I have always thought game prices have been too high, and I have put my money where my mouth is. At Dynamix, I pushed to have an entire line of casual products come out at the then unheard of price point of $19.95 instead of the industry standard of $40-50. When we first started the GarageGames Game download store, I advocated for, and won, a $14.95 price point. For the next six years I constantly advocated that we should blow away pricing friction and come out with some games at $1-3, as it was my belief that these rock bottom prices were inevitable.

There is an old saying that being too early is the same as being wrong, and I was way too early in all of these cases. Customers did not appreciate the $19.95 price point in 1997, instead thinking the games were probably not good (although they were great front line casual titles (like RC Racers, Mini Golf Mania, and Cool Pool), although the under $20 price point did eventually become the standard for boxed casual titles. There was not enough traffic to the GG store to justify the $14.95 price point, so we raised the price to $20, and saw increased revenue, if not greater unit sales. And, finally, GG just never got around to the $1 games, but we did set new industry pricing with the $100 Torque Game Engine.

One of the first successes in lower priced games came from XBLA, where Microsoft went out and did huge surveys of gamers, and found they would be much more receptive to downloading games at lower price points, so they came up with the $5, $10, and $15 price points (further disguised by using Gamer Points) seen today. Our Marble Blast Ultra was one of the first games in the store at a $10 price point, and it made us hundreds of thousands of dollars in revenue, so I finally felt vindicated for my years of lower price point pontification.

Now the flood gates have been opened, and I am telling you to look out below. Today Reflexive, recently acquired by Amazon, opened their new download store, with lowered front tier pricing of $9.99 and second tier pricing of $6.99 for Indie casual games. All of the other casual portals like Big Fish Games and Yahoo games have pricing of of $6.95 by joining their “clubs”. It is my belief that even these prices will not hold up over time.

As an example of the future, look at the game section of the iPhone App Store. In this market, the right price for a game is $0, and I believe that is where all game prices are heading. For a while, there will be successes at $3.99 to $1, but eventually, I think you will see capitulation to the $0 price point.

Why are games going to what many see as absurdly low price points? It is a simple answer. Supply and demand. It used to be difficult and expensive to make games, so few people had the knowledge to create a game, and even if you could figure out how to make a game, there were only a few distribution outlets. There was no Internet, so only a few games could be brought to the few shelves open to selling them. With relatively few games being made, and fewer being distributed via hard media, games were scarce, resulting in high price points.

Contrast that to today, with an uncountable number of inexpensive or free game engines and tools, game development schools and thousands of web sites that teach people how to make games resulting in tens of thousands of game developers and games competing in the market. I always compare game development to music, and I will again. People want to be in bands even though there is no exact way to make money, let alone make enough money to make a living. As proof, there are over four million bands on MySpace alone. In the future, I am sure there will be millions of games developers, and all of them will be putting downward pressure on price points.

This is already happening in the Flash game market, with even a cursory look showing Kongregate, a single Flash games portal, with over 11,000 free games on their site. These games are already fun, but watch for them to get more polished with more features as more sophisticated Flash development gets easier with tools like our upcoming Push Button Engine as well as the foundation of Flash itself getting better. As there are more and more games on the market, developers will have little chance if they do not keep up with bigger and better productions. These great, creative, free games will put tremendous downward price pressure on all other categories and distribution channels.

What about consoles, and big game publishers, and the $60 price points of AAA titles? In depth analysis of this market is another article, but suffice it to say that prices will come down on all of them. Of course, all of this will take time, but it will be an excruciating fall. All you have to do is watch what is going on in the music industry to get a feel for how it will play out. There will be fights, finger pointing, lawsuits, and tons of press while the incumbents attempt to hold onto old business models while thousands of new competitors ravage the old way of doing things.

How will you survive in a market with a $0 price point and millions of competitors? I have ideas, and I can’t say for sure, but I do know there will be no one way of succeeding. I’ll explore different strategies such as ad supported games, micro-transactions, etc. in future articles. Don’t get me wrong, if you are already an Indie with nothing to lose, and you are following my Foundational Five ways of running your company, you should be excited about the changes.

-Jeff Tunnell, Game Maker
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