GoG.com: Huge sales "damage the long-term value of your brand"

One of my issues with these comments is the generality of them. For instance:

"... but you're damaging the long-term value of your brand because people will just wait for the next insane sale"

Some will. Some won't. If you were to look at this rationally, you would probably find that those who wait for the "next insane sale" are those with very little money, or at least no impulse-purchase cash. I'd also question whether the "long-term value of your brand" gets damaged by deep-discounting, when it can actually lead to an increase in visibility and an extended long-tail. Certainly, the timing of a deep-discount on a game with the release of new DLC doesn't diminish the value for either the consumer or the developer/publisher.

Rambourg and Longino claim that the industry has failed to make day-one purchases a compelling value proposition for the consumer.

Patently false. Look at how many pre-order bonuses are available, for everything from ME3 to the new Max Payne. There's a massive amount of attention (I would argue too much) on getting the customer to buy early/Day-One. I would actually argue that so much focus on Day-One purchases can negatively affect the industry, since the consumer is paying out a sizable amount of money, for a game that won't have been reviewed, and might be rubbish. In fact

"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 what happens if that consumer buys a game Day-One, from an established company, and finds that it's a sub-standard quality? Isn't that just as bad? How many people got burned by making a Day One £35 purchase of Need For Speed: The Run, because it looked shiny? It works both ways, and in fact the customer will surely be more forgiving of a poor game at 75% off than they will a brand-new one at full price.

Edited 1 times. Last edit by Morville O'Driscoll on 12th April 2012 11:11am

Posted:A year ago

There is some merit to what he says, i certainly feel this is the case with iOS, the race to the bottom has devalued everything, most users think twice if something costs more than 99p now, regardless of how much content it may have, and half the time they look for the free ad driven version, great for the consumer, but not sustainable in the long run for the majority of developers on there.

Posted:A year ago

No, that's true. Though I would be tempted to say that comparing his remarks to the mobile market is a bit apples-and-oranges. The PC and console market is used to spending large amounts of money (comparatively), where-as the race to the bottom in the mobile market happened almost in the blink of an eye, so the consumer was never trained into spending "proper money" for a generous amount of content.

And I'm certainly not saying he's wrong - I've got a fair number of games in my Steam library that I haven't even played yet, because they were so cheap I couldn't not buy them. It just seems... not very well thought out, I suppose.

For instance, Steam is name-checked, but the devaluation of games on Amazon is just as bad. The Darkness 2 (released in February) is currently just over 12 bucks on Amazon.com. What does that say about not only the worth of the game, but of those who did actually buy it Day-One?

And then you get into other things, like all this is really tied into giving the consumer value - "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...". Well, that's only if the game is bad, right? So what happens when the game is good? Or, rather, when the game is good enough for the price it's sold at, but no more. I'd be tempted to buy The Darkness 2 at £7.50 ($12), but not at the £30 it's currently selling for on Steam.

Edited 1 times. Last edit by Morville O'Driscoll on 12th April 2012 12:07pm

Posted:A year ago

It is a mistake to separate the different markets and think that prices on one market does not impact price levels on another. Perceived values travels between markets of similar products. Price elasticity is under rapid change on all game markets and market awareness of cost differences between a 3 hour app on iPhone and a 3 hour AAA game is zero, and therefore never part of a buyers evaluation during the decision process.

All actors within the industry must be aware of the long term effects of their actions on the industry as a whole. The Apple App-store taught the gamers that on the iPhone no game is worth more than 3 USD and that will in the end choke the quality levels of games there. The aggressive price strategies to get on the lists of the app-store is also having long term effects on the market since the general behaviour seems to be that everyone expects all games to lower their price after a very short time. All this will in the end choke the Apple platform as a gaming platform.

Steam is also running down this rabbit hole with a smile on their faces. They teach the buyers to wait since we all know prices will fall. The new kid on the block is Origin and I feel that this will dampen the markets willingness to lower prices. It is mainly for EA:s own games and I think the urge to mark down their own products is lower than Steams urge to mark down others.

Posted:A year ago

@ Rolf

The price of every game on Steam requires the publisher's approval. Obviously, this also applies to sales (, not just Daily Deals but Mid-Week/Weekend etc). So, to say that "Steam is also running down this rabbit hole" isn't quite correct - it's the publishers who are running down the rabbit hole. It's the publishers who devalue their own games, not Steam.

"Perceived values travels between markets of similar products... market awareness of cost differences between a 3 hour app on iPhone and a 3 hour AAA game is zero, and therefore never part of a buyers evaluation during the decision process."

