Browsing through GI.biz, I came across this bit where a UK store is speculating with a retail price of 400 pounds for the XBox 360. That got me thinking into the prices for other territories.

400 UK pounds is roughly US$ 700. However history says a more likely US price would be $500. History also says that the rest of Europe would see a price of 500 Euros. Weighing in the standards of living, average salaries and whatnot, this means gaming in Spain and most of Europe is twice as expensive as gaming in the US. A similar problem happens with the price of games themselves. No wonder the European market is still behind the US, despite being potentially bigger. I’m going to build some rough figures to get an idea:

Price of a movie ticket:
US: $7 ($7)
UK: 5 UKP ($9)
Spain: 5.5 E ($6.7)

Price of a PS2 game (checked Episode 3 on PS2 in Amazon and FNAC):
US: $50 ($50)
UK: 40 UKP ($72)
Spain: 60 E ($72)

Price of a DVD movie (checked Collateral and Troy)
US: $20 ($20)
UK: 16 UKP ($28)
Spain: 20 E ($24)

Average salaries (circa 2002):
US: $37K /
UK: 22K UKP ($39K) (Interesting bit: median salary was 18K UKP ($31K))
Spain: 19.2K E ($23K) /

(Sources: (US) http://www.bls.gov/cew/state2002.txt (UK) http://www.lirg.org.uk/lir/pdf/article82e.pdf (Spain) http://www.invertia.com/noticias/noticia.asp?idnoticia=1295847 )

Relative prices of a movie, game, DVD:
US: 0.189, 1.351, 0.540
UK: 0.227, 1.818, 0.727
Spain: 0.286, 3.125, 1.042

So, in Spain, a game is more than twice as expensive as in the US, for people of similar standard of living / social status. Of course the salaries are for 2002 whereas the exchange rates and costs are more recent… but I don’t think the results are too far off anyway.

Now, if you need to earn double of the national average in order to be able to afford games in a similar way as the average american does, well you see why gaming is not terribly popular in Spain. At least, paid gaming. 🙂 Let’s make a wild guess that 20% of the population earns at least twice the national average. With a population of 40million (compared to the US’s 290m), you’d conclude that the spanish high-end game market would be roughly 5% of the US. According to http://www.electro-imagen.com/es/noticia/1678, Spain has 2.6% of the worldwide games market, so these figures are not too far off. For our population, we should be somewhere around 6% of the global games market.

Now let’s look into pricing. Given our standard of living, to achieve similar unit sales %’s as the US or UK we would need prices of games slashed from 60E to around 25E. Such a 60% price drop would probably bring revenue per unit down to 20% of what it is today (considering fixed costs such as operations, manufacturing, distribution and etc). If you sell 3 times as many units, but only make 1/5th the revenue, you end up losing money. Such bold attempts have caused enough damage to our industry in the past.

Ok, enough pulling numbers out of my hat. There are enough assumptions here to fill several trucks. Is there a sweet spot where a small price drop could bring a noticeable increase in sales? Well, if that price drop happened, the public wouldn’t increase overnight without some serious publicity and campaigning. Since the games market is handled by several competing companies, it’s unlikely they’d all agree to something like that. However, with the new crop of consoles coming out during the next year, it would be a great opportunity for one of the console makers to pull it off. I’m looking at you, Microsoft.