TESO and the Subscription Fee --- An Unbiased Lesson in Econonmics

I've been a longtime fan of the Elder Scrolls series, so I've been following the chatter about the new MMO soon to be released in the Elder Scrolls universe.  It seems the majority of the talk is around cost of the game's subscription model, and the value provided for that price.  It's clear that there are very few people who are thinking about this in a rational way, so here is how this works, from an economist's unbiased perspective.

With a fixed price product, there is really only one relevant variable to consider with regard to willingness to pay: Perceived Value.  Everyone has different perceived value they place on this game, and a different willingness to pay for that value.  For any given person at a point in time, if the perceived value the game is greater than the price, that individual will buy the game.  If the perceived value is less than the price, they won't buy it.  It's that simple.

There is no universal measure of value.  The perceived value of an item is different for every single person, and depends on many different factors. In this case, these include how big of a gaming fan a person is, how much they like Elder Scrolls, how much they like MMOs, how excited a person is about the game based on what they've seen so far, how much time they are planning to put into it, whether their friends are playing it, etc.

The game was set at a $60 fixed price plus $15/month.  All negative comments by individuals thinking or discussing purchasing this game fall into one simple category of non-purchasers. Example comments I've seen over and over include:

"For what you get, it's not worth $15/month"   
"There are better [or equally good] games that cost less than $15/month"
"I can't afford a $15/month subscription fee"
"Skyrim had better graphics/gameplay and had no subscription fee"

It doesn't matter how it's justified.  Comparisons to other MMOs, single-player Elder Scrolls games, etc. are irrelevant.  However an individual frames it, they are all saying the same thing: The perceived value to him/her is less than the price.  Due to a unique mix of personal factors, they believe alternative uses of their money (and time) provide greater value than this game.  The opportunity cost is too high.  These people will not purchase until either the price or the perceived benefits of the game change.  End of story. On the other hand, all those individuals whose perceived value of the game is greater than the price will buy.

I keep hearing people say "This game will be free to play within a year."  The bottom line is this: The game company has set their pricing based on their one and only objective: return on investment.  They have priced the game with the goal of maximizing total profit over the entire life of the game.  The market will dictate what decisions the company makes with regard to pricing.

People will vote with their dollars, over time, whether or not the price as set is profit-maximizing for the publisher.  To keep with this singular goal, they may keep the price the same, or they may decrease the price over time to incent those individuals with lower willingness to pay (ie. lower perceived value) to buy and play the game.  Note that a decrease in price also may alienate/upset those loyal individuals who had been paying the higher price, which could counteract the influx of new players to some extent.  Increased number of players also increases costs to some extent due to servers/support/administrative, which is also important to keep in mind.

So, the game might be $15/month forever.  It may end up as $5/month.  It might go free to play.  The publisher will decide based on what they feel maximizes total future profits.  If you feel you understand economics and this industry so well that you can predict what this will be, you are free to conjecture.  I can assure you that the publisher understands these forces at least as well as you do, and has plans to act accordingly (or no plans to change at all) based on their own market research and projections.

To give a more extreme example of this entire topic, take Ferrari exotic cars.  I like Ferraris. They're fast, fun, make me look/feel good, etc.  These are the benefits they provide.  Assuming I have or can acquire the money to buy one, should I?  To the vast majority of us, the $250,000+ could be better spend elsewhere, despite the fact that most of us would love to have one for free (or for the price of a regular car).  To us, the perceived value is less than the price.  However, there are some individuals out there such that the perceived value is greater than any alternative use of that $250,000.  These are the individuals who buy Ferraris.  Are they wealthier than most people on average?  Absolutely.  But there are extraordinarily wealthy people who never buy expensive cars, and some ordinary-income people who do.  I won't take sides about what's "right" or "wrong" because it's irrelevant.  It's all about perceived value, which dictates someone's willingness to pay for a product.

Whether you see TESO as a Ferrari of video games or just a Hyundai with a Ferrari price tag, it's your opinion based on your own perceptions.  You're free to keep discussing your thoughts, but know that those of us who understand economics better think your comments are lacking in perspective.  Whether you buy the game or not is your own business based on the value you place on the game.  Whether you eventually buy/play it in the future, given a change in price or value proposition, is also your business.  You are unique, and the entire landscape of both those with similar opinions and vastly different ones will dictate the success of the game and the publisher's attempt to improve upon that success (or lack thereof) via changes in price or features.  I don't see people storming Ferrari forums complaining the price is too high, that what you get for $250,000 isn't worth the price, or that they'd buy it if it had X/Y/Z.  We all have our own financial situations and willingness to pay for a product/service, and we all place different value on a given product/service.

I wont' tell people not to comment on this topic, but I do hope you'll keep this in mind as you do.