Is it not? I suppose it depends upon how knowledgable the consumer is, which is a variable. I know that a game on iOS is cheap and may be rubbish or may be awesome. Either way, I know that I won't play it a lot, so I place a low value on it. I know that Kingdoms of Amalur is my type of game (and is a good game), and that I'll play it a lot, so am perfectly willing to pay full-price for it.

Edited 3 times. Last edit by Morville O'Driscoll on 12th April 2012 1:16pm

Posted:A year ago

The image for this article missed out my wallet quivering on the floor shouting "no, Steam, no!".

I don't think it's necessarily the sales that are the problem, I've read plenty of reports that Steam sales have dramatically increased the profit of a game opposed to RRP pricing in a same length time period. I think it's more to do with the frequency of sales, my friends and family, myself included have all been guilty of saying "well I'm in no rush to get this game, I'll just wait till the next sale". If there is any damage to games through sales then it's that kind of "hold out till the next sale" mentality that's doing it.

The sales have encouraged me to pick up many titles that I wouldn't have otherwise though, so this isn't quite the black and white issue that's being painted by GoG.

Posted:A year ago

You make the common mistake to look at your own behaviour and knowledge level and think you can draw market conclusions. Anyone registered on this site is in fact as far withdrawn from the regular game buyer as you can get. I'm quite sure that the knowledge level of the general customer won't allow them to make informed decisions regarding values in a game product. This is generally the truth in all other products in all other markets and should be the same here. What is your knowledge on how much money is spent on developing a new car model?

Regarding the steam thing. Its their store, its their responsibility to dampen the effects that price devaluation is having on their business in the long run.

Having said that, most publishers really should be cooler when it comes to pricing. To make money in the long run they must be able to keep their cool and not lower prices in panic when some games don't hit their mark. The movie industry doesn't lower prices at the box office week two when the first week didn't live up to expectations, at least not in Sweden as far as I know. That way they can keep up the prices week two of the hit movies.

Posted:A year ago

@ Rolf

I'm quite sure that the knowledge level of the general customer won't allow them to make informed decisions regarding values in a game product

Ouch. 2 Things.

1) That's quite an assumption you make. I do admit that the knowledge level of the consumer is variable, and that some don't know the values of a product. But equally there will be a number who do know them.

2) Surely it's in the industry's best interests to educate the customer about the value and content of the product, and help them make informed decisions? It's an arrogant and short-sighted industry indeed which simply assumes that the customer is too indifferent/bored/stupid to understand the processes and costs of a game and value it accordingly. I have a working knowledge (that is, some, but not a lot) about the costs involved in most industries, though in that I am definitely not the average.

Regarding the steam thing. Its their store, its their responsibility to dampen the effects that price devaluation is having on their business in the long run.

Well, yes and no. I see what you're saying there, but they do have a massive amount of metrics that they can (and do) give to publishers, showing the leap in sales that a drop in price can give. From there, it's the publisher's choice, which leads us to...

To make money in the long run they must be able to keep their cool and not lower prices in panic when some games don't hit their mark

This I agree with. My example of Darkness 2 above is shocking... If I'd bought the game on Day-One I'd be pig-sick that it had dropped so low, so quickly. And that's 2K's doing, not anyone elses. (Like Steam, Amazon have to have the go-ahead from publishers to place items on deep-discount, I believe, though if someone knows otherwise... :) )

Posted:A year ago

I would point out that something is only worth as much as people are willing to pay for it. So perceived value is a nonsense. It blatantly smacks of greed on the developers part and even without these so called insane sales. The trend has been for people to not buy games as their actual value has been far too high for a while now. Couple that with the milk them dry DLC policies of the big games publishers and it's no suprise at all that people have simply started abandoning that side of the industry in droves.

Posted:A year ago

1) That's quite an assumption you make....

Not much of an assumption, well documented in most marketing research done over the last 100 years. People basically know nothing about the products they buy and why they buy them. Price is actually one of the only factors that weighs in on the decision making and that's why most industries are really scared of price wars. And for this reason, educating the customer is extremely important and the industry as a whole should do try to do this together.

I don't think the industry think people are too stupid or lazy, its just that educating people is too expensive and they rather use peoples weaknesses than take advantage of their strengths (learning). This is a case where the individual company is not ready to do the common good.

Posted:A year ago

@peter
Perceived value is a thing, believe me. When you buy a piece of candy the perceived value of that candy is much higher than the actual value. Physically, economically and psychologically.

Edited 1 times. Last edit by Rolf Moren on 12th April 2012 2:59pm

Posted:A year ago

@Morville

The price of every game on Steam requires the publisher's approval.

You couldn't be more correct sir!

