Pricing Strategy in Video Game Industry

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Pricing strategy in video game industry
Video Gaming industry has gone dramatic changes when more and more digital platforms emerge and improved technology in portable devices, mainly in social games(Facebook, Myspace) and mobile games. 27% of US online population play at least one game on social network, and Facebook gaming revenue hit $1.32 billion in U.S market in 20111. Also, as more than more people have smart phone especially apple’s iOS devices, gaming application becomes more and more popular in mobile market(72% game applications on iTune)2. There are traditional console game players such as EA, Activision, Nintendo and Ubisoft in this industry, also there are leading company in the social game area such as Zynga in the market. Traditionally, console games are sold in retail stores with $39.99 to $59.99 retail price for the whole disc content. Hard-core games such as Call of Duty(Activision), Assassin’s Creed(Ubisoft) and etc. usually price at $59.99 while casual titles such as Nintendo wii games price around 30$. Usually the pricing approach for these console game companies is the industry standard – means every player in this market follows the same rule as the same price. It can be considered as based on cost structure because of the long time of development (18 to 36 months), money-consuming game development cost and all kinds of add-on cost (packaging, marketing and third-party licensing etc.)3 They also only have two months’ shelf time as the game lunch. Because of the high entry barrier in the console game industry and high brand perception among customers, several main competitors dominate the market. The console game price does not differentiate too much among these players. However, as facebook’s extreme success leads to people’s behavior change to be more “social” associated, a plenty of small companies start to enter into social gaming market and undergo blast growth speed such as Zynga. Zynga’s pricing strategy is “Free-to-Play” and...
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