Thursday, March 25, 2010

Wonder and cynicism

Seems to be the day for thought experiments, as Syp kidnaps his younger self with a time machine and remarks "We complain way, way too much in comparison to the great amount of entertainment that’s put at our fingertips for obscenely low (or no) prices.". But while I agree that a teenager from the past would stare at wonder at the great amount of cheap entertainment on offer, the older and more cynical me, with a mind tuned to economics, thinks that this can't last.

In economic speak, "great amount of X for obscenely low or no prices" is typical for a classic boom, to be followed by a bust. There is simply too much supply for the business to be profitable. Add to that the current economic crisis, where people are bound to diminish discretionary spending, and there will be a lot more game companies laying off people or even closing down. The amount of new games released will diminish, and prices will go up, until game companies are profitable again. For any company to keep going, the total revenue must be higher than the total cost. There might be reserves somewhere to operate at a loss for some time, but that isn't something which can go on.

There is a market for video games, and presumably there will be a market for them for the foreseeable future. So video games won't disappear. But in the end the players somehow must pay for whatever it cost to produce those games.

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