Thursday, June 21, 2007

Pokemon DS Games Raise All Pokemon Prices

Pokemon Diamond and Pearl were released April 22nd for the Nintendo DS and prices for all the older Pokemon portable games shot through the roof in anticipation. Apparently, the slogan “gotta catch’em all” refers to the games as well as pokemon themselves.

graph pokemon game prices
The graph above shows the average price of all portable pokemon games on a seven day moving average vs. the price for all video games during that same time. The data starts in early February, almost three months before the DS games were released, and goes until the end of June 2007.

The blue section shows the prices stay relatively even with the overall video game index initially. From the end of February until Pokemon Diamond and Pearl were released on April 22nd (the yellow section) prices start rising and don’t follow the same trends as the rest of video game prices. For the next month after the release prices fall back into the overall trend and steadily decline at roughly the same pace as the index prices. Starting in the green section though, prices for Pokemon games start increasing again and are nearly 50 percent higher than other video games at that point and 23 percent higher than when they started back in February.

What accounts for these big differences in prices and the three separate price increases? Generally, people want to collect all 493 pokemon, which requires them to buy the older games as well as the new one. Or, they enjoy the new ones so much they want to play the older games, too. Whatever the reason, people seem to really increase their buying at three separate times shown on the graph below.

graph of pokemon game prices
The first increase is about two months before the new DS games release and prices increase about 20 percent in 30 days. The second increase is shorter and not as big, about 11 percent in two weeks. The third price spike starts the day kids get out of school for the summer, May 25, the Friday before Memorial Day. Parents start buying games for their kids once they are out of school and have more time to play. What better way to entertain your kids all summer than a collection quest that requires you to beat at least three different games?

The time between the three price spikes are generally decreasing about the same as the overall video game market. Showing that supply and demand for pokemon games and all video game are about the same during these time periods.

I plan to continue looking at pricing trends for other old games after the new ones come out to see if this same phenomenon occurs. Does it happen to Spiderman 1 and 2 when the third game came out? What about Final Fantasy X and X-2 when Final Fantasy XII came out? I’m guessing all games show a spike to some degree when a new one in the series arrives, but by how much? Back to the data I go to find out.

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Tuesday, June 5, 2007

Buy Video Games in November

If you want to save money on your video game purchases, buy used games the first week of November when the prices are the lowest they will be the entire year.

Before I get into any analysis, I want to go over what this graph represents. I randomly chose 50 used video games for PS2, Gamecube, Xbox, and Gameboy Advanced and tracked their prices on a daily basis for the past 18 months. Each price point on the graph represents the average of all 50 games on that particular day. The graph was indexed so January 2nd 2006 is defined as 100% and every other day is a percent of that value. For example, November 4th is 60.3% of the January 2nd price and also happens to be the lowest point of the year. (If you want to know how I get the prices for each of the 50 games read my "How do I get the Prices" post)

The prices throughout the year seem to break up into four distinct groups better illustrated below.

The blue segment is January through the end of May and prices are decreasing for the most part. Yellow is the summer months, June through the end of August and prices are fairly steady during this time period. Then there is a drop in September and October represented by the pink region. And finally a sharp rise in prices starting in November and ending at the end of December shown in green.

I think some major events are responsible for the general trends. Christmas is obviously responsible for the big upswing in the green region. Video game prices increase more than 30% from their November lows to the December peak and this makes sense because everyone and their mother (literally) are buying video games for gifts. The prices in the blue region are the inevitable decline in prices after the Christmas rush is over, but why is there a distinct leveling out of prices starting in June? From my experience and from what the data shows, I think people start buying games again once kids are out of school. I know, I know, they should be playing outside on their bikes, but the prices stop declining right after Memorial Day and stay steady up until Labor Day. I think video games are used as a cheap way to entertain the kids while they are home during the summer. After Labor Day the pink region starts and prices decline again until November when Christmas shopping takes over.

So what can you do with the data? If you get a bunch of games for Christmas that you decide you don't want or you beat in two days and you decide to sell them online. Be sure to sell them as quickly as possible because they depreciate pretty fast. Or if you are looking to buy some used video games as gifts for Christmas or Hanukah, buy them in November. Procrastination will cost you quite a bit of money.

Just as you compare an individual stock's return vs. the SP 500 to know how it behaved relative to the market; I will be using this baseline seasonality graph in all my future posts. Individual games prices will be compared against the overall used game market to see how they compare. I will start using it in my next blog post about Pokemon game prices before and after Pokemon Diamond and Pearl released for DS this past April.

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