The Devil in the Details: RRP in New Zealand and Australia

By: Noah Baxter

New Zealand and Australia have long held the short end of the stick when it comes to imported entertainment. Music, books, movies; all of these are significantly more expensive on this side of the world than elsewhere. But here, there is one medium that runs our Oceanic wallets dryer than the rest: the medium of game.

We often receive games late, with some never making it to our shores due to certain restrictions. While this is certainly an issue for the consumer, there is an overarching concern over every game sale here. No matter how you look at the data, we pay a phenomenal price to enjoy our games.

As a Kiwi consumer, I’ve been exposed to these prices firsthand for far too many years. Closely modelled on Australian standards, our own market suffers the same pitfalls that we see in theirs.  I will never forget the sting of regret after my first $100 game purchase, a highly anticipated sequel to a much loved game series. I emptied my wallet for the game, took it home to my PS2, and there it remained for a good while. I enjoyed it enough, but it wasn’t long until buyer’s remorse kicked in.  The game itself? Arbitrary. The real problem stemmed from the cost versus my expectation, and ever since I’ve treated buying games like a gamble.

Unfortunately, $100 dollars for a game sounds perfectly normal in New Zealand. For a long time, high profile releases have been sold for just that much across the board, it being the standard retail price for console and PC titles. I remember Halo being released with an ominous $100NZ price tag compared to $50US, but back then I didn’t bat an eyelid.  And rightly so; at the time this was reasonable. Sure it was expensive, but with the currency exchange rate of the day, it meant that you were picking up a brand new copy of Halo for roughly $65US. We were happy to pay that little bit extra to cover the odds and ends it takes to distribute games to such an out-of-the-way part of the world.

The problem only arises now that this retail model hasn’t changed. For New Zealand in particular, our dollar has done little else but climb against the American greenback for roughly a decade. Yet here I am, still being asked to spend $100 or more for the latest blockbuster game? With our dollars coming closer and closer to parity, this just makes no sense.  The gamer in me is livid, and the complacent Kiwi counterpart is starting to side with him. The recommended retail price (RRP) of games has long been a thorn in the side of Australasian gamers, but lately it’s been digging in too hard and bleeding us too dry for us to ignore it.  Now, as sore as I am, I’ve set aside my personal grievances to investigate how PC prices fare in this complex debacle.

The United States argument:

One thing that always comes up when Australasian prices are mentioned is the inevitable comparison to the United States. To get this out of the way, I’ve collated a graph to highlight the price difference at a glance. I want to make it perfectly clear that this is purely for comparison’s sake, not a statement that we should decide our RRP on the same model as the US:

For this graph, US Retail is based on Gamestop and Best Buy. I can only find out so much from over here on my little island, but my understanding is that this is an accurate depiction of US game prices. Here’s the same graph in NZD, for translation purposes:

For NZ Retail, I’ve generally used prices from well known local stores. These aren’t necessarily the lowest prices out there, just those typical gamers see here.  To gain a better understanding of US RRP, I’ve also tasked myself with some background research. I’ve spent a lot of time gathering resources, but I must also tip my hat to a friend who works for a US game outlet for sharing and confirming this information. I sincerely apologise if any of the following is incorrect, so feel free to point out any misinformation in the comments below.

What I’ve learned is that like here, PC prices are generally cheaper than their console counterparts. About 5 years ago, the standard RRP for PC games in the US was $40. Since then, PC titles have strapped on $50 price tags, and some of the higher profile games are now donning $60 tags to equal typical console prices. At this point it seems that some AAA publishers are upping the ante, but $50 is still the general going rate for a new PC title.

We can speculate that this higher price is to mitigate for the effects of piracy, or to “legitimise” the PC as an equal to consoles. But no matter the reason, high profile games are becoming more and more expensive. It seems like this is a concept that US gamers will have to get used to.  Assuming this is all accurate, we now have some international context. With these foundations set, I can move on to more familiar ground.

