Amid all the talk of soaring rents and petrol prices, there's an unexpected and significant new contributor to NZ's high inflation: The cost of computer games.
Stats NZ consumer prices manager Aaron Beck plays FIFA '22 with his 11-year-old son, Oscar.
It's one of 10 games that the agency has been measuring in the basket of goods for its consumer prices index, published last week. And buried in the data is the discovery that the cost of gaming has soared in the past 12 months.
"He used a big dollop of his pocket money to help pay," Beck says. "I think he felt the pain more than I did. But then, he keeps crushing me, so I think he might consider it a bargain."
For Beck and his son, the price increase is something to laugh at. But that doesn't mean it's laughable – in fact, it's a statistically significant contributor to New Zealand's inflation. That's bad news for those more economically vulnerable players for whom gaming provides a community and physical and intellectual stimulation, according to the eSports Federation.
But it's also bad news for the rest of us.
The sharp (though unpublished) rise in game prices has dragged up average price of all games, toys and hobbies by 40.3 percent. That, in turn, contributed 0.27 percentage points to the overall CPI. "That means the 5.9 percent annual increase for the CPI would have been 5.6 had we observed no movement in the games, toys and hobbies index," Stats NZ says.
That CPI inflation figure helps the Reserve Bank's monetary policy committee decide whether to raise interest rates on your mortgage. Te Kawa Mataaho, the Public Service Commission, compares civil servants wages rises to CPI increases. StudyLink adjusts student loan living costs in line with CPI. Student Allowances and supplementary assistance are indexed to CPI, minus the cigarettes and tobacco subgroup. Inland Revenue is required to adjust household childcare standard rates in line with CPI. NZ Super is indexed to the greater of CPI or average wages.
So CPI matters. And CPI is a not insubstantial three-tenths of a point higher because of the cost of computer games.
Why is the price of games rising?
The explanation isn't entirely clear, but there are some theories.
Of course, people the world over have been playing more games in their interminable series of lockdowns. But games aren't like tomatoes or fossil fuels; there's no real limit on the supply. Because they're more often distributed as downloads than as CD-ROMs, they can be downloaded by as many people as are willing to pay, with little marginal cost to the manufacturer and distributor.
The only real supply constraint is on the server capacity, says Jonathan Jansen. He's just been appointed as the first chief executive of New Zealand's eSports Federation, the role a reflection of just how fast the participation in gaming is growing.
Because most games are multi-player, one has to have a fast internet connection to the game's servers, located on cloud-computer banks around the world. The more people play a game, the more banks of computers must be hooked up and powered up. So that's a cost to the game's producer – but in the scheme of things, not a big one.
A bigger supply constraint is around the actual computer and console hardware, especially with recent shortages of microchips. "I think gamers can be hit twice as hard," Jansen says, "because it's not just the games prices that are going up, it's the hardware too."
The second theory is from Stats NZ: that people have bought more new release games in the past quarter, rather than older, cheaper games. On Stats NZ's top 10 list of games in the December quarter were new releases Halo Infinite, Call of duty: Vanguard, FIFA 22 and Cricket 22.
"We know the overwhelming positive benefits to people's wellbeing like teamwork, a feeling of community, sporting spirit discipline, the same things that we value in sport." – Jonathan Jansen, Esports Federation
"This quarter we had more new release games which tend to go for $100-$110 and some cheaper games – where last quarter there were more of the cheaper games and less of the expensive games, as the recent new releases had not been released yet."
Take FIFA 22 as an example. According to Pricespy, the version for the new Playstation 5 console is retailing for $119 at The Warehouse, and a little less at competitors like Mighty Ape and JB Hi-Fi. But the previous Playstation 4 version ranges from $64 to $109 at this country's retailers.
Similarly, Call of Duty Vanguard is $119 to $129 for the Playstation 5 console, but just $109 for the Playstation 4.
Both Playstation and Microsoft XBox have new versions of their consoles out – which means that in recent months, many gamers may have been paying to upgrade their games as well.
Jansen says that like film studios, game-makers altered their release schedules as best they could to get games out while the demand was so high during US and European lockdowns. For instance, he says, Amazon Games postponed the release of its New World online game from May 2020 to September 2021, to capitalise on all the people at home and locked down globally.
