M18 GAMES! :D

Article from Straits Times: M18 games: Prices unlikely to go up

Distributors plan to absorb 80-cent sticker fee, starting with Grand Theft Auto IV. Extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer.

That is what the distributor of Grand Theft Auto IV (GTA IV), the first game to be affected by the revamped system, said.

The game will be released for Play Station 3 and Xbox 360 machines on April 29, a day after the new rating takes effect.

The additional expense stems from the Media Development Authority’s (MDA) 80-cent charge for every M18 label issued.

So for game distributor Infocomm Asia Holdings (IAH), which plans to import 20,000 copies of GTA IV, this means an upfront payment of $16,000 to the MDA.

“The regulations of the new system were announced after we submitted our suggested retail price. WE are keeping to it,” said Mr Jonathan Sze, assistant director of IAH’s product management division.

Sales volume will help determine whether the company will absorb the additional charges for other games. For GTA IV, 80 per cent of the 20,000 copies have been pre-sold

A Sunday Times check with other major distributors such as Microsoft, Atari, Maxsoft and Electronic Arts revealed that most of them plan to absorb the new charges, though nothing has been finalized yet.

Only New Era, another big player, has confirmed that it will not pass on the fee to the consumer.

This move has got the thumbs up from retailers.

“It would be best if distributors were to absorb the sticker fees” said MR Ong Jenn Long, 30, a purchasing communicator at video retailer G3. “This way, we do not have to burden our customers or incur possible losses at the end”.

But retailers are worried that they could be charged fees similar to those currently imposed on DVD and VCD retailers.

DVD and VCD retailers pay a one-time fee of $30,000 as a security deposit and an annual fee of $1200.

If these fees are levied on video-game retailers, the likely result is that consumers will feel the pinch

“We would have to charge around $5 or more for each game,” said Mr Koh Kew Siong, 38, manager of The Software Boutique. “We might not carry M18 games then.”

Purchaser Easter Seah of Comics Connections, another games retailer, shares her sentiments.
“ If that really is the case, we won’t carry M18 games anymore,” she said.

The move to introduce M18 and another category – Age Advisory – is meant to open up more choices for consumers.

Without the new regulations, GTA 4 would most liklet be banned, just as GTA I, II and III were.

Reflections:

This article talks about the incidence of taxes, which is the division of tax between the consumers and producers.

This new game, GTA IV that would be launched in the market soon, has yet to test the market of its receptiveness towards this game since GTA I, II and III were all banned. This would officially be the first time that GTA IV gets launched in the market, as the move for M18 games were open to provide “more choices for consumers”.

It is clear why the extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer. Firstly, the demand for such game softwares is highly price elastic. There are many cheaper and better alternatives that the consumers can turn to. Due to large scale of the computer games market, there is a lot of competition in the industry. Therefore, firms need to have an upper hand advantage by reducing the cost incurred from the classification in order to draw more consumers to purchase its goods.

Secondly, such video games are deemed as a luxury good. People are often not willing to pay extra for such goods. Besides, since it’s the first launch of GTA IV, the success and value of the game has not been guaranteed. No one has ever played this game before, so no addiction towards this game has been formed. This firm thus, does not have a fixed pool of people that would be hooked on the game and buy it no matter what price it would be. Therefore, in order to ensure that the consumers would support this game, the firm definitely needs to use a low price as a luring factor.

Since the demand for GTA IV or any gaming software is price elastic, the greater the incidence of taxation would be on producers. It was also mentioned in the passage that absorbing the sticker fee by the software firm would be beneficial to both the consumer and producer as they “do not have to burden customers or incur possible losses at the end (by producers)”. Raising the price of the software might deter many from buying it. In addition, the consumer size has been sized down to those above 18 years of age, due to the addition of a new category M18. Therefore, it is more important to capture the remaining consumers left and persuade them to choose this game over the rest. If the price is raised, it might cause consumers not to “carry M18 games anymore”.

This new sticker fee would also serve as a barrier to entry for new emerging gaming firms. As said in the passage, if “game distributor Infocomm Asia Holdings … (would have to pay) an upfront payment of $16,000 to the MDA”. Having less firms in the market, would mean less competition in the market. GOOD news or BAD news for the consumers? IT DEPENDS :D

-Gaomin-