Thu
Jun 14 2012 2:30pm

Gaming Roundup: Are Massive Discounts and Sales “Bad for Gamers”?

It should come as no surprise that the respective braintrusts behind Valve Software’s Steam, one of the pioneers of online game distribution, and EA’s Origin, a newer (and frankly, thus far inferior and user-unfriendly) entry into the marketplace, are at odds with one another, both competitively and philosophically. Origin head David DeMartini fired a shot across the bow recently, claiming that Steam’s frequent 65-75% off sales “[cheapen] intellectual property,” and while these sales “certainly [work] for Valve, [they] may not work as well for the publishing partners who take on the majority of that haircut.”

Upon being asked to elaborate, he explained: “If you want to sell a whole bunch of units, that is certainly a way to do that, to sell a whole bunch of stuff at a low price. The gamemakers work incredibly hard to make this intellectual property, and we’re not trying to be Target. We’re trying to be Nordstrom.”

DeMartini believes that there are other ways to maintain and win over a customer base aside from low prices, but will not at this time disclose Origin’s plans in terms of how to do so. Regardless, they face an uphill battle, considering EA trails Steam by a considerable margin so far in both pricing and consumer experience, which may make it difficult for Origin to fulfill their Target/Nordstrom analogy.

What’s interesting is that DeMartini’s perspective may represent an increasingly pervasive viewpoint in the gaming industry, as only last month, GOG.com head Guillaume Rambourg claimed that “heavy discounts are bad for gamers” and “[damage] the long-term value of a game.” 

Rambourg elaborates, stating: “If a gamer buys a game he or she doesn’t want just because it’s on sale, they’re being trained to make bad purchases, and they’re also learning that games aren’t valuable.”

While this argument might seem a little hypocritical when GOG.com’s weekend sales are factored in, Lambourg noted that their own sales generally hover around the 40-50% discount range, rather than in the 70% range, although it’s easy to lose sight of the percentages given GOG.com’s extremely low price points to begin with.

The question ultimately seems to boil down to whether it’s better to sell more for less, or less for more. We welcome your consumer (or developer!) perspective, or Steam/Origin experiences, in the comments below.

In other gaming news this week, we touch on the failure of The Old Republic, the latest scuttlebutt from Tamriel, Nintendo’s intentionally (we hope) terrible Wii U commercial, the future of gaming graphics technology, and more.

  • A few weeks ago, we showed you some early screen captures and feedback of Epic’s next-gen Unreal 4 graphics engine. Today, we bring you the actual footage, courtesy of Epic’s team at E3. Picture the CGI cut scenes of modern games, now made playable. For a more detailed look at the technical chops of the engine, check out this video afterward.

  • While we’re on the topic of playable cut scenes and next-gen graphics, we would be remiss if we did not also mention Square Enix’s latest graphics engine, Luminous Studio. We’d like to take this opportunity to remind you that the following video is indeed in real-time. Imagine playing the next Final Fantasy with these visuals?


If there are games you’d like us to cover or blogs you think we should be following for more news, please let us know @tdelucci or @pritpaulbains.

27 comments
Mordicai Knode
1. mordicai
I have to agree; the "race to the bottom" price model-- no matter your medium-- has devestating longterm ramifications.
Colleen Palmer
2. arianrose
I'm a consumer, and was recently tapped to become a writer for a new indie publisher. Frankly, I think EA is a little out in left field, here. Lower price points are bad for gamers - why exactly, was that again? It somehow disparages the work or the medium?

Frankly, I want someone to play my game, preferably lots of someones. I want them to love it, tell all their friends, and take to theory boards to hash out all the delightful little twists I have planned for them (*ob. evil laugh*).Of course , I'd really like all of that to come with the monetary ability to help the little company I work for make even more games that they can love, share, and discuss.

But the way to do that is to build a base, not fleece them. Yes, when pricing, our team has to take into account sales and discounts. That's the point, though, our team has to do that, not the consumer.

I don't devalue books, movies, board games, or any other form of entertainment based on it's price, why would I do so with a video game? A gamer who buys a game on sale is not being "trained to make bad purchases;" they're being encouraged to be curious and adventursome. A low price point on a game I'm unsure of may tip me over the edge into buying it, because my risk/reward ratio is much closer to 1. If it's a high price point, I may defer: there's too much risk for what I get out of it.

