The standard $70 price for AAA games has remained static despite inflation. The highly anticipated launch of Grand Theft Auto 6 could be priced higher, giving other publishers the "cover" they need to raise their prices to $80 or more. This single product launch could effectively reset the market's price expectations.
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For the past five years, the top-performing shows on major streaming platforms have been adaptations of video game IP, such as 'The Last of Us', 'Fallout', and 'The Witcher'. This demonstrates a significant cultural shift where gaming franchises are now the dominant source of new, blockbuster entertainment content.
As audience fatigue with superhero movies grows, Hollywood studios are increasingly turning to the video game industry for their next wave of reliable, high-grossing intellectual property. Films based on Minecraft, Super Mario Bros., and The Legend of Zelda signal a significant shift in where entertainment giants are sourcing their blockbuster content.
For luxury brands, raising prices is a strategic tool to enhance brand perception. Unlike mass-market goods where high prices deter buyers, in luxury, price hikes increase desirability and signal exclusivity. This reinforces the brand's elite status and makes it more coveted.
Contrary to conventional wisdom, re-accelerating inflation can be a positive for stocks. It indicates that corporations have regained pricing power, which boosts earnings growth. This improved earnings outlook can justify a lower equity risk premium, allowing for higher stock valuations.
Pricing power allows a brand to raise prices without losing customers, effectively fighting the economic principle that demand falls as price rises. This is achieved by creating a brand perception so strong that consumers believe there is no viable substitute.
The lack of a great pre-installed game on new consoles isn't an oversight but a calculated business decision. Platforms prioritize capturing user payment details immediately by forcing a download, avoiding sales cannibalization from third-party developers, and maintaining options for lucrative paid bundling deals.
Similar to the early internet, the time users spend on video games far outweighs the advertising dollars captured by the industry. This gap indicates a huge, untapped monetization opportunity where ad spend will eventually calibrate to match user attention, especially among young male demographics.
The difficulty of video games is not just a creative choice but a direct function of their business model. Arcades monetized failure, so games were hard to extract more coins. Home consoles monetized a single purchase, so games became easier to appeal to a wider audience, showing how platform shifts alter design philosophy.
Recent streaming price increases, which are vastly outpacing inflation, serve as the primary evidence that the market is already too consolidated. Further mergers would grant companies like Netflix unchecked pricing power, transferring wealth from consumers and labor directly to shareholders in an oligopolistic environment.
The success of events like the Daft Punk concert in Fortnite signals a strategic shift. IP holders will launch new brands within games first to build community, then expand to movies or TV. Games are now viewed as the most influential social platforms, not just secondary marketing channels.
