Explainer: Decoding the gaming industry’s pricing experiments
Price hikes, price drops and now dynamic pricing. Here's how the various mechanisms affect spending habits.
We’re entering a weird new world when it comes to how you pay for videogames.
Consider the past month. We’ve seen price rises (mainly for consoles), price drops (Xbox Game Pass) and now, in hushed whispers across the gaming business, talk of dynamic pricing (both Nintendo and Sony are actively experimenting with this). Let’s hope nobody gets inspiration from Uber and tries surge pricing!
It’s all such a far cry from what we are all used to. A lifetime ago, working at retailer JB Hi-Fi, I found that games and consoles usually cost the least at launch, when competition to sell them was at its greatest. Then a day or two later we’d bump the price back up to recommended retail. It would stay this way until it went on sale, usually months, or even years, later.
Physical retail made pricing harder to adjust, and therefore simpler for consumers. Now, while retail largely operates in the same way, digital storefronts have unlocked new strategies. As broader economics continue to pincer the gaming industry, experimentation has begun in earnest.
It’s an issue I’m keen to follow as it unfolds, especially in regard to how these models interact with various consumer laws. But to help get a sense of it all initially, I’ve teamed up with pricing and marketing expert Kayla Medica to understand some of the mechanics behind the strategies at play here.
Thanks for joining me, Kayla. I wanted to first ask you about the console price hikes in recent months. Consoles are traditionally a loss leader for gaming companies. Yet Sony bumped up its consoles by between 15 and 20 per cent last month. That follows another price increase from May 2025. Can you talk me through the mechanics of price increases?
Kayla: Thanks for having me! Raising prices can not only adjust for the increase in production cost but also reduce the loss that these companies take to sell consoles — it can be a net positive for the company. They sell lower volume, but they also lose less money.
There is very much a pure business decision at play here: charge a premium and sell less but potentially increase profitability, or sell it “cheap” and move higher volume of stock, which might help them reduce the cost of production through economies of scale (i.e. the more you make, the cheaper it is to make, due to bulk pricing discounts on raw materials and manufacturing) and help them get into more homes and then go on to sell more games.
Harrison: That’s really interesting. We actually saw a couple of things happen in response to this latest hike. For starters, there was a rush on consoles in response to it, triggering another wave of sales.
Kayla: Price increases to generate sales are actually used all the time! Think about early-bird event tickets, hotels and flights, new calendar or financial year price increases — there are endless examples. Oftentimes this is also related to supply and demand or material costs increasing, but it can also just be artificially inflated for no real reason.
Harrison: I just wanted to pull up something you mentioned earlier. It’s interesting that you mention profit here. As I touched on, while Nintendo is an exception to the rule, the typical play with consoles is for them to be sold at a loss, and make the money back over time by charging a premium for the games themselves.
Kayla: Yeah, that’s a common approach. A loss leader product that hopes to upsell you later is called a “land and expand” strategy. Away from the console topic, it’s similar to freemium app-based games, where a few whales offset the cost of giving something out for free to the majority of users — however, that mass number of users might be what makes the game worth playing, and so it’s a necessary evil.
If (profitable) games rely on multiplayer mode to make them “worth” playing and paying for, then that free user base is essential to attract the whales.
All of this is to say pricing is complicated and depends on a number of factors: what game types are bringing in profit and what their value proposition stems from, the company’s overall profitability, the journey from entry point to a payment being made — it all has to be viewed as one connected piece.
Harrison: Let’s move onto the next point that has everyone up in arms: dynamic pricing with games. How does this work more broadly?
Kayla: Dynamic pricing requires the company to have a lot of real-time data. The simplest data is supply and demand, like in the case of Uber knowing how many drivers are available compared to how many passengers are requesting them — and importantly, the price goes up for all passengers during surges. In the case of Sony using a factor like assumed income, that would be pretty shitty of them.
However, simply changing the price due to location isn’t necessarily dynamic pricing; it could just be localisation. If we go back to the dichotomy between selling a lot of things cheaply vs selling fewer things for a higher price, localised pricing allows less wealthy geographies to still get the same game as wealthier nations, while the company still makes a profit in both regions. If they’re doing this then I’d be all for it, because gaming is such a universal hobby across all kinds of diversity factors.
Harrison: This is what I’m wondering. To an extent, dynamic pricing already exists on a geographical basis, thanks to currency fluctuations. And games are just cheaper in some regions because that’s what the market can pay.
Kayla: Yeah, real dynamic pricing would be two people in the same town being charged different amounts at the same store because of their gaming history, which will probably cause uproar — but there will be no change unless people universally vote with their dollar. You cannot influence these companies to change their tactics if you continue to buy games from them, because you’re proving their theory that people will pay the price they set. You’d need a proper boycott to get them not to do it.
Harrison: It’s interesting. We’re hearing a lot about pricing experimentation from Nintendo, Microsoft and Sony. But little from Steam. And prices for games fluctuate a lot on that platform too, continually going on sale and essentially creating a culture that disincentivises buying a game at full price. The last thing I wanted to ask: do you think there are any other pricing models that may surface here? Any other thoughts on the direction this could all go?
Kayla: One interesting pricing strategy could be group-buying. Take games like It Takes Two for example: it specifically requires two people to complete the game and it’s aimed at couples — even long-distance couples. They have the ability for the second player to join the co-op game without having a second copy of the game; basically, only one person needs to have the game for two people to play together via internet connection, and not sharing a single console if they’re not physically in the same place.
There’s absolutely questions here as to what consumers will and won’t tolerate in terms of monetisation. And whether its fair too. But the group buying model could be another avenue for exploration here. Especially with games that get more value from more players playing together in a session (think: Mario Kart or Mario Party). It could be interesting to see shared group logins much like a Netflix account.
What do you think about gaming companies experimenting with new price points and models? Is there a model that seems fairer to you than any other? Let us know in the comments.
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