Observations of a Kiwi Gamer

To be perfectly honest, I didn’t take a great deal of interest in the RRP of PC games until about 4 years ago. Since then I’ve come back to my roots as a PC gamer, and sold games over the counter for a couple of different retail stores. It’s enough to notice the obvious trends, but little else. I asked a number of distributors for comment to help fill in the gaps, but as I initially feared I’ve heard little back but cryptic and unpromising clues. In the absence of much craved inside knowledge, I’ve had to draw more from my personal observations.  The first thing I can note is that the market standards we have generally reflect those in the US. PC games, up until recently, have been a little bit cheaper than their console versions. Now that they’re rising, more and more PC gamers are looking for alternatives to local sellers, and the public perception of prices is becoming even more negative. I ran a poll on Facebook to get some small look at how people see our game prices today; at the time of writing over 90% of participators feel that they are too expensive. This oversimplified observation isn’t enough to paint an accurate picture though, so I’ve burrowed into a horrendous number of forums and websites to gather some insight on the matter. There’s an interesting dynamic between what you can actually discover about RRP in Australasia and what people think of the issue, so I’ll cover both separately.

The main thing I noted within discussions of interest was a tendency in people to denounce the corporate aspect. It’s common to see the attitude of “AAA publishers charge us more because they can take advantage of us”, and to be fair I can see why. Researching the matter is no cakewalk, and a lot goes unexplained when most of the publishers and distributors involved keep tight-lipped. It’s easy to make the assumption that they just want more of your money.  Whether or not you agree with this attitude, it is still understandably frustrating to see your money disappear into some mysterious abyss. Seeing as the discrepancy between what the consumer knows and what the consumer feels is so jarring, the matter is one that needs to be addressed. But how does one address such a convoluted issue? With the factors and variables of Australasian RRP being vast and subject to change, how do we establish solid ground?
To give a short answer, we don’t. As an economic issue, it’s incredibly hard to measure where our marketplace stands. All we can do is consider everything relevant, and put it together as some monstrous, mismatched jigsaw puzzle. Even after extensive research I’m still struggling to make out the image in front of me, but I’ll do my best to share it.

I’ll start with what I’ve seen the most of: the competition angle. Essentially, this is the same for us as it is all around the world, only with one major difference; the size of our local market. In other territories, there are vast numbers of brick-and-mortar stores that all have a part in bulk purchases, price-matching and competitive pricing. Here the pool is limited, and because there are so few competitors to set the bar to, retailers are able to maintain higher prices. In the end, the consumer loses.

From what I’ve gathered on the marketing front, it’s simply a factor that goes into the price on the developer’s end. As AAA titles cost so much to produce, it’s our role as consumers to fund them. Advertisements and marketing campaigns generate demand for any given game, which in turn generates a high price, which is exactly what is needed for the developers/publishers to recoup the money spent on production. It’s a simple matter of supply and demand, and it works.

A more significant factor of our RRP is likelier our distribution costs. Australian and Kiwi markets already have to put up with high distribution costs due to existing within smaller economies, but these become staggering when you examine them further. For New Zealanders, the games we get generally come from Europe, route through Australia, and then get shipped to us. Australians obviously subtract the last transition from the equation, but both countries suffer from extra, not to mention inflated, costs that other continents don’t. As efficient as they can make their distribution channels, it’s not yet enough to cut the cost out. To make this issue more complicated, the publisher’s offices in Australia operate as separate businesses to their head offices in other areas of the world. What this means is that Activision AU might order their games from Activision EU, which then adds a specific exchange rate on top of the already high cost of distribution.

Of course the currency exchange rate has always been a factor in game prices. In days gone by it meant that the prices were more or less reasonable, as I mentioned earlier. Steep price points were accepted when the AU and NZ dollars had less sway on an international scale, and it was then that the $100 standard came to be. Now that our dollars are coming closer to equality with that of the US, it seems only logical that we should see a price drop sometime soon, right? Not quite. The fact of the matter is that exchange rates fluctuate too much for us to base a viable price point on them. Yes, we’re trending towards parity, but no, there is no way of guaranteeing that this will remain the case. It’s an unfortunate truth, but on this front we have to accept the $100 price point as a necessary evil.