Publishers have to approve prices for all games. But they go about it quite illegally. Steam offers a sale idea to a publisher for a massive 90% discount on an entire publisher library (or the majority of).

Publisher approves the bundle discount... FOR STEAM ONLY.

Nobody else gets this discount. Nobody else that sells games digitally that steam offers also gets to sell these games at such a discount.

And why is this? because Steam IS in fact going down the rabbit hole with everybody's money... Sure the publishers have to agree to a sale... but if Steam comes up to you and strongarms you into agreeing to a sale or not make any money... what are you going to do as a publisher?

We can argue all day about how discounted games give people an opportunity to purchase and play games that they wouldn't normally purchase otherwise, but most people ignore the legallity of what they do on a daily basis.

Approving a sale for one distributor (Steam), and then denying it for another (anybody else), is completely illegal in the United States. Most distribution contracts require disputes fall under legal domain of the distribution company, in this case and many cases, that is the United States. And even if it's not, many EU countries are in trade agreements with the United States to follow our laws on distribution regardless. What are these laws exactly? Anti-Trust laws. The act of giving preferential treatment to one distributor over another is completely illegal. The exceptions are in bulk ordering discounts with physical products, but there IS NO preordering for digital sales. So approving prices for one distributor and not another is Illegal... Too many publishers get away with it, Steam gets away with it, and nobody has smacked them down and told them no. Why? It's a rather incestuous relationship if you think about it... You make us money, and we will let you sell stuff at prices lower than anybody else. Both parties are breaking the laws, but there isn't another digital distribution company big enough to take the issue head on because Valve can just wait it out in the courts till the other doesnt have anymore money and gives up.

There are a lot of grey areas in Anti-Trust laws with digital distribution of products, but that's because they were originally written with physical sales in mind. I have a feeling this will change over the next couple years and Steam is going to get a rude awakening.

Posted:A year ago

@ Joshua

but if Steam comes up to you and strongarms you into agreeing to a sale or not make any money.

Ah. See, that's a bit strong, surely? For one thing, I doubt that they specifically say to the publisher that they can't have a sale anywhere else. In fact, I know for a fact that they don't - Steam had a Square/Enix Weekend Sale a couple of weeks ago. 2 days later, Green Man Gaming had a Square/Enix Weeklong Sale. Moreover, it's not a choice between "sale or not make any money", it's a choice between "make a bit of money, or make more money".

I think Steam comes across strongly because it's the market-leader, and that creates a self-fulfilling dynamic. Publishers want to sell lots on Steam, so when Steam says "Do you want a sale?" the publisher obviously says yes. This in-turn means that Steam gets more sales, so the next time they go to a publisher and ask that same question, they have the metrics to prove how much the publisher can make, and the publisher obviously says yes. And so it goes. Honestly, though, there's nothing stopping EA saying to publishers "Let's have a sale", other than greed; they want to keep prices high to ensure maximum profits on what sales they get.

More generally, your comments about anti-trust are...

Well... If the Monopolies and Mergers Commission and the Federal Trade Commission looked at the video-games market - both digital and physical - they could have a field day if they wanted. Exclusivity of pre-order items alone is anti-competitive, and then you have exclusivity of digital systems (HL2 needing Steam, BF3 needing Origin), GameStop's bricks-and-mortar-exclusivity of new StarDock games, anti-competitive pricing strategies, DLC sold only in one store (that'll be the BioWare store, the only place to get DA2/ME2 DLC)... The list goes on. In many many ways, the gaming industry is anti-consumer and anti-competitive, so singling out Steam is both a good thing (recognising its flaws), and a drop in the ocean.

Finally, I'll leave a quote here from Tom Pickard (of The Creative Assembly). It's from a thread about Game on this very site a few weeks ago:

"As for how publishers do it, Steam give publishers control of how much they slash the prices for a limited time (usually 24h, 48h or a week) and then co-ordinate marketing efforts to sell a large number of games and DLC for products which are usually well out of their 6 week “in-store” life, breathing life into great games that are overlooked or a little older to people prepared to go for it cause its £10 not £30 etc"

Edit:

Also, this

You make us money, and we will let you sell stuff at prices lower than anybody else

Made me giggle. Excluding sales, Steam is about average for prices. They charge less for Kingdoms of Amalur than EA do on Origin, but Dead Space 2 is £15 on Steam, and £10 on Origin. So, it really does vary.

Edited 3 times. Last edit by Morville O'Driscoll on 12th April 2012 5:38pm

Posted:A year ago

Whilst there is some merit to this argument, I and many other people have bought games on Steam sales that we wouldn't have otherwise bought. After the sales taper off, would publishers rather have none of my money for their high priced game, or some of my money for their low priced game?

