily, by both the producer and by illegal copying, the supply is virtually unlimited. It is hard, in such a situation, to avoid the “race-to-the-bottom” in terms of price competition. I guess the main thing that allows a price to stay high is if there is a sort of de facto monopoly. In other words, the price point can be maintained mostly to the extent that the game is unique or has unique qualities. As far as your average clones are concerned, the near-infinite supply can result in an situation where you can’t give them away. Only Google profits from them because they profit from web traffic.

If you are looking for books, I think a basic Econ 101 or Intro to Econ would cover most of this.

#4

There was one guy from the industry pointing out how ridiculous it has become, especially since the iPhone and cheap ass game prices became more prevalent
but people have no problem tipping a pizza guy a multitude of what games on the iStore cost; do anything more than $1 and people are like :confused:

But thats just the way it is. However the PC / Steam market is a little bit more relaxed.

Needless to say, making games just to make maximum profit might be hard at this point.

#5

Another idea to consider is that when people buy software, they also believe they’re buying a service and not just a product.

In your pizza example: what if when the pizza was delivered, you discovered that it was missing a slice? Or that it had the wrong toppings on it? Chances are you would probably ask for a refund, or at least a replacement pizza. There is some idea of “attached services” even to seemingly one-time things like pizza.

Similarly, if you buy a PS3 game (on a disc, from a store) and then when you get it home it doesn’t work, chances are you’re going to take it back to the store. Sometimes games don’t work because of user error -maybe you bought an xbox game instead- and that can also be straightened out by the clerk at the store.

Traditional game distribution (in boxes, in stores) has a lot of that inherent “service” built into it: you can talk to the person you bought it from, they can talk to the wholesale distributor, they can talk to the manufacturer, they can talk to the company, who can maybe talk to the developers, etc. The president of Sony doesn’t have to answer every email from people asking why PS4 games don’t work in their PS3. There’s a “service layer” for that.

But then along came online distribution- first in the form of downloading a game directly instead of going to the store to buy it. This cuts out all of the above “built in” service mechanisms, which is GREAT for indie developers who can’t afford all of that middle-man service layer stuff. But now what happens if the game doesn’t work? You’re going to get an email from every grandma trying to buy Minecraft for Little Timmy, asking where the any key is. And a week later when her computer crashes, guess who she’s going to blame, well the last thing I did was download Minecraft, that must have been it!

And yeah, grandma is wrong- but she doesn’t know she’s wrong and from her perspective, she paid 10 bucks for a product (the game) but also the built-in layer of assumed SERVICE that comes with every product. Traditionally she could go to the store and talk to the person who sold it to her, not the developer directly. Traditionally, grandmas all over the world could go to different stores, so no single person has to deal with ALL of them.

But now that we’re distributing things online and the product comes directly from the producer (the developer of the game), the producer also absorbs all of the service-related responsibilities as well. That’s why Notch is constantly getting flack for every change in Minecraft. This is why Cas has to put up with angry teenagers blaming their porn viruses on his games. Is it right? Nope, probably not. Is it fair? Nope, probably not. But from the consumer’s perspective it’s natural based on how we’ve done business for thousands of years.

And it gets worse- now we also have downloadable content and updates in every game, the product itself becomes, in a way, a service. Most modern games aren’t a one-time product, but a service that evolves. So now I pay ten bucks and that gets me the game itself and also the assumed service that comes with every product but now also access to every update and new feature for the rest of time (some of which I might have to pay for, but the access is there). So now if the developer releases a new feature but I wanted this other feature, I start to perceive that as bad service that I paid for and now I’m going to write an angry email telling the service layer (who happens to be the one guy who developed the thing) all about that. And multiply that by hundreds, or thousands, or millions of users- and you start to see the kind of stuff that Notch and Cas talk about.

#6

All this thread has done is make me hungry for pizza.

Interesting though, not going to lie; there has been times I have said I don’t have money or XYZ but I willingly go by myself a pizza for dinner.

Imo it’s just not games lol.