The third theory is from Chelsea Rapp, head of Strategy at local game development company CerebralFix, and chair of the NZ Game Developers Association.
She suggests that the increase in price is not driven by constrained supply, but by increased demand. In short, producers will charge whatever the market can pay – and right now with entire new demographics (like women aged 35-plus) taking up gaming in lockdown, the market will pay a generous premium.
"The fastest growing demographic for games is actually women over 35," Rapp explains. "Those are typically mid-career professionals with greater access to resources to buy new release games."
“Too many people look at video games, and they think about the guy in his parents basement playing games in the dark. But that perspective is just really antiquated. The reality is, over half of the people who play games are female.” – Chelsea Rapp, Game Developers Association
They want a wider range of games, too. Not for them the traditional first-person shooters, but more often creative games like Animal Crossing. That's not to say that this industry is any less guilty of gender-typing than others: "There are a lot of apps that are really popular with women that allow you to redecorate your house or raise pets, or, you know, these games that you can kind of jump in and jump out of, that are very peaceful and wholesome."
One game that she spent more than 100 hours playing in the past year is called Stardew Valley. "It's won a lot of awards, but it's really simple. It's just a farming simulator. You run a farm and you raise farm animals and it's has a day-night cycle. So every day you like wake up, you feed your animals, you harvest your crops, you walk around, you interact with the townspeople, you sell your crops at the market, and you buy other things."
Belatedly, some new games feature a female lead character, like Horizon Zero Dawn and the latest Assassin's Creed. “Too many people look at video games, and they think about the guy in his parents basement playing games in the dark. But that perspective is just really antiquated. The reality is, over half of the people who play games are female.”
Her key takeaway is, gaming is reaching out to a wider, wealthier market than just the stereotype of spotty teenage boys – and so, games studios are making virtual hay while a digital sun shines.
But none of these three theories are unique to New Zealand; none explains why New Zealand game prices have risen so significantly when other countries haven't.
"When the games go up, and when the hardware goes up, and when there's nowhere locally that you can go to gain that experience and those benefits, that can definitely impact people. And it disproportionately impacts people who can't afford to spend thousands of dollars on their own gaming machines." – Jonathan Jansen, Esports Federation
But Jansen says they should be combined with one other economic reality: the fact that because this is such a relatively small market, the big games manufacturers don't set independent retail prices that reflect the cost of living in New Zealand, or the strength of the kiwi dollar.
Instead, New Zealand games prices are often aligned to those in Australia – and over there, incomes are higher.
"New Zealand can struggle sometimes to compete with the exchange rate, or the price expectations that game publishers have."
Who is worst affected?
For those who doubt the contribution of gaming to healthy, engaged communities, Jansen has a ready reply.
"It's really important for us to try and create spaces for people to come together to play and compete at a regional level, especially because we know that there are 600,000 New Zealanders who have asthma and New Zealanders who might not necessarily be able to compete traditional sport."
He argues that esports provide many of the same "overwhelming positive benefits" to people's wellbeing: teamwork, community, the sporting spirit discipline.
"And when the games go up, and when the hardware goes up, and when there's nowhere locally that you can go to gain that experience and those benefits, that can definitely impact people. And it disproportionately impacts people who can't afford to spend thousands of dollars on their own gaming machines."
But local funding bodies struggle to see those outcomes, Jansen says, making it harder to fund opportunities in low income communities through local digital hubs or esports centres.
Moreover, he says esports and sport are much symbiotic than competitive – and that's backed up by the data.
He says 44 percent of gamers have gone on to participate in traditional sport or active recreation with friends they first met while gaming. And 81 percent are more open to participating in sports with friends that they game with. "Esports for many can be a social step into participating in traditional sport, and we support that pathway."
Furthermore, research by Bond University, in the Digital NZ report for 2022, reveals that gaming, and video gaming specifically, was the second most used medium for getting through the pandemic and dealing with it. 76 percent of parents played with their children during Covid lockdowns.
Study participants spent 81 minutes a day gaming, which outranks the time spend on social media and any other recreational activity – so all of this helped drive up demand for games.
"I can definitely see the correlation between the price rise and just the absolutely huge increase in demand because more people are playing than ever," Jansen says.
