In last Monday’s Musing, I tackled the issue of game pricing in Australia and explained some of the reasons why we pay what we do for our games. Today, let’s look at what we pay for our games online.
So last week I focused on traditional retail stores. The two key points from that column were:
1. Comparing retail prices between countries based on fluctuating currency exchange rates is problematic;
2. Australia is its own market with its own local conditions and, as such, Australian publishers set their prices accordingly, without regard to how things are in an overseas market.
Digital distribution services complicate matters even further. I’m going to talk about Steam here, mainly because it’s the most popular and familiar service, but these points apply generally across the board.
Many readers ask me why games are priced differently on Steam than at retail or why we pay more for particular titles than Steam users in the US. Once again, just as with traditional retail, you need to look beyond isolated cases of exchange rates proving unfavourable.
Even though Steam prices are given in US dollars, these prices are set by the Australian publisher for Australian consumers. This is where it gets confusing: Steam doesn’t sell to some homogenous global market; it sells into specific markets around the world and each one is considered differently.
Follow that? International Game Publisher X doesn’t just go to Valve and say, “We want our new FPS on Steam” and that’s that, everyone around the world gets their new FPS. Instead, Publisher X’s Australian office will negotiate the availability and pricing of their new FPS for Australian Steam users. Likewise Publisher X's US, UK, Canada, etc offices will do the same.
Some of the publishers I spoke to in researching this article expressed a desire for Steam prices to be shown in Australian dollars, just as they appear in local currencies in the UK and some parts of Europe. It will be interesting to see what price points we find on Steam when that eventually happens.
I suspect they won’t be terribly different to what you currently find at a traditional retail store. The Australian publisher can’t be seen to be favouring a particular retailer by offering its games at a cheaper price on Steam – just as they wouldn’t offer their games to EB at a cheaper rate than they offer them to GAME, for example. There needs to be a level playing field.
When, for example, Sega launched Empire: Total War, the US sales team at Sega opted for a US$50 price point on Steam and at traditional retail. The Australian sales team went for a local RRP of $100 at retail and US$60 on Steam. The exchange rate at the time of launch made for a saving of around $20 for Steam purchasers.
Variations in the exchange rate play havoc with price comparisons. As the dollar gets stronger, expect to see Steam prices rise for new releases. If it gets weaker, then expect them to drop back.
Consumers tend to expect digitally delivered games to be cheaper. The publisher isn’t printing a box or pressing a disc; they’re not paying for shipping or other transportation demanded by a physical product; they’re not seeing the retailer taking a massive slice of the pie.
These are all commonly voiced “facts”. But they’re only part of the story.
Manufacturing costs are minimal. It costs cents to press a disc in the volume required for a retail game.
Yes, it costs money to move a boxed product from warehouse to warehouse. But it also costs money to transfer data. Is the cost equivalent? I don’t know, but it certainly costs something.
Sure, retailers take a slice of the pie. But, hey, so does the digital distribution service. I wouldn’t presume to know what sort of percentages we’re looking at here, but I wouldn’t expect them to be too far apart.
Also, bear in mind when you buy digital you’re paying for convenience. You might not have that physical thing to hold or display on the shelf, but you’ve got the convenience of never having to worry about losing your disc.
For the next few years, as digital distribution services increase their market share and begin to close ground on the major retail chains it will be interesting to see how that shift in power affects pricing.
We’re already seeing a huge increase in the number of “limited” or “collectors” editions of games being offered at retail. I see a future where, for every new release, you’ll have a choice of a) the standard disc version for RRP, b) the convenience of the digital version, for the same RRP, and c) the limited disc edition with bonus trinkets for $10-20 over RRP.
What are you going to choose?