Are spectacular sales and insane discounts a problem for the industry?

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Wednesday, April 18, 2012
EDITOR'S NOTEfrom Rob Savillo

Last week, Rambourg and Longino of PC games digital distributor Good Old Games issued some rather interesting comments about sales and price points. Do deep discount sales really "devalue" games? Do you always feel that you're getting your money's worth at $50 or $60 a pop? Do you think that as a consumer that you have a say in how much value a game has?

File this one under perplexing as much as anything else...I certainly was confused when I read some of what Good Old Games Managing Director Guillaume Rambourg and marketing head Trevor Longino said about Steam sales. The pair of them recently had an interview with PC games blog Rock, Paper, Shotgun, and among the subjects, they discussed price and value.

When asked about things like discounts (perhaps the most famous examples being Steam sales, which can include entire catalogs of games for pennies on the dollar), they took a stance that I didn't expect:

Selling games at too high a discount -- one often sees discounts above 80 percent off here and there -- sends a message to gamers: this game, simply put, isn’t worth very much.

They further argue that while sales motivate a lot of people to buy, having massive price cuts is "damaging the long-term value of your brand because people will just wait for the next insane sale."

 

Now, what I find strange about this is that GOG has been no stranger to sales itself. Hell, recently it was just giving the original Fallout away for free to whoever wanted it. Certainly GOG is aiming at a slightly different market given that a lot of their titles do fall under the realm of classics, but considering that they have titles like Assassin's Creed, Hitman: Blood Money, and the Witcher series, they might be trying to branch out more.

When asked about sales, they responded, "Our average sale tends to be around 40 percent to 50 percent off; that’s plenty of incentive to pick up a game if you’re interested or if you just think you might like to try it because you’re not sure about the game, but not some crazy 75 percent or 85 percent discount that damages the long-term value of a game."

The thing is though, looking through GOG's library, you'd be pretty hard pressed to find something that costs more than a twenty (at the moment only Witcher 2: Assassins of Kings does so at a $39.99 price point), and with a lot of games costing 10 dollars or less, there's not really any need for a deep sale. This is perhaps the point that GOG is trying to raise, but the issue here is the same one I touched upon earlier: Most of these games aren't new, so no one could really justify trying to sell them for a new-game price point anyways. If one takes the rant to simply be an angry diatribe directed at a rival delivery service, then yeah, it kind of falls flat. I think that there's much more than that here, though.

It's strange because it feels like GOG's stance should be something that I'd argue against, and yet the points they're making are ones that I feel are in line with the way I've looked at things. Take this quote, for example:

Our industry failed to provide gamers with a fair and attractive offer on day one and, therefore, convince them to buy games when they are released, which is the best way to support a publisher or developer from a financial standpoint.

What I believe (or at least would dearly like to believe) they are saying here is that if the industry wants the support of the people it needs to survive, then it should be making games worth it from day one. I can't argue with that point because that's the kind of thing I want happening. Whether the value means a lower price point or more content that actually makes the game worth the expensive purchase price out the gate or a combination of the two, it doesn't matter. This is something that should be happening.

But I don't agree with every point they make in the interview, particularly that "[h]eavy discounts are bad for gamers, too. 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." I would counter that with the observation that people with poor impulse control are people with poor impulse control regardless of whether or not a sale is going on.

If the only selling point of a game is that it's actually on sale, then you need to take a step back and consider whether or not you're buying this because it's something that you're genuinely interested in or only because it's heavily discounted. I've certainly seen a fair share of games that I could have bought for huge discounts, but given that I didn't care about the titles in the first place, I don't see what would compel me to buy them now just because it's cheaper to do so. Perhaps I'm an odd case in respect to sales, but certainly, a line has to be drawn somewhere. They admit as much, though, when they continue:

There’s a counter argument to that, of course, which is that sales encourage people to try games that they’re not sure about. And there’s a certain truth to it, but I think that you need to reach a happy medium between giving someone a chance to take a risk without feeling like they’ve gotten a bad deal, and pricing things so cheaply that you tell gamers, "This game I made isn’t worth very much."

It makes sense that someone would buy a game that they are up in the air about, but gaming isn't the first or last sort of hobby to suffer from impulse buys. I would take the stance of cavet emptor towards such things, but that's something that's neither here nor there. A prevalent mindset right now is that if a person wants a game, all he has to do is wait in order to get it at a better price.

Sometimes that wait is less than two weeks. Sometimes it does mean having to sit by for months until some service is selling it, but either way,it portrays the opposite to what GOG is saying here: That rather than games not being worth very much, gamers know something that's overpriced when they see it and will gladly wait for a better opportunity to present itself.

I'll admit, I wanted to be mad about all of this. I certainly thought I was going to be. After looking at what they're saying, though, I can't help but think that they're raising good points -- misplacing the blame, perhaps, but raising good points nonetheless.

I wouldn't say that the Steam sale is the root of all evil here, but rather, the fact that games are priced so high in the first place is why sales have to happen in order for some people to buy. People want value, and if given value, they will be happy. There's nothing difficult about that, so why does it take people obviously pointing it out like this to make us think about it?

I don't have an answer for that; if I did, I'd be rich enough to afford all the games on Steam, regardless of whether they're on sale or not.