Certainly, there's a point to be made here about how people value things more when they pay for them, as opposed to when they are free. And, at least in book publishing, there's certainly a price point that demonstrably leads consumers to doubt the quality. However, a sale is a whole 'nother animal. A sale says "this work should cost more, but you're getting it at a discount, you savvy consumer, you." Not "we don't value this enough to ask a market sensitive price for it, so you can buy it if you want to."
James Whitehead
3. KatoCrossesTheCourtyard
Caveat emptor definitely applies here. If a game provider constantly offers such deep discounts you have to, as a responsible consumer, ask what's being left out? That is, what corners are being cut by the producer of said game to meet this advertised discount & yet still make a profit?

Cut rate musicians, storyboard creators, software developers, the list goes on of things that have to be skimped on in order to survive as a company under this model.

We as game players can't let the bottom line drive our purchasing. It needs to be considered, especially in these trying economic times, but if it is the primary factor in our product purchasing we're just helping to ensure that future product innovation /creativity may take a back seat to rehashing the same products oevr & over again.

Kato
Herb818
4. Herb818
The very fact that industry types are squawking about "consumer welfare" is the surest sign that that is the furthest thing from their minds. Yes, all businessmen would love to conspire and keep prices (and thus profits) artificially inflated. But consumer welfare has nothing to do with it, except as a sacrificial goat.
Herb818
5. Tesh
It's not about companies training consumers, it's about consumers training companies. Naturally, companies don't like the power shift.
Walker White
6. Walker
Frankly, I think EA is a little out in left field, here. Lower price points are bad for gamers - why exactly, was that again? It somehow disparages the work or the medium?

Price points below production costs are essentially dumping. And that is bad for gamers. It is a known fact that this killed the causal portals.
Colleen Palmer
7. arianrose
@Walker

Yes, I understand and agree. That's what the Amazon vs. agency model was all about. I think a conversation needs to be had about what a fair pricing model is, and what a fair discount model is. But to say specifically that sales - temporary reductions in price - cause that harm is a bit too far reaching for my tastes.

Perhaps I am unduly riled by the thread of classism that seems to underpine the opinions of those quoted, made especially apparent by the "Target/Nordstrom" analogy.
Ashe Armstrong
8. AsheSaoirse
I think that, most definitely, companies should get back what they put in for their games (provided they're not awful). Anyone who provides something, in our very capitalistic system, and provides a GOOD something, deserves compensation.

However, gamers getting games on sales doesn't really hurt us. Unless it's nothing but sales all the time. Last fall, I bought Arkham City, Skyrim, and AC: Revelations, pre-ordered them in fact (fun fact about that: I was the only person to get Arkham City for the PC at this Gamestop store). I fully plan on pre-ordering Assassin's Creed 3 as well.

But that's the thing, as someone else said, when you can't try out games via rentals anymore, you're gonna be hesitant with your money. If the industry wants to "help" us, then they need to add demos or trial periods for games. Especially with digital distribution being what it is. It would be so very easy to include, say, for a bigger game, a fifth of the game or something. Imagine if Steam had a rental service built in as well?

I dunno, just ideas and opinions. The internet has completely altered the business world and these "issues" are happening because of that flux.
Herb818
9. CaitieCat
We as game players can't let the bottom line drive our purchasing. It
needs to be considered, especially in these trying economic times,

Spoken like someone with a secure income, a good portion of which is disposable.

How, then, for those of us who are un- or under-employed? Too bad, so sad, only the well-off can be gamers?

I often buy games at those low sale prices that I simply couldn't afford any other way. Case in point: Football Manager 12, came out last September at $60 or so. Couldn't afford that. Come this weekend, nine months later, I can buy it for $12.

What these people are failing to see is that it's not a case of whether I want to pay more for games. I cannot. So, I wait until they drop to a level that is affordable, then I purchase.

What this means is that, far from damaging their sales, the price cuts are making sales happen that wouldn't otherwise.

Given that extra copies of the game, once prepared as digital, cost next to nothing for the publisher, and they're still getting paid for it, if not as much, this is just an astonishingly silly thing for a publisher to say.

Push the price points too high, and what you encourage is what we've been told will kill the game industry: theft/piracy. Why isn't it a good thing to get, say, $12 for something that is a near-costless copy of something you already did? I is baffled how this makes any sense at all. We're not talking about physical property here; EB isn't doing this. It's digital downloads.

