High street price war kicks off

High street giant GAME has reduced the price of its chart titles to £29.99 from today as part of an aggressive ten-day promotion - a move which is likely to provoke an ugly confrontation between publishers and retailers over the coming months.

The move, effective across all of its UK stores from today, has been widely expected for some time with GAME and other high street chains increasingly under pressure from aggressive online retailer and supermarket pricing which has slowly chipped away at its market share.

Indeed, price erosion has been particularly severe for some time, with online retailers routinely slashing between £8 and £12 from the suggested recommended price of £39.99. Statistical data from Chart-Track suggests that the average price of a chart videogame is around £35 or less - a figure which has effectively been 'propped up' by GAME and its ilk largely standing firm on the issue of new release pricing up to now.

But now that GAME has decided to respond with such a dramatic price cut, the floodgates are set to open across the industry with other retailers such as Dixons, Gamestation, HMV, and Virgin expected to match GAME's tactics immediately. But it's the effect on the independent retail community where the price war will be felt particularly keenly.

The latest high street price war has long been expected; indeed, in the summer of 1999 Virgin Retail kicked off a similar price war in the UK that was also initially billed as a 'promotion', but quickly established £29.99 as the standard price of console new releases. It was only when the PlayStation 2 was released in November 2000 that prices returned to their previous levels, and the publishing community can expect something similar to occur this time around.

The question is how publishers respond to the move; will they be forced to reduce their cost price, or will they attempt to slug it out with retailers and let them take the margin hit? Going on past history, once retail forces the price of games down, many publishers are often left with little option but to comply on all but their very biggest titles. EA may find itself in a stronger position than its rivals, but small to medium sized publishers will find it especially difficult to reduce their unit price.

Although the move is limited to the UK market at present, it would not be a major surprise to see the same thing occur across Europe very soon. And with publisher revenues likely to be hit hard as a result, it appears that this generation's dreaded transitional period is now officially underway.