 
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Comments (7)
Robsavillo
April 18, 2012

GOG's comments are so off base that I'm not even sure where to begin. For one, as you point out, their business model already lowers the "value" of games by having a really low starting price point (between $6 and $10). A deep disount off that (which they've done! I'm sure I could dig up a GOG email detailing a 75% off somewhere) isn't that much lower, but it's still low nonetheless.

So dropping $6 to $3 (a 50% discount) isn't much different from dropping $30 to $3 (for a 90% discount) in that at the end of the day, they're both $3 games.

But they also fail to recognize that retailers and publishers alone don't set "value." You can price your game at $60 'til you're blue in the face, but if I (as a consumer) don't think the game is worth $60, I'm not buying. Maybe I'll wait for that 75% off for a game I would never have purchased at $60. This is basic market forces at work: If people think your game is worth $60, they'll buy at $60. If your game isn't selling, though, dropping the price to meet consumer expectations is what usually happens. In other words, consumers set value for products in tandem with producers.

If anything, this just sounds like GOG complaining about a business rival's success. More broadly, though, I think it says a lot about the $60 price point. For a lot of games, that's just too high.

5211_100857553261324_100000112393199_12455_5449490_n
April 18, 2012

See, now I don't have to type anything at all.  I can just go to work.

Thanks for that.

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April 18, 2012

First, thank you very much for promoting my article Rob. This is the first article I've gotten promoted on Bitmob, so I'm honoured that I made the grade.

I can definitely see the point you're coming from here. I do think that what GoG did here seems like trying to discredit a competitor -- of course how much of a competitor Steam is to GoG or vice versa is up for debate -- but like I said, I thought they raised some valid points about pricing.

I guess more than anything what they said acted like a springboard to me in regards to the state of the gaming economy right now. The conscensus even from these few comments seems to be "why get it now when I know that if I wait I'll get it at a much better price later?" and until the industry does something that makes people want to get it now, it'll just keep going on like this.

Robsavillo
April 19, 2012

Hey Graham, no problem! Thanks for writing such a thoughtful analysis. This is somethiing that's actually been on my mind for a while now.

The problem with this "consensus" is that it's too anecdotal. Sales figures speak louder, and the fact of the matter is that, generally, video-game sales are incredibly front-loaded, i.e., most games are selling in their first few weeks from release when the price is the full $60.

And the reason is mostly social: People want to be a part of the conversation when a game is new and hot. Overtime, that value dissipates.

For people who decide to wait for the inevitable sale, I'd say that they weren't all that interested in the game to begin with, i.e., they don't think the game is worth what the publisher is asking.

I don't think there's anything to be done about it...I mean, if the price held at $60 indefinitely, those waiters may never buy the game at all. How does that help the bottom line?

Honestly, I can't see what the problem is at all. Is it that games sell more units at lower price points (and, according to Valve, simultaneously produce more revenue)? What's the issue?

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April 18, 2012

Something that no one seems to be talking about is that it's not like you ever get an opening day discount. As someone who buys most their games on Steam sales, there are a few types:

1. The pre-order loyalty discount. Typically, this drops a game $10 ($60 to $50 or $80 to $70 for the deluxe). These kinds of discounts are basically a "thank you" for people supporting the game before they can really know what it is they're buying, and generates additional revenue before the game even comes out. Win-win.

2. The "testing the waters" sale. After a game has been out for a few months, publishers will try to get a second wave of buyers. These discounts are typically between 30-60%.

3. The "everyone who's going to buy this game has already bought it" sale. A year after a game comes out, typically no one's buying it anymore. If it's part of a series, the next one may even be right around the corner or already out. Either to squeeze a little more money out of a title or to drum up interest in the next title in the series, publishers will discount a game to crazy low, 70-95% off. This is the kind of sale that Rambourg and Longino were talking about.

But with this kind of sale, who's it hurting? The publisher/developer already have their "success" numbers for the game. Anyone who's going to spend $60 has already done so. This kind of sale is essentially an advertising plan, except the publisher is getting paid for it.

Edit: Also, you have to take into account Paradox's numbers. They own Gamers Gate, and have seen profits SKYROCKET by heavily (75%) discounting their Europa Universalis, Hearts of Iron, and Victoria games. That's profits, not just number of sales; they make MORE money by charging LESS.

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April 18, 2012

The phrase 'I'll wait for a Steam Sale' is something I hear more often than not these days. And certainly I've found myself holding off on a purchase and waiting for the price to hit rock bottom. Not becuase I think the game isn't worth the initial valuation, but just becuase of the certainty of it. Knowing you will be able to pick a game up at a vastly reduced price at some point in the none too distant future is a very tempting things. Espeically given we all have quite vast 'piles of shame' due to the ever increasing release cycles. It's easy to ignore new releases these days more than ever.

I think the issue might be that it seems to be an all or nothing with Steam, you are eaither paying pretty much RRP (quite often above what you would pay for the game elsewhere) or you are paying next to nothing. Could they not do 20% off Pre-orders. or 10% off all FPS games. Things which still give you value for money without practically giving the games away? Save the massive sales for maybe once a year on older games where the day to day sales have dropped off and the only way to get interest back into them is by reducing them to impulse buys.

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April 18, 2012

As long as the developer/publisher make money from the sales. All is fine. There is plenty of games out there that sell well after it's released (Syrim for example) so the idea that huge Steam sales are bad is wrong in my opinion. Developers have stated that they make much more money from the sales than the actually do from the regular price.

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