With that in mind, it’s worth noting that the cost price for stores to sell the more expensive titles is incredibly high in itself. In Australia, $80AU is the average cost for a retailer to secure a game. Even when they mark that up to $120, they’ve still made little profit considering their operational bills. Even the publishers don’t reap much benefit at the end of the day, making little profit compared to their overseas roots.

At this point in the puzzle a question arises. Why don’t retailers just import games themselves without using the publishers as middlemen? Unfortunately, the answer isn’t simple. Firstly, there are parallel import restrictions in Australia set in place to prevent this sort of thing (initially a boon for retailers, now a bane), and then there are possible consequences that could drive publishers out of the region.

As one extra cost on the bill, regulation also has a larger effect on Australian games than in other parts of the world. Whereas in the US an R-rated game still has a huge market, Australian publishers narrow their already small market further by releasing something over a G rating. The theory here is that a G-rated game can reach a larger audience, and therefore can make a similar profit with a lower price tag than an R-rated one. Then there’s always the time and money it takes to have a game regulated in the first place, but this still just goes towards the initial cost of publishing a game.
One thing is clear: none of these factors are the sole cause of our inflated RRP. We have to mash them together again and again before our puzzle starts to make sense. When we do piece exchange rates, regulations, taxes, distribution, marketing, and operational costs together, an image finally starts to take shape. It’s still not pretty, but at least it looks more like a confused consumer than a boot stepping on a human face. Obviously this still isn’t the picture we want to see, but nonetheless there is hope. No matter how grim the state of things may seem, there is a light at the end of the tunnel, and it looks like we’re starting to head towards it. Any day now…

The shape of things to come

One of catalysts in this movement is undeniably the availability of games online. Now that it’s easy and affordable for gamers to get their entertainment from the internet, the local marketplace is taking some harder hits. And no, I’m not talking about piracy (though that certainly has its own effect on the economy of the industry). The new competition for local retailers lies instead with digital distribution stores and overseas importing.

Digital distributors, like Steam and Desura, have a number of benefits over the brick-and-mortar sales we’re used to. Among these, they offer a fantastic service and most importantly, they cut out the middlemen to offer more affordable games. It’s little wonder that this option seems so appealing to the savvy consumer.

It’s even becoming less of a hassle to import games from overseas, with some retailers being modeled specifically to help us in our plight. NZ Game Shop for example, a UK-based business, specializes in exporting games to New Zealand. Alone, they cut prices to as much as half of our standard RRP, acknowledging that $120 is far too much to pay for a new release or pre-order. They even take it so far as to base their prices in NZD and offer free postage to New Zealand. With options like this available, it becomes blindingly clear that our local markets must adapt.

Thankfully, the appearance of these options has finally forced publishers and retailers to confront the issue of price and competition. A result could well be that they work together to reach a solution; they have all the information they need from sales statistics and feedback, now they just need to take it on board. Unfortunately, from what I can tell they can take their time – Australia’s online competition isn’t as significant as it is in say, the US or UK. While there’s certainly a swell, it may take some time before a wave can crash down on the market.

First of all, the buyers who are finding better deals elsewhere make up a minority percentage of the overall group. Many gamers still prefer the draw of physical purchases, special editions and in-store incentives. On top of this, there is still a wariness of online and overseas transactions. Some are sceptical of region locks, risky transit, online insecurity, and one that always hurts me as a Kiwi, poor internet connections.

