Coming back to consoles, people were surprised to see Xbox 360 and Wii games from Milestone, because there’s this image of Milestone being in the PlayStation team. So how does that work? Is there any conflict of interest with Sony?
Not at all. In terms of our agreements and understandings, the hardware formats are the exclusive domains, therefore we cannot deal with Microsoft and Nintendo, because there is a clear conflict of interest there. But with third party publishers, who are all-format anyways, there is no conflict of interest. Being mainly a software distributor, it is only fair for us to be sort of platform agnostic. We will obviously have our leanings towards the PlayStation format because we also do the hardware, but I think business sense suggests that if there are other formats that have an opportunity to build a business around, then it is not something we should let go of. Especially with publishers like Atari, and now Capcom, and with some other publishers we are talking to whom we’re hoping to sign on, we will bring all formats. How we will market them and how much of a relation from a marketing point of view we can forge on non-PlayStation formats is a question mark and it’s something we will look at. In terms of offering the full bouquet as an all-format strategy, I don’t see a problem.
Which are the publishers that Milestone currently handles?
We do Sony, which is just for the PlayStation. Also EA, we only do PlayStation for now. For Atari and Capcom it’s all format. For Empire it’s all format, but they don’t have too many products. Novalogic is largely PC, but they’re not very active now. That’s about it for now. But like I said, we are talking to a leader in the MMOG space, which will be PC driven for now. Everyone’s been talking about taking MMOGs to consoles, so as and when that happens, that’ll happen. There are also other publishers we are talking to and that will also be an all-format strategy.
Do you have a tie-up with Namco? You’ve released Tekken here.
Namco has a tie-up with Sony as a distribution relationship. So we get Namco products from Sony for PlayStation. But we are not doing Namco games on other platforms because they have similar deals for other formats with other publishers.
Will PC versions of Capcom games be released as well?
So far we have Capcom products on PS3, Xbox 360, PSP and PS2. What we don’t have is PC products, where we’re still trying to resolve pricing issues. Capcom is a premium developer and they’re Japanese, so they’re relatively cautious in terms of how they approach the market. PC price points are maximum Rs 999 or Rs 1,299 so it makes no sense for us to be introducing games that are 50 per cent higher than these prices. This is why we are delaying it till we get the strategy right.
Now that you do have Xbox 360 games as well, can you tell me why a PS3 game is priced at Rs 2,799 while the same game is available for Rs 2,499 on the Xbox 360?
For us, the pricing strategy is driven by the format owner. In this case, the PS3 games that are available at Rs 2,799 are largely the PS3-exclusive games. Most of the multi-format games are at Rs 2,499. EA has games at Rs 1,999 on Xbox 360, whereas the same game retails for Rs 2,499 on PS3. Even internationally, there is a $10 difference.
Not really; it’s pretty much the same.
It depends from publisher to publisher. In some cases a game is available for $59.99 on the PS3 and $49.99 on the Xbox 360. So it is cheaper in a sense or probably the publishing model with Xbox makes it viable for some publishers to sell it cheaper. Maybe their cost of goods is cheaper because it’s on DVD, not Blu-Ray. But it varies from publisher to publisher. For instance, someone like Capcom will not differentiate.
But the prices are different; Rs 2,499 and Rs 2,799 for Devil May Cry 4.
Yes, but that is just a cost of goods and working backwards from there. So we felt that on PS3 we could find a slight extra margin, because for someone like Capcom and for many other publishers who come to India in the future, it is a challenge to keep the kind of price points we have in India. If these publishers are based in Europe, they are equating their SRPs and multiplying that by 67 to arrive at our SRP. If that were to be the case, we would sell all PS3 and Xbox 360 games at Rs 3,500 to Rs 4,000, which is what happened in the case of MGS4. I think these are some of the challenges publishers are facing at this stage, and in time, they will find a way of addressing this by reducing their margins to India as long as they can ensure that their products stay in India. The moment you start selling your products cheaper and the fact that you’re selling an English product, the chances are the product will flow out. In a market like Russia, where they are able to localise quite a bit and have it in Russian language, you can go with these pricing strategies. These are challenges that we face.
People still seem to complain about prices of games, when in fact, they are comparable or even lower than prices in the US. So despite import duties, we’re able to keep the prices at this level. Can you explain to us how the pricing works?
I think our audience needs to realise that we are actually the cheapest in the world. Now, customs duty is in excess of 32 per cent, VAT on software is 4 per cent, Octroi in Mumbai is 5.5 per cent. All this builds into the price and then there’s the Central Sales Tax, which is another 2 per cent. Even if you take a weighted average, that’s about 40 per cent being just the tax component on software. Now take an EA PS3 game, which is at Rs 2,499. That’s approximately $60. The same PAL game will by 50 Euro and in Rupees that comes to about Rs 3,300. Now considering 40 per cent duties and taxes, you’re selling the game at Rs 2,499 when it should be selling at Rs 3,300 and if I were to add duty and tax, all next-generation games should cost between Rs 3,500 and Rs 4,000. So it is the publisher that is taking a hit. They are absorbing the costs that are going to the Government of India in order to ensure that the Indian consumer gets games at affordable prices. Again, in the grey market you will get it for Rs 2,800-3000, but these guys pick up the games from Dubai or Hong Kong and bring it through baggage and pay the carrier. These are smuggled goods and to the seller, he gets the game at about Rs 2,400-2,500 and he keeps a margin and sells it for Rs 3,000. So if it wasn’t for the big taxation, we could be competitive across the board.
So do these low prices mean that distributors aren’t in a position to negotiate for day one releases?
No, the dates issue is more of a logistics issue. In our experience with Sony and EA, Sony games we are able to give on day one or even two days prior. We get goods shipped out to us a week prior to release date. In the case of EA, because it’s largely Europe-driven, there is an assigned date, which then lengthens due to transit time. So if the street date is a Friday, goods ship on Tuesday. The same goods will hit stores in Europe on Thursday and they’ll be on sale on Friday. In the Middle East, because there are no customs duties, there is a direct flight from Europe to Dubai and they too have the goods on Thursday. Now for us, the goods arrive over the weekend, we have our customs department that takes its own sweet time, so by the time we get the goods, it’s the next Wednesday. So I’ve missed the street date by four days. Then there’s the logistics of our country, where in Mumbai, I can give it on Wednesday, whereas for Kolkata, it will be another week down. We can’t airlift all the time. For Delhi and Chennai, it takes three days. Effectively, we try to have a common street date for all of India so even though we may have the goods in Mumbai on Wednesday, I will release them only on Friday. So release dates have nothing to do with pricing because I think we’re taking all precautions to ensure that goods don’t flow back. We’ve had some big enquires from so-called online retailers, but the moment we verify their backgrounds, we notice something is fishy. For quantities like 100 and 150 we have not agreed to supply. As an organisation, we are very careful about this because this business is built on trust and goodwill and that’s not something we’re willing to compromise.
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