Transparent "We feel we should be able to make cable-TV-level markup" argument, frankly.
Herb818
10. CaitieCat
Or, to put it another way, not discounting in these circs is basically to commit the fallacy of considering sunk costs.
treebee72 _
11. treebee72
Rambourg elaborates, stating: “If a gamer buys a game he or she doesn’t want just because it’s on sale, they’re being trained to make bad purchases, and they’re also learning that games aren’t valuable.”

Yeah, my computer is just full of games I have no desire to play just because they were cheap. Oh wait... No it's not!

I don't care if a game is $60 or $1, if it looks like crap and/or it's a game I have no wish to play I won't buy it.* Like CaitieCat above, my gaming budget is limited and I have to think carefully about any game purchase. Many of the games I have I was only able to afford because of Steam sales. The idea that people would blow even a small part of their entertainment budget on something they don't even want just because it's 'cheap' reeks of privilege.

*The exception to this is a bundle that includes games I do & don't want to play, but the bundle price is cheaper than even one individual game.
Ben Frey
12. BenPatient
Simply put, if it weren't for things like Steam sales and the Humble Bundle sales, I wouldn't be buying any computer games at all, because I don't have a lot of free time, and I know that spending $50+ on a game would never make any sense for me. The last game I payed full price for was StarCraft II, mainly because I played so much of the original as a younger, less-busy person. I should have waited a few months for a sale. As it was, it took me over a year to even finish the single player game. I haven't even been able to venture into multiplayer land yet.

I divide my entertainment time between books, games, TV, movies, going out on the town, going out in the woods, and sporting events.

If all games were 30-60 dollars and never went on crazy Steam sales, I would simply not play any of them at all. Maybe I would buy xbox games at garage sales. Maybe not even that. How does that equal more sales for developers?

Lots of the younger generation that grew up with Kazaa and PirateBay will pay 4 or 8 dollars for a 60 dollar game when it goes on sale on steam, but would otherwise just steal the game because it is so easy.

EA is on the wrong side of logic here, and on the wrong side of math, and on the wrong side of pretty much everything. The proof is in the pudding, and Valve has made Steam a great ecosystem by thinking about games and gamers in an honest and practical way, not in a condescending and investor-focused way. They take a large chunk of the profits and fold it back into their infrastructure and design for Steam. If you were around for the launch of Half Life 2 and Steam 1.0, then you know how far it has come. There were literally 5 or 6 games available in the beginning, but they had a vision, and they built it piece by piece into something truly new and amazing.

If gamers are given a choice between not playing a game, or playing it only via Origins, a great number of them will simply give up on the game. I will not be buying Sim City 5, which makes me a little bit sad inside...simply because I won't be participating in the Origins machine. Too many bad vibes. This article just further reinforces those feelings. I can always fire up SC4 if needs be.
Herb818
13. NormanM
CaitieCat apparently paid attention in microeconomics class (either that, or has tremendous economic intuitions; good job either way). Somebody needs to get the folks at EA a copy of Hal Varian's theory of sales: it's all about reaching different demographics. Sure, there are wrong ways to do sales, and if Steam puts too many games on sale too often, it'll come out of the bottom line. But if you want to earn back what your investment was worth, then you should be scrambling to find more and better ways of price discriminating like Steam does, not fewer. *Especially* when the marginal cost of selling one more copy is zero.
Herb818
14. CaitieCat
Thank you, NormanM; call me a gifted amateur, if you will, I've not taken any economics courses formally.

I do, however, read the words of Krugman (long may he blog) as they drop from on high, and I guess some has rubbed off. :)
James Whitehead
15. KatoCrossesTheCourtyard
@9CaitieCat, not for nothing but my income is no where near secure nor is much of it 'disposable.' If the price is too high I don't buy it. Or as you pointed out, I pick it up in 6-9 months when the price is acceptable to me.

My basic point was that if this becomes the sales model continuously, that is deep discounts on all games, and the companies still want to make the necessary profits to run said companies, then something is going to be lost.

Anyway, price is big for me but so are reviews for the games I'm looking at; both professional & at my local game store. I'm not going to buy it simply because it is cheap. But by the same token, I'm not going to assume the high price tag games are fabulous just 'cause they cost a lot. I know that's often due to the fact that they're new to the market, or still terribly popular.

As for being under/un-employed & purchasing video games; maybe that shouldn't be high on one's purchases for the time being. I've been unemployed, with two children & a third on the way, and stuff like video games, comics, beer, etc... went out the window.

I grew up in a family where if you couldn't afford it, you went without. Particularly when it came to discretionary purchases such as video games.

