The Future of Gaming is Impulse-Driven
Issue   |   Tue, 04/09/2013 - 22:38
Image courtesy of fistfullofpotions.com
Steam offers massive discounts and has sparked many imitators.

Call me a cheapskate if you want, but I haven’t paid full price for a PC video game in at least a year. At the same time, I have well over a hundred games in my Steam library, and at least a dozen more from other digital download services. What’s strange, however, is that at least a quarter of them I’ve never played; of those, I bet at least half of them I never will. Yet I scope out new game deals nearly every day, and fight the temptation to add the increasingly backlogged catalog of games. Do I have a problem? Probably. I’m working on it.

It’s a good time to be a PC gamer. Game prices are getting slashed every day. Even before a game goes on sale, vendors will offer pre-order or release-day discounts. This trend really struck me as I watched the days tick down to Bioshock Infinite’s recent release, as sites such as Amazon, Steam, and Gamefly vied to entice customers with the best pre-order deals. These deals included bonuses such as free copies of Bioshock 1 & 2 or other games, cash-back, credit towards future purchases and extra in-game content. It was entirely possible to spend $60, the industry standard, for a pre-order of one game, and get $30 in cash-back and vendor credit, along with free games to sweeten the pot. At the same time, you can bet that in only a few months you’ll find the same game for half-price, and by the holiday shopping season it’ll be even cheaper. If you don’t believe me, I offer The Darkness II as an example: a critically praised game, it went down from $60 at its release last February to a mere $4.99 this past February. Such is the lifespan of a PC game these days — from full price to impulse buy in a year — and boy is it sweet. But why? Why shoot yourself in the foot with such low prices? Why is this only the case with PC games? How did it come to this?

Steam, among the first and arguably the most successful of digital distribution services, was not warmly received in its infancy. At that time, Steam was merely an anti-piracy and update client, and many found it an intrusive and cumbersome addition to their gaming experience. It would be years before Valve, the game development company behind Steam, would begin selling games other than their own, and longer still before Steam even turned a profit. At some point the pieces started to fall into place, however, and Steam began to feature the big name third-party titles (in addition to their own popular games) and rake in profit. While the convenience of digitally distributed games wasn’t new, the key was its integration with the software that had become familiar to so many players. As the catalog of games sold through Steam grew, Valve experimented with new business models, toying with the idea of frequent, massive discounts on certain games. It was a huge success, and people began buying the discounted games in droves. The sheer number of people buying the discounted games made up for the cut price. Games that had only moderate or waning financial success suddenly saw a huge spike in profits. Vital to this business strategy was to keep customers on their toes — deals were announced suddenly, for only a limited time and one never knew what game might be discounted next. You may not want this game, but it’s so cheap, and it may never be this cheap again, so you might as well buy it and save it for a rainy day. Couple that with periodic seasonal sales, with even steeper discounts just in time for the holidays, and you have a business model that could revolutionize the industry. Or destroy it? Could there be danger in adjusting consumer’s expectations of video game prices so radically?

Around the time that Steam began offering these massive discounts, skeptics feared the worst for the industry as a whole. Critics denounced Steam’s promotional sales as “cannibalizing” the profits from normal game sales, discouraging people from buying games unless they’re massively discounted. Now it seems that the critics may have been right, but it may actually be the best thing for the industry. Valve has grown tremendously as a company in the past several years and has only attracted the attention of an increasing number of developers. Yet what I think signifies the success of this model aren’t Steam’s supporters, but rather its imitators. Digital content distribution wasn’t a novel concept, but Steam showed how profitable it could really be. Competitors have arisen over the past several years, the largest among them being Amazon, which often price-matches and even undercuts Steam with every discount. Last year, I wrote an article about pay-what-you-want business models implemented by independent game developers. The concept behind that model isn’t too different from Steam’s: offer games at low, impulse-driven prices and let the sheer number of purchases drive profits.

So far, it seems to be working across the board, and it makes consumers happy to boot. Yet it is only possible because the product and distribution are digital. In terms of material costs, there is little difference in selling ten or ten-thousand copies. This advantage has allowed the PC game market to evolve in a very different direction than console games, whose prices tend to remain stable. The benefits and success of digital distribution systems are very clear to console manufacturers, however. Sony and Microsoft alike have focused primarily on integrating digital distribution services into the next generation of home consoles to both offer convenience and minimize cost. No matter where you look — PC game deals, upcoming consoles and even the pocket-change prices of the iOS and Android apps — all signs say that the future is impulse-driven.

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