Friday, July 6, 2007

Video Game Prices Drop 60% in First Eight Months

I tracked the prices of video games released in October and November of 2006, 2004, 2002, and 2000 to see how their prices behave after a game has been on the market eight months, two years, four years, and six years. The average game released in 2006 dropped 60% between it's release and July 1st. The games released in 2004, 2002, and 2000 had dropped an average of 20% in this same time period.

The graph below shows the relative price changes from February 1st to July 1st on a daily basis for each release year.
Old video game prices vs Video Game Index
Video games are obviously a depreciating asset. Every single year they drop in price over time. Like cars, computers, and most other equipment, the prices drop the fastest the first year. Games released in 2006 depreciated an average of 32% from their release date until February 1st, going from $42.08 to $28.66 in three months (not shown on graph). And then drop another 38% in the following five months from February until July 1st, going from $28.66 down to $17.70. The average video game released in 2004, 2002, and 2000 only dropped 20% during this same time frame going from an average of $9.61 to $7.70.

By the second, fourth, and sixth year after a video game's release, the prices follow almost the exact same pattern in their price depreciation. This also is very close to the Overall Video Game Index as you can see in the graph below.
2006, 2004, 2002, 2000 Video game prices
This information won't stop me from buying the Halo 3's, Mario Galaxy's, and Metal Gear 4's of the world, because they are worth every penny and I don't want to wait six months. But for all those marginal games that I might like but can't quite decide if I want to buy them, I'll wait a few months and save myself some money. If I wait six months, I can buy two games for the price of one.

Downloadable Video Game Price Guide available


Travis Hendricks said...

I hear ya about that last paragraph especially. Obviously I'll be buying Metroid next month because I would rather pay full price and play it sooner than have to wait. Games like Contra 4 for the DS though will have to wait. And 60% is quite the difference not to wait.

I wonder how a game like Resident Evil 4: Wii Edition would drop in price during the same 6 months considering it started at discounted price of $30.

Cory said...

One thing I've noticed about DS games is that they don't seem to drop in price very fast. Two examples are Kirby Canvas Curse and Mario and Luigi 2. They both were released over two years ago but still sell for close to their original price. Whether you buy them used or not.

JJ Hendricks said...

Good observation Cory. I plan to post some analysis in the future with prices comparisons for all the different systems. I have a feeling that some systems prices stay higher on a more consistent basis but I guess the data will show it that is true.

Let me know if you have any more ideas for posts. So far my readers have given me my best ideas yet.

Anonymous said...

I'm curious about how this applies to digital download games. Microsoft's Xbox Live marketplace has been up much longer than 8 months, and I can't think of a single game that has seen a price drop. (Didn't Lumines' add-on packs *increase* in price after a time?) It looks like Valve's Steam service is dropping prices, though.

JJ Hendricks said...

Noyb, good question. I only track prices of games that can be resold but I bet Live games drop in price some too. But I'm sure it is not 60%.

With Live and Playstation Network games the prices are much more stable because the publishers basically eliminate the used market with the download games.

Anonymous said...

It may be interesting to see if there's any relationship with the price drop and the media used. As someone mentioned before, DS prices remain fairly consistent... is this the market forces of popularity? Or simply because game ROMs are much more expensive than a DVD. This might also play a role with the earlier games being more cartridge based (if I remember correctly)...

Also it also might be interesting to see if the cost of creating a DVD has gone down since 2000.

JJ Hendricks said...

I definitely think there is a correlation between the media and the price drops. A lot of which is due to the publishers releasing 'Greatest Hits' versions. They start selling the game new for $19.99 so the used ones would drop below that for obvious reasons.

Back in the N64, SNES, and Genesis days this wouldn't happen because the ROM's were so expensive to make like you mentioned.

I plan to do a comparison of prices over the first six months of release for all different systems to try and show some of these differences between systems.

mndrix said...

Interesting. The early depreciation makes sense. I wonder what caused the price spike for the 2006 games during the first two weeks. It looks like games actually appreciate by about 5% during that time before dropping sharply.

JJ Hendricks said...

I need to do a better job in the future with my graphs and my data correlating. The graph is prices from Feb until July, but all the data is from Oct until July.

The price spike in February on the graph is an increase in prices during that time but the 1.0 on first point on the graph is much lower than the initial sales price of the items back in October.

I will try to graph all my data in the future. That was a mistake on my part.

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