It Could Be Said #61 Who's Afraid Of Big Mario?

What the row over the Switch 2's price tells us about people's understanding of economics

Like man-children the world over I eagerly awaited Nintendo revealing their first new console in eight years as on April 2nd they gave us the first detailed look at the Switch 2, complete with reveals of key games such as Mario Kart World and Donkey Kong Bananza. My reaction was in line with most people’s - the games looked great, a clear step-up from what the increasingly decrepit Switch 1 hardware could deliver in terms of graphics, performance and scale. In Mario Kart World and Donkey Kong Bananza the Switch 2 will within less than two months have more exclusives to justify buying the console as opposed to a gaming PC than the Xbox Series X/S, and as many as the Playstation 5.

But then the arguments started, primarily about price. Most notably about Mario Kart World having a recommended retail price of $80 with Donkey Kong Bananza and other key games being $70. This was visciously attacked by many content creators as being a scandalous attempt by Nintendo to rip-off consumers, especially as it had only been with the launch of the PS5 in 2020 that major games started to be released at $70. You literally had angry fans troll online chats of livestreams showcasing the new games, demanding the price be dropped.

Whilst I understand we all want things to be as cheap as possible, this whole argument revealed some serious falls in the way we all as a society think about prices.

I won’t belabour the point about inflation because this Games Industry Biz article does a really good job of stressing the key point; that like everything else in life, we should expect games to go up in value as inflation increases. The reason we don’t is because video games actually bucked that trend for the longest time:

You can see the clear drop-off in game prices as the Playstation era begins. The way this data has been presented actually underestimates the drop-off because it looks at the price of games at launch; Genesis/Mega Drive and Super Nintendo games kept getting more expensive as the generation progressed because they got bigger and more complicated. This meant more memory being used, which back then was very expensive, and often the inclusion of bespoke chips to boost the performance of the console. That’s why the still cartridge-based Jaguar was able to launch with cheaper games and why Nintendo 64 games became notoriously expensive as they got ever bigger.

The PlayStation and Saturn switching to CDs meant games were stored on a much cheaper medium, with the savings being passed onto the consumer, partially because the games were more vulnerable to piracy. Even better console gaming was a growing business as generations who grew up in the 1980s and 1990s playing games at home as kids became young adults who wanted to continue the past time, which meant everyone involved could accept smaller profits on each game sold, because they were selling way more of them. And whilst its a long time since that happy situation ended for Sony and Microsoft, with Nintendo their successful consoles this century have come from outdated but gimmicky tech that allowed them to keep costs down to reach the broadest possible audience. It says everything that only with Switch 2 does Nintendo finally have a console powerful enough to easily emulate its last normal console - the GameCube.

Now it may be that as when last they tried to awkwardly shuffle towards more premium products like the 3DS and Wii U, Nintendo brutally discovers that their customers really do suffer from sticker shock. But that would be consumers making a very logical choice, the same choice that has seen more and more gamers gravitate towards mobile, indie or retro gaming; that they don’t care about these new fangled graphics and just want to play relatively basic games on whichever system will run them. That is the rational consumer in action, considering the benefits and the costs, and deciding to go for a cheaper product because they don’t care about what the additional expense buys them.

What people freaking out about the Switch 2’s pricing structure are doing, is something very different. Mario Kart 8 released on the Wii U back in 2013 for $60, which in today’s money is slightly more than $80. The Switch released for the equivalent of $390 back in 2017, only $60 less than the Switch 2, and there’s good reason to believe that the new console is a more advanced system relative to the rest of the gaming landscape than its predecessor. Indeed, given it seems to performing at around the same PS4-esque level that most handheld PCs are pitched, it is very competitively priced.

What’s more, the Switch 2 is being released into a video game business that is imploding. That is partially due to the industry being hit particularly badly by the general withdrawal of cheap and easy credit, given outside the biggest publishers, games usually require funding from external investors to cover the many years they spend in development before finally earning their money back upon release. There are also chronic issues with mismanagement within the industry that was exacerbated by the pandemic not just disrupting normal working patterns but causing several publishers to overestimate the public’s appetite for live service games.

