Hardly any games are worth $50, so hardly anyone buys them. They think that they'll make more money by charging $60 or $75?
If you want to put a serious dent in piracy, lower the price. It's simple economics. Most of us have better things to do with our money than spend $50 on a game that we'll probably only really enjoy for a week or two. Most games aren't even interesting for that long.
But the industry can't just charge whatever it's worth to every customer, because they'd have to charge everyone a different price, and smart people would simply set their value artificially low. Plus, the people who pay higher prices would eventually find out about this and get pretty mad. A constant price is necessary, creating a price lock.
They've set a price floor of about $50. It's extremely unusual to see a new game (of any significance) available for less. Some people would gladly pay $100 for some games, but they get a bargain and only need to pay $50. But others, like me, don't value the games that highly. They're just not worth $50 to us. So instead of paying $50, we pay $0 - either by pirating the game, or simply not playing it at all.
This is a lost sale, and it's a loss of potential revenue for the company. If people are willing to pay more than $50, they still get the game (at $50), but if they're willing to pay less than $50, they don't get it at all. This is a fundamental economic problem - where should they set the price to maximize the overall profit? It needs to be approached like other economic problems. What are the competitive forces?
Piracy is a big one, but not as much as they'd have you believe. If a game isn't worth $50, many people just won't play it - therefore, some potential customers are being left behind. Meanwhile, if someone pirates a game, that doesn't necessarily mean that they would have bought it otherwise - therefore, every pirated copy is not a lost sale. The industry has difficulty grasping this, at least publicly.
Considering brand loyalty, merchandising opportunities, advertising opportunities, and possible accessory purchases, let's assume that a company is better off having 1000 customers instead of 10, even if they get the same amount of total revenue either way.
How many games would you buy if they cost less?
For me, this is not a linear model, and I bet I'm not alone:
|Price||Annual Qty.||Total Spent|
The $5 is a special price point. That's low enough to really be considered disposable income by the critical mass. At $5 each, why not just try a new game every week? It's 5 bucks, who cares if it sucks? You risk more money by getting lunch at an unfamiliar restaurant.
The benefits aren't difficult to see here.