Commentary on Euro Pricing Flamefest

[HMXGLo]

Hi, I’m Greg. I run product development at Harmonix, and have some insight into the RB European pricing controversy. I haven’t been authorized by my corporate masters to comment on this topic, so these comments should only be attributed to me. Here’s what I’d say in response to the Euro pricing complaints if I were so authorized.

First of all, we pay close attention to all the customer and fan comments that come our way, in the forums and elsewhere. We are in this for the long haul, and we know that customer satisfaction is the key to our long-term success. We can’t keep everyone happy all the time, but be assured that we all show up every day and work hard to make Rock Band as good as it can be in every way that we know how. This isn’t corporate BS, this is how we really feel. So:

We’re not making a killing on Rock Band in Europe. We are incredibly sensitive to pricing issues. We are painfully aware that the higher the price we charge, the less copies we’ll sell. That is true of any nonessential commodity; it’s not rocket science. Given that our ambition is to establish Rock Band as the premier music game title in Europe, we are strongly motivated to keep the price as low as possible. That said, we don’t propose to lose money on it. The fact of the matter is, the costs of releasing in Europe are far higher than in the US, in some ways uniquely so for Rock Band compared to other game titles, because of the size of the peripherals. Oh, before you ask: no, I’m not going to share details of our cost structure. That would probably get me fired, and rightly so. This is just general information collected and presented for your convenience. Some specifics :

--For a box the size of the RB box, shipping costs are really high, and far higher than in the US. Why so high? I have no idea; I make games for a living and have no deep knowledge of the world of European shipping. But it’s a fixed cost that doesn’t apply to conventional games, for which shipping costs are a far smaller percentage of the retail price. Seriously, I was shocked to learn how much it costs us to ship an RB peripherals box to Europe. It’s way more than you’d expect.

--It is a bit misleading to compare the US Suggested Retail Price (SRP) and the UK Suggested Retail Price as apple-to-apples, in two key ways.

1. The European SRP incorporates the VAT tax, but AFAIK, there aren’t any further taxes piled on at retail. In the US, the SRP doesn’t include state and local sales taxes. These vary from state to state, (and don’t exist at all in a few states), but a reasonable rule of thumb is that US customers are paying an additional 5% on top of the SRP. So the appropriate full-bundle US price to compare against isn’t $169.00, but more like $177.50.

2. Another key distinction between the US and Europe: games generally sell for the SRP at all retail outlets in the US. Wal-Mart, Target, Best Buy, Gamestop, etc all charge the SRP for games, with rare exceptions. It is my understanding that European SRP incorporates a hefty retail markup, but that European retailers are free to discount if they so choose. So European retail customers have a reasonable chance of paying less than the SRP, unlike US customers, almost all of who paid the full SRP plus sales taxes. So a reasonable price comparison is what you actually pay, not just the SRP, which means two different things in the two territories.

--This is probably already well understood by folks on these forums, but the built-in VAT tax boosts the price by an additional 17.5% in the UK, and more elsewhere in Europe. That’s not the whole discrepancy, but it’s a big chunk of it.

To recap my main point: we’re not gouging you, primarily because doing so doesn’t serve our interests. We can only build our franchise if you buy our games. You may conclude that Rock Band isn’t worth the price charged, and that is your prerogative. But it’s not magically going to get cheaper because you wish it to be so.

Final point: is it worth the money? You can all be the judge of that once you’ve had a chance to play it for yourselves. Obviously, we’re biased at Harmonix; we live and breathe this game. But we’ve sold a ton of these in the U.S. at a far higher price point than people are used to paying for a video game, because it really is a new and different experience that you have to experience to believe. Once you get a crack at it, you’ll know whether or not it’s worth the money. We think you might decide that it is. OK, I’m going back to work. Thanks for listening.



***UPDATE***

There have been some questions on this thread about why we didn’t simply ship full bundles including the software in Europe, as we did in the US. It is a good question, and the answer isn’t totally obvious. Like the last post, this is my unauthorized personal opinion, and carries no official weight. That said, here are some reasons why:



1. The peripherals are manufactured in China, but the software is manufactured in Europe (Mike?). In order to bundle the software, we would need to set up a bundling facility, ship all the peripherals to it, open each box to insert the software, then re-pack it into containers and route it to the distribution centers. This is very expensive to do in Europe, and we are actually focused on trying to keep costs down; see earlier post. It isn’t really possible to do the bundling in China, since the peripherals shipping is done by boat (airfreight would be insanely expensive for boxes that big), and the peripherals need to leave China before the software development is complete.

2. The game disc and peripherals are identical for all European territories, but the manuals have to be localized for each country, so in practice the software package is different for each country. That means that for each territory that we launch into (currently UK/France/Germany), we’d need to build and track separate bundles. If we were to launch into additional territories in the future, then we’d be obliged to track even more unique bundles. This also has big inventory-management challenges. For example, if the game ends up selling really well in Germany, but not in France, then we’d have a warehouse full of French bundles and no inventory for Germany. For a region like Europe, it just makes more sense to treat the software and hardware separately. This wasn’t an issue in the US, since it’s one giant (mostly) English-speaking country.

3. Given that the game is expensive (which we acknowledge), we want to provide some alternate options for purchase than the entire bundle at one go. If you already own a USB microphone, it will probably work with Rock Band. Depending on the console you own, other controllers you own may (OR MAY NOT! See lengthy commentary elsewhere on this forum) work with Rock Band. Providing standalone software and peripherals may give you an opportunity to get into Rock Band at a lower price, depending on your situation.



I hope this helps to clarify that specific point.