Obviously the industry has to get its own house in order, but part of that is it charging the correct amount for video games. The whole industry bears all the hallmarks of one distorted by price controls with publishers reacting to their inability to go beyond the informally agreed maximum by finding other ways to charge fans more be it offering premium editions, in-game purchase or expansion packs. A real danger with such charging strategies is that they exploit the most dedicated fans who are encouraged to spend small fortunes on character upgrades or cosmetics that feel dangerously close to exploiting those players too addicted or innumerate to realise how much they’re ultimately spending. Likewise, they become an enormous timesink, with development teams that could be developing new games instead tasked with producing endless digital tat.

Whatever you say about Nintendo, they have largely stood aloof from this trend. They are notoriously assiduous at not offering in-game purchases within their games, and when they do offer expansion packs, they tend to be substantial and competively price. The best example is the Switch’s edition in the Animal Crossing, where Nintendo offered several free updates before closing the game up after eighteen months with a substantial paid expansion that was free to subscribers through Nintendo’s premium subscription service. And that subscription service is itself priced extremely reasonably compared to other console producers, although to be fair it is an inferior (but improving) service. Nintendo can do this both because they manage game development budgets more carefully than other publishers, but also because they’re willing to charge people a genuine price upfront for their games.

Transparency is always better for the consumer because it allows people to make informed decisions about whether they want to purchase something or not. Charging premium prices for premium products not only allows for those premium products to be produced when there is genuine demand, but also acts as discipline if producers are getting ideas above their station and creating a product that is too expensive for their market niche. It also avoids the problem that plagues video games at the moment, where smaller/simpler games are judged relative to the blockbusters, and so can only charge an appropriate fraction of what the biggest games cost. If the biggest games start being priced between $80-$100, that allows the next level down to starting charging around $60 rather than $40, or $40 rather than $20. That may help make more such Double-AA games viable, so increasing the number of quality games that are successfully released. But above everything it stops publishers relying on sketchy or speculative gimmicks to bridge the gap between what their games cost to make, and what they think they can charge upfront. It is not a coincidence that it is the most beloved and respected game publishers that can charge the highest prices - they are held in such esteemed because they don’t distort their games to further gouge players.

And it was depressing to see so many content creators encouraging fans to lash out at transparent pricing by refusing to acknowledge the march of inflation or Nintendo’s previous good behaviour on DLC. We had people engage in the fantasy that the Switch 2 pricing was somehow pricing people out of gaming, when ever greater numbers of people are moving to much more expensive gaming PCs. It is common for people in the media to complain about how toxic the online discourse has become but journalists and content creators have to realise they help set the tone of these discussions. If they want their audience to chill out, they should try telling them the truth.

And that lesson applies to more than just gaming. An ugly cynicism mas has infected much of the media landscape that makes everyone miserable by refusing to place things in their proper context. Nothing is more likely to attract howls of outrage or derision than to say that whilst there’s room for improvement the economy is working well for most people. Nowhere is there the space for people to make an honest case for a difficult decision with so many figures having to hide their intentions behind misleading gimmicks, something we see most notably with British fiscal policy. We desperately need more people in the media to put away their cudgels and be willing to be pro-system, not being afraid to explain the true trade-offs to people. Otherwise we will end up with more sights such as what we saw outside the White House a few hours after Nintendo’s video presentation, as Donald Trump declared economic war on the rest of the world.

Cooling Content Consumption Corner

It’s been mostly doomscrooling and watching Switch 2 trailers this week but I did finally finish Get In by Patrick Maguire and Gabriel Pogrund. I am left even more concerned about Sir Keir Starmer’s suitablity to be Prime Minister in these difficult times, with the sections on his attitude to Israel/Palestine and approach to management in Cabinet, portraying a limited and aloof figure without the empathy or imagination to be an effective leader. In particular there’s real reason to fear that his desire to be seen as serious and results-focused and Morgan McSweeney’s hatred of anything that smacks of corbynism, means they will stay too closely aligned to an increasingly deranged American government.