wraggster
July 13th, 2011, 22:25
Analyst firm EEDAR thinks Sony may have stumbled across "a new profitable sequence for video game" releases, via its PSN Welcome Back offer.
The Welcome Back offer, which granted users free access to games like LittBigPlanet and Infamous for a limited time, is thought to have been behind a significant increase in interest around the titles' sequels.
And according to EEDAR, publishers could drive sales of new games by making previous entries in the franchise available for free.
"The first recommendation is to make free, for a limited time, an older iteration of the product prior to the launch of the title's next iteration," the firm said in a research report. "When broken down mathematically, the results make a sound financial argument.
"If a game that once sold 2 million units in the market is currently available digitally and physically, it is likely producing gross receipts of about $500,000 a month. Assuming that gross receipts reduce to $0 during a 30 day period where a title is free (-$500,000), as long as the free offering boost sales of the next iteration by 8,500 units (at $59 ASP), then it would produce a net/net benefit to the publisher.
"EEDAR believes that the publicity generated from the free offering, in addition to new consumers being introduced to the series, would make the 8,500 unit mark easily achievable."
However, EEDAR says there are two potential downsides to this model. "First, series with strong storylines (e.g. Mass Effect), typically realise much stronger sales on previous iterations the month prior and after a new iteration is released, to the point where the risk of losing all those sales may not be made up through purchases of the new iteration.
"Second, this would be unfavourable to physical retailers due to the loss of potential back catalogue sales of the older iteration immediately prior to the launch of the new title."
The second option would be to release an older iteration for free for a limited time two to four months after the sequel has been released. "The theory being that the free offering would likely boost sales of the new iteration while the new iteration still maintains its premium pricing structure ($59.99/$49.99) and has appropriate shelf space.
"While the net/net benefit may not be as high as the first recommendation, it does limit risk to the publishers, while providing some potential upside to retailers."
http://www.computerandvideogames.com/311467/news/sony-ps3-freebies-uncover-new-profitable-games-model/
The Welcome Back offer, which granted users free access to games like LittBigPlanet and Infamous for a limited time, is thought to have been behind a significant increase in interest around the titles' sequels.
And according to EEDAR, publishers could drive sales of new games by making previous entries in the franchise available for free.
"The first recommendation is to make free, for a limited time, an older iteration of the product prior to the launch of the title's next iteration," the firm said in a research report. "When broken down mathematically, the results make a sound financial argument.
"If a game that once sold 2 million units in the market is currently available digitally and physically, it is likely producing gross receipts of about $500,000 a month. Assuming that gross receipts reduce to $0 during a 30 day period where a title is free (-$500,000), as long as the free offering boost sales of the next iteration by 8,500 units (at $59 ASP), then it would produce a net/net benefit to the publisher.
"EEDAR believes that the publicity generated from the free offering, in addition to new consumers being introduced to the series, would make the 8,500 unit mark easily achievable."
However, EEDAR says there are two potential downsides to this model. "First, series with strong storylines (e.g. Mass Effect), typically realise much stronger sales on previous iterations the month prior and after a new iteration is released, to the point where the risk of losing all those sales may not be made up through purchases of the new iteration.
"Second, this would be unfavourable to physical retailers due to the loss of potential back catalogue sales of the older iteration immediately prior to the launch of the new title."
The second option would be to release an older iteration for free for a limited time two to four months after the sequel has been released. "The theory being that the free offering would likely boost sales of the new iteration while the new iteration still maintains its premium pricing structure ($59.99/$49.99) and has appropriate shelf space.
"While the net/net benefit may not be as high as the first recommendation, it does limit risk to the publishers, while providing some potential upside to retailers."
http://www.computerandvideogames.com/311467/news/sony-ps3-freebies-uncover-new-profitable-games-model/