Kato
treebee72 _
16. treebee72
To add to my comments above, as a knitter who has tried to sell her work at craft fairs and had my time/skills devalued to my face by people just looking for a 'deal' I agree there does need to be a conversation about price/value and the ever growing sense of entitlement with both consumers and producers. However, that conversation can't start with the classist & privileged comments put forth by Rambourg. Why the frell bash Target and that entire consumer group, when that's where the majority of your actual customers exist?

@15 Kato:

I'm trying to figure out if you are actually saying that people with limited funds should never ever buy video games, because that is just BS. People need entertainment in their lives. Sometimes when things are crap, the escapism offered in a video game that was saved for or purchased on a super deal is the only thing that can make things less crappy. And of course there have to be priorities on purchases, that's part of CaitieCat's point. A game for $60 isn't just a game for someone with a budget - it's missed meals, an empty gas tank, bills not paid, etc. However, a game for $12 can be one of those months where you just ended up with a little extra or were able to sock away a dollar here or there.
Teresa Nielsen Hayden
17. tnh
What I don't know are the development, manufacturing, marketing, and distribution costs of these games. Are Steam's markdown priced at below cost? What's the markup on games sold at standard retail prices?
Mordicai Knode
18. mordicai
16. treebee72

My wife quilted for a bit & said there was no way she would sell them, because any attempt to put an accurate value on her labor would price it into the stratosphere.
James Whitehead
19. KatoCrossesTheCourtyard
@16treebee72, I'm not saying that at all. Just made the point that people in dire financial straights, such as unemployment, should find these purchases low on their priority listing; as I had to when on unemployment assistance. Kinda like going to the library to borrow a video as opposed to renting on from Blockbuster - or pay per view.

Definitely think people should find avenues to escape and if you can get that game for cheap, definitely do it. Things like that help people keep their spirits up. When I was unemployed we lived near Boston & so were able to take the "T" in as a family to walk around and have a picnic lunch. Helped keep me going seeing my wife & kids still having fun despite what was going on.

Just didn't agree with CaitieCat's reading of my point regarding game purchasing. Anyone can be a gamer, I just feel that if you are unemployed purchasing games isn't that high a priority; nothing revolutionary there. Has nothing to do with being a 'well-off' gamer or not; just the fiscal realities of life.

@18mordicai, that seems to be an issue at craft fairs for many crafters. Coming up with a price that represents the time & effort put into what you've made but still covers your non-labour costs & will be attractive to prospective customers.

Kato
treebee72 _
20. treebee72
@18 - mordicai Yep! For many people, they just can't comprehend the time & effort put into making things by hand. I gave up trying to sell years ago and just knit/crochet for personal and charity use. My sister-in-law still tells me I should sell and I'm always, 'NO! NO! NO!'. I tried it and it was a horrible experience.

I believe that developers need and deserve to get paid for what they produce, but I also believe that the pricing model for digital content is flawed. It really frustrates me when a digital and physical copy of a game are priced the same when all the costs of creating & packaging that physical copy have been removed. Then add on the fact that I may actually have to spend more on a digital copy because I have to use up my own ink and paper should I choose to print up the manual or quick key charts or whatever.
treebee72 _
21. treebee72
@19 Kato, but no one is actually saying purchasing games (or any entertainment) is a high priority!
Herb818
22. CaitieCat
but if it is the primary factor in our product purchasing

This, btw, is the line that suggested privilege of income to me; for me, there can be no other factor before price, because if the price is more than I can spare out of my entertainment budget - hell, at my wage and limited hours as a disabled person, buying a single discounted game is my entertainment budget for the month - then the game does not happen. Period, end of sentence. To do so without saving for it would literally be to take food out of my mouth.

From here, anyone who can argue that I should only pay full or near-full prices for games is saying that I should either never have games, or that I should be expected to save up two or three months' entertainment budget to buy a single game. Yes, I really do have about $20 a month for playtime. Welcome to being disabled and trying to stay off the dole.

That I am supposed to do so to make sure that the publishers can make a full 50 or 60 dollars of nearly costless company income (digital copies, remember; once the game is produced, a sunk cost by nine months later, then gross is very near to net), or they will just die as a company, is just absurd.

The snark about how us poor un- and under-employed folk should really have other priorities, I will leave lie in the open, speaking for itself as a marker of privilege.

