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A new report from Electronic Entertainment Design and Research (EEDAR) delves into the topic of price protection, defined as "when a publisher lowers the per unit cost to retailers on a specific game title or SKU." Sometimes this occurs too soon after a game's release. This "early price protection" is explained by EEDAR as happening "when a title's third month average selling price has decreased by 20% or more from its original average selling price. Games enter early price protection because the retailer requests an early price drop; the game is performing below expectation and they want to clear out their inventory of the game."
Interestingly, software for the Wii has experienced far more early price protection than either the Xbox 360 or the PS3, perhaps suggesting a problem with quality control for games on Nintendo's ubiquitous console.
"Over 7.5% of Xbox 360 and 9.09% PS3 third-party published titles go into price protection early. The Wii, however, nearly doubles the Xbox 360 and PS3's average at 15.1%. These results are significant, as one would expect that aggregating the percentage of titles entering into early price protection across these three systems would produce similar results. This disparity on the Wii reinforces concerns that the market has had with third-party publishers developing successful titles on the Wii," explained EEDAR analyst Jesse Divnich.
"Because of the highly competitive and unpredictable mainstream and casual markets, EEDAR believes retailers and publishers are overly aggressive on expectations for Wii games," he continued. "This is directly leading to a higher percentage of third party Wii titles entering into early price protection. For reference, we consider games targeting the core market to have a less competitive landscape as core targeted titles are typically spread out through the year and receive less competition upon release. Aside from the often congested holiday release schedule, most publishers typically avoid releasing their big AAA core targeted titles against other AAA titles, whereas it is common to see many mainstream/casual titles, targeting similar markets, released in the same week."
Of course a number of factors can play into the price protection phenomenon, but as EEDAR points out, a game's quality is paramount.
"Every time we use our data set of aggregate game reviews, we generally come to the same conclusion; quality is one of the most impactful features for a video game. Whether we dissect quality scores by genre, sales, multiplayer components, Accomplishments or in this month's subject, early price protection, high review scores tend to correlate to a positive outcome, while low review scores correlate to below-average results," commented Divnich. "What is most astonishing from this dataset is that games that achieve quality scores above 91% have never been price protected early on the PlayStation 3, the Wii or the Xbox 360. Furthermore, EEDAR data indicates that there was not much of a difference between a game with a quality score of 75% and that of one with 88%. In other words, mediocre to above average games have a similar chance of going into early price protection."
"We should all keep in mind that publishers and developers should not use this dataset alone when forecasting the probability of their title entering into early price protection as other factors, such as genre, multiplayer components, marketing budgets, and demographics play a significant role influencing the retail shelf-life of their titles," he concluded.
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Interestingly, software for the Wii has experienced far more early price protection than either the Xbox 360 or the PS3, perhaps suggesting a problem with quality control for games on Nintendo's ubiquitous console.
"Over 7.5% of Xbox 360 and 9.09% PS3 third-party published titles go into price protection early. The Wii, however, nearly doubles the Xbox 360 and PS3's average at 15.1%. These results are significant, as one would expect that aggregating the percentage of titles entering into early price protection across these three systems would produce similar results. This disparity on the Wii reinforces concerns that the market has had with third-party publishers developing successful titles on the Wii," explained EEDAR analyst Jesse Divnich.
"Because of the highly competitive and unpredictable mainstream and casual markets, EEDAR believes retailers and publishers are overly aggressive on expectations for Wii games," he continued. "This is directly leading to a higher percentage of third party Wii titles entering into early price protection. For reference, we consider games targeting the core market to have a less competitive landscape as core targeted titles are typically spread out through the year and receive less competition upon release. Aside from the often congested holiday release schedule, most publishers typically avoid releasing their big AAA core targeted titles against other AAA titles, whereas it is common to see many mainstream/casual titles, targeting similar markets, released in the same week."
Of course a number of factors can play into the price protection phenomenon, but as EEDAR points out, a game's quality is paramount.
"Every time we use our data set of aggregate game reviews, we generally come to the same conclusion; quality is one of the most impactful features for a video game. Whether we dissect quality scores by genre, sales, multiplayer components, Accomplishments or in this month's subject, early price protection, high review scores tend to correlate to a positive outcome, while low review scores correlate to below-average results," commented Divnich. "What is most astonishing from this dataset is that games that achieve quality scores above 91% have never been price protected early on the PlayStation 3, the Wii or the Xbox 360. Furthermore, EEDAR data indicates that there was not much of a difference between a game with a quality score of 75% and that of one with 88%. In other words, mediocre to above average games have a similar chance of going into early price protection."
"We should all keep in mind that publishers and developers should not use this dataset alone when forecasting the probability of their title entering into early price protection as other factors, such as genre, multiplayer components, marketing budgets, and demographics play a significant role influencing the retail shelf-life of their titles," he concluded.
source