Video Game Prices Are Too High: THQ CEO
It’s not uncommon to hear consumers grumble that the price of video games is too high, but that’s not something you expect to hear from the CEO of a game publishing company.
THQ’s Brian Farrell, however, is taking a stance that runs counter to some of his peers, with plans to launch the next installment of one of the company’s oldest franchises at just 2/3 of the going price for new software.
“MX vs. ATV” will cost $40 instead of $60 when it comes out next year. Farrell’s betting that increasing consumer interest in digitally downloaded content will make up the difference—and maybe even result in higher markings.
“I know investors worry about price points,” he says. “When we think about this business, we wonder if we can turn it on its head a bit. How many users can we capture? … The real key is expanding in the installed base.”
Digital add-ons for games have become significant revenue drivers for publishers. Activision , for example, saw sales of its first map pack for last year’s “Call of Duty: Modern Warfare 2” generate revenues of $37.5 million in its first week of availability—a figure many standalone games fail to reach. The franchise itself has sold more than 20 million map packs life-to-date, with sale prices ranging from $10 to $15.
“MX vs. ATV” won’t pull those numbers. As a franchise, it’s nowhere near as strong as “Call of Duty”. But it does have a dedicated fan base that Farrell believes is willing to buy additional vehicles and tracks.
The experiment—and Farrell is careful to label it that—is reminiscent of how video games are sold in Asia. There, many games are given away free, with players then paying small amounts for in-game items. While it might not sound like a path to riches to some American investors, this “freemium” model has resulted in companies like Nexon seeing double digit increases in revenues annually.
“We spent a lot of time in Asia watching that freemium model,” says Farrell “I think our markets [in the U.S.] are migrating that way, but you see it more in iPhone and iPad games right now. I think what we’re doing [with “MX vs. ATV”] shows us to be forward thinking. It’s a variation to that [freemium] theme.”
While he’s optimistic about the company’s new pricing model, Farrell says he doesn’t expect it to become an industry standard—and notes that even if it proves successful, there are no plans to reduce the price of all THQ games.
AAA titles—those with blockbuster potential—will always carry a premium price.
“A movie like ‘Avatar’ didn’t stop the demand for ‘Survivor’ on TV,” he says. “They’re different experiences. It doesn’t cost as much to make an episode of ‘Survivor’ as it did to make ‘Avatar’. So a [AAA game] … is a different type of experience and we’d charge for that. [Titles that are more] mass-market oriented are a natural for this type of pricing experiment.”
Pricing experiments are just one of the ways Farrell is trying to turn around THQ, which has struggled over the past year. The company has hired separate executives to run its divisions for core and casual gamers to avoid any sort of split focus. And it’s also looking to expand onto new platforms, including social network games and Apple devices.
That’s notable as THQ bet heavily on the Nintendo DS—and made millions in the process. Sales of that system have fallen off considerably this year, however. Nintendo will introduce the 3DS, a 3D handheld gaming system that does not require special glasses, early next year. And while Farrell says THQ will actively develop games for it, it’s not betting on the 3DS exclusively.
“The iPhone and iPod Touch have taken away some of the audience,” he says. “I think the 3DS will definitely find an audience. That being said, we’re doing more and more games on the iPhone. I think it has impacted the DS market.”Questions? Comments? TechCheck@cnbc.com