Games in this era have a very limited shelflife. If a game has, say, 100 hours of play for the dedicated gamer who goes through all of it, how many weeks of play is that? How many units at $60 would they be selling, nine months later? Very, very few. Anyone who wanted it at that price will long since have bought it. If they wanted it cheaper, they'd wait until it was already much cheaper. Like, say, remaindered or reprinted books, or CDs/DVDs that have already largely sold their lot, or last season's clothes, or anything else in the marketplace. Why should game companies be specially exempt from this?

I've often wondered at what a person who could bite off their own nose to spite their face would look like. Apparently, one would look like David diMartini.
adrian bellis
23. Nilrem
Heavily discounting the games pricing immediatly could hurt the developers, I agree with that.
But what Steam has tended to do, is similar to what many games retailers do, and discount the games heavily for a while 3-6-12 months after release, getting sales from people who weren't interested in the game at full price.
I, and many others I suspect buy a lot of Steam sale games on the spur of the moment because they are cheap and I don't mind risking a fiver on a game that I'm not sure about, but wouldn't do the same if the game was £30.
I get the impression that EA would like the games to retain their full/near full RRP for years, which is very unlikely to bring in more money than allowig a lower price after a while, as you don't get the "uncertains" who don't want to buy the game at launch price buying sooner, nor are they likely to buy it a few months later at the still high price.

I'm unlikely to ever buy anything from Origin because I'm not a heavy games player, and more importantly (to me), I've had years of experience with EA's billing and (lack of) support as a UO/warhammer player (they've mucked the billing and accounts for them several times, usually with zero information to the players on how to deal with the changes*).
I'm not going to trust them with something that controls the normal games I play having had the experience of how they cope with simple things like keeping a subscription payment going on am MMORPG (where suddenly loads of users are having their cards not work, and no official help to sort the problem out - it turns out you needed to delete the card from the account an option that wasn't obvious and add it again).


*Things like merging the accounts systems from multiple games, and adding suffixes but not documenting the change in the help system (IE 'user1' changed to 'user1_eur').
treebee72 _
24. treebee72
Another thing that is off with DeMartini's & Rambourg's comments is the inplication that the Steam Sales have eliminated day one purchasers, which is proven completely false by Diablo 3. If a game is released that people really want and believe it's worth the price, there will always be be a segment of purchasers who buy it day one for full price.
James Whitehead
25. KatoCrossesTheCourtyard
@21treebee72, I understand that & that wasn't my point. I was simply responding to an earlier comment that games should only be for the 'well off.' That's all really.

Kato
Herb818
26. chaosprime
It isn't selling less for more vs. selling more for less. The point is the same as "freemium": saturating your demand curve. If you have 20 people who will buy it at $50 and 200 people who will buy it at $10, which is the optimum scenario?

1. Selling it to the 20 people at $50 and making $1000,
2. Selling it to all 220 people at $10 and making $2200,
3. Or selling it to the 20 people at $50 and the 200 people at $10 and making $3000?

Steam is achieving option 3 by offering deep discounts in limited timeframes. As far as I can tell, EA is agitated about the risk that people who could buy at $50 will sneakily wait for the $10 opportunity. Which kinda makes me say "cry more, emo kid". People who care about your game and can afford it will buy at release for full price. People who don't care or can't afford it will wait for the discount. If they couldn't afford full price, you've lost nothing. If you lost $40 because they didn't care about your game, well, it's your job to make them care, isn't it?
Herb818
29. helacious
Gabe Newell of Steam basically pre-rebuts (if there is such a thing) DeMartini's argument in this interview http://www.geekwire.com/2011/experiments-video-game-economics-valves-gabe-newell/
from October of last year. His arguments are backed by actual data collected from Steam, and the data opposes the conventional wisdom - "wisdom" that DeMartini seems to be accepting without actually taking the time to see if its correct.

Some choice quotes:
"Without making announcements, we varied the price of one of our
products. We have Steam so we can watch user behavior in real time. That gives us a useful tool for making experiments which you can’t really do through a lot of other distribution mechanisms. What we saw was that pricing was perfectly elastic."

"But then we did this different experiment where we did a sale....
We do a 75 percent price reduction, our Counter-Strike experience tells us that our gross revenue would remain constant. Instead what we saw was our gross revenue increased by a factor of 40. Not 40 percent, but a factor of 40."

"Then we decided that all we were really doing was time-shifting revenue....Then when we analyzed that we saw two things that were very surprising. Promotions on the digital channel increased sales at retail at the same time, and increased sales after the sale was finished, which falsified the temporal shifting and channel cannibalization arguments."

The whole interview is worth a read - too bad DeMartini didn't see it before he opened his mouth.

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