As if that weren’t enough to secure the RRP’s place on the throne, it seems that the Digital platform is falling prey to publisher’s nepotism. Many new releases on Steam AU are starting to reflect the retail price of our local market, with the added insult of the exchange rate being overlooked. As a recent example, Arkham City has leapt up from $50US to $100US, a sad highlight for this ugly trend. The argument for this action is that the prices are being “localised”, in part to ameliorate the issue of competition and possibly in an effort to further “legitimise” the PC platform. What the publisher’s don’t realise at this point is that localising prices that are already considered too high will win them no fans, especially not when they fail to take the exchange rate into consideration. Sure, it’s good for the local marketplace, but once again it leaves the customer with an empty wallet and a bitter taste in their mouth. If not for this, we could have optimistically embraced digital distribution as an affordable medium for games. Sadly, we’re back to square one.

So where does that leave us?

At this point, it’s incredibly difficult to guess as to what comes next. There’s just no telling if we’ll see a brighter future, and no way to know how much longer we’ll be playing the role of the downtrodden consumers.

We’re seeing so many changes in the way our market operates, but we’re yet to see any real solutions. If anything, we now have more problems; every new option seems to carry with it a calamitous side-effect. It’s not the best situation, but all we can do is make our collective voices heard (however that may be) and play the waiting game.
In the meantime, we need to stop comparing our market to those overseas. Our unique position simply doesn’t translate to the rest of the world, and the sooner we can leave this idea behind and look for a solution within our own system, the better. Perhaps if our dollars stay high over the next few years there will be a miraculous price drop, but otherwise we have to abandon our exchange rate scapegoat.

With any chance for our games to become cheaper, our market will need to grow and adapt around whatever is thrown its way. Economists have predicted everything from game RRPs dropping to $70, to our dollars falling and re-establishing the $100 tag as a reasonable standard. No matter what happens, we’ll need our industry to stand firm and make the right choices.

At the end of the day though, the “right” choice is impossible to pinpoint. While the economy of the world’s game industry is growing, our little corner simply isn’t generating the profit it needs to make everybody happy. The only way for the consumer to get a better deal is for everyone to make even less money than they already do in this high cost/low profit gamble.

Personally, I’ve got my ears to the ground to hear word on potential government funding, something I’d only like to briefly touch on. With world leaders taking games on board for both cultural significance and investment opportunities, we are starting to see game studios around the globe receiving grants as a helping hand. With the matter now being discussed here, we could see it have an effect on the industry we know. If my own assertions are correct, this could lead to lower production costs and therefore cheaper games, but time shall tell.  In the event that the whole scenario turns into a massive shipwreck, we’re going to be stuck with our current RRP, love it or leave it.

Unless we’re willing to pay hand over fist for our games, we’ll have to watch the trade winds to find the best deals we can.

Further Reading:
http://www.gameplanet.co.nz/features/136430.20110128.Approaching-parity-The-cost-of-everything/
http://au.gamespot.com/news/aussie-game-prices-to-drop-by-end-of-year-analyst-6329509
http://www.kotaku.com.au/2011/07/could-retailers-and-publishers-reduce-game-prices-in-australia/
http://www.kotaku.com.au/2010/11/why-do-videogames-cost-so-much/
http://www.kotaku.com.au/2009/05/monday-musings-the-price-is-right/
http://www.stuff.co.nz/technology/digital-living/5681610/Online-purchases-a-rip-off
http://www.atomicmpc.com.au/News/278564,batman-doubles-in-price-on-steam.aspx

N.B.: It was hard to mention NZGameShop without it feeling like a sales pitch. To clarify: I have never bought from them so I can’t comment either way on the use of their service.

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13 thoughts on “The Devil in the Details: RRP in New Zealand and Australia

  1. Great exhaustive article. GOG just announced they will pursue new games, and with their “one price for everyone” policy, that is some seriously good news.

    • When GOG decided not to use IP to determine location and gouge those who happened to live in other countries besides North America, they won some serious fans across the world. I live in the US and when Noah and I were talking about him putting together this article, I was floored by how much Aussies and Kiwis have to pay. Crazy.

  2. Pingback: Game prices in Australia/NZ : Curiouser & Curiouser

  3. You could be a Canadian. 10 years ago, paying $90Cdn for a game in the US which was selling for $49 was common, and we’re right next door. With exchange USD/CDN that worked out to actually being around $72. What you need to do is what we did up here, make a gigantic stink over it. Prices are falling even more so now that there’s an investigation into price fixing going on. We still see prices 20-40% higher than right across the border, even at dollar parity.

    • Here’s hoping we see something similar! I’m certainly not the first to write about the issue, nor will I be the last. Fingers crossed that once the AU 18+ rating is resolved there will be more pressure put on the RRP issue.
      Then again, we’ll only see a change if our dollar stays high enough to allow it. I’d love to make a stink, but realistically it just isn’t viable unless we maintain parity (or near enough).
      I’d love to know the reason Canadian games were so expensive back then, assuming it wasn’t just greed. Any idea?

      • Not a clue to be honest. There was a serious currency difference at the time, it got as low as 0.62/1 cdn/us at one point. But besides that? They like to say that it’s because there’s huge transportation costs and all that up here. Which is true to a point, but 80% of the population lives within 200km of the US border. But prices were dirt cheap in the US at the time too. $0.62/gal for US fuel, and we were paying $0.62/L($2.32/gal)

        I do hope you’ll see a different and prices equalize more. Nothing bugs me more than things like this.

  4. There’s one small flaw in your argument, Games sold by publishers are not imported from europe they’re manufactured in Australia (assuming all the titles I have are representative, xbox 360 games don’t have a made in australia stamp on the disks unlike ps3, so it’s possible xbox software is imported premade) and the cost of making a cd is around .50c NZ, I’m not sure about a bluray but I’d imagine somewhere between $2 and $5 NZD…

    So PS3 software at least is manufactured in Australia, there should be no additional cost over the european release (they’re both PAL in the same zone). I see no reason they should be priced differently..

    • That is an interesting point, actually. To be fair this is a TPG article, so it naturally has a bias towards our own platform. However, I was intrigued by your comment so I checked my collection. Exactly half of my PS3 games were manufactured in Australia. Every game I purchased before 2009 was manufactured in Europe, most in Austria. I’ve done a bit more hunting for you, and I’ve just learned a blu-ray factory did indeed open in 2009, as an extension of the DADC (Digital Audio Disc Co).
      One of the tidbits I came upon (that I briefly mentioned in the article) was that the Australian distribution channel is a lot more streamlined than it used to be, I’m getting the feeling that DADC (who also distribute) is a big part of this. I’d be interested to know how much publishers pay for locally made games vs. European imports, but it seems info on this matter is like hen’s teeth. I could guess that there’s still a high cost involved, but surely it can’t be as high as importing… Maybe PS3 games will be the first to drop in price? 😛
      Every other comment I can find is along the lines of “Australian games are all imported”, so I think it’s a safe bet that this exception only applies to blu-rays.
      Great comment, sorry I can’t dig up more! Props to you for pointing that out.

      • Same thing with PS1 and PS2 games early days they where manufactured in Austria , then as time went by they where made in Australia with a small % coming in from Austria , one thing I have noticed though even though the rrp hasn’t changed and why would it since in HD terms Sony and MS operate as a duopoly and aren’t under enough pressure , to unilaterally drop prices across the board, instead I have noticed a lot of new games retailing at the 79 /89 dollar range and if not I find it easy to get them to do a deal .

  5. Assuming nzgameshop is essentially the same as ozgameshop (and it sure looks identical), they’re definitely worth frequenting. Top prices and free postage, the only downside is that you’re often waiting 2-3 weeks for delivery but if you don’t want a title RIGHT NOW!!! then you’re going to be better off financially or you can just buy 2 games for the price of 1…

    If the RRP for games dropped to something around au$70 though, I’d very probably not import games anymore.

    One very handy thing to get around steam’s regional pricing discrimination is to have a friend in america who can gift you things, works a treat for me. Greenmangaming is also good for prices a lot of the time, I bought skyrim for a mate from them on launch day, us$90 on steam, us$55 on GMG

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