Conversely I and other people I know usually hold off buying SEGA games on release. This is because they are normally discounted to around £20 fairly quickly. But this isn't due to sales, this is due to a predictable pricing scheme.

Posted:A year ago

when I refered to prices, I meant sales prices.

Steam has artifically created a barrier to entry for many new digital distribution companies not only by being the market leader, but with the use of Steamworks in most modern PC titles.

Sure, a digital distribution company can sell a Steam code, but if they're trying to compete directly with Steam, it kind of defeats the purpose. By having Steamworks on a game, it effectively ties that customer to Steam regardless of the purchase method (be it retail, digital distro company with code, etc). So how can any new company come in and have any hope at all of gaining a foot hold, when even if they sell new titles, they're giving their customers to Steam? How is that not strongarming? It's not strongarming in the sense of demanding promotions, but it effectively eliminates new players in the digital distribution industry simply BECAUSE those new players cant retain customers.

A while back, Direct2Drive and Impulese along with several other DD companies were threatening a boycott (some even did), on selling games with Steamworks because they had their own client software to directly compete with Steam... And what happened to those companies? They went under and got sold off to other companies to mitigate losses, most recently Direct2Drive/Gamefly and Impulse/GameStop deals come to mind. If I remember correctly, those two companies were the leaders in the attempted boycott, and they got crushed because they couldnt keep up without selling steamworks games.

Posted:A year ago

Ah, confusion about what you meant. I get you now. :)

Want to know how to compete with Steam?

Look at what Steam does. Then better it. Origin is a good example of something that could seriously be a Steam competitor:

1) It's backed by EA.
2) It has third-party publishers.

But it lacks:

1) Good prices (and by that I mean, not gouging customers. There's no reason why ME3 should've been more expensive on Origin than at Game or Amazon).
2) A good social system. Steam Friends is easy, intuitive, and inviting other people to a game of L4D is a walk in the park. Try doing any of that in Origin.
3) A gifting system. Again, no reason why Origin can't do this. But EA just haven't got the infrastructure up, or maybe they just don't care about friends buying other friends awesome games.
4) Achievements.

Now ask yourself what other digital distro system has these benefits for gamers. Ask yourself why, after Steam has been around 8 years, EA have built an inferior product that doesn't compete with Steam as it is now. You don't want games with Steamworks? Ask yourself why EA's Origin system has been cracked repeatedly on Day-One of release, whilst there's still no fully-functioning pirated copies of Shogun 2, due to Steam's CEG DRM.

You want a competetitor to Steam? You want less implied strongarming? Awesome. Me too. :) But the lack of a genuine competitor isn't down to Steam-activatable games.

(Oh, and don't even get me started with Games For Windows Live. :p )

Edited 1 times. Last edit by Morville O'Driscoll on 12th April 2012 6:58pm

Posted:A year ago

The film industry learned this years ago.

If you go to a rep cinema to watch an old classic, they won't give you 75% off. You'll pay the same ticket price.

The idea of discounting is basically contamination from those who confuse game development - which is an entertainment industry - with software development. Software gets obsolete. But software is just functional. It isn't entertainment. Good entertainment is eternal.

Posted:A year ago

Surely film and TV DVDs is a better analogy? Both in how the consumer "consumes" the entertainment, and in pricing.

Posted:A year ago

@ Everyone citing the film industry, you guys do realize the film industry has serious profitability problems right? Even worse than gaming. MUCH worse than gaming in fact. The film industry's inability to appeal to a customer's sense of value is one of their greatest faults. Their heavy resistance to services like Netflix, Amazon Prime, and Hulu is literally killing them. The film industry needs to learn from Steam, not the other way around.

A lot of people are failing to understand what Steam is really doing, and who it benefits and who it hurts, including Mr. Rambourg. Full-priced, even EXPENSIVE full-priced games have not decreased in sale quantity in even the slightest amount due to Steam sales. In fact, they're higher than ever (see: Skyrim, still selling ridiculously strong at $60). If your game isn't worth $60 to the consumers (most games) it has nothing to do with Steam, but with your game. Valve even has stats that show that sales not only increase profits of games during the sales, but increase sales AFTER the sale ends.

So then what are these sales doing? Massively boosting awareness, and creating huge reach for games into a market of people who otherwise would NEVER have bought the game at a standard retail price (or a reduced retail price, which is still almost always much higher than Steam, and generally used.) If anything, Steam's ability to constantly have sales has created a massive consumer interest in PC gaming, and fostered a community that WANTS to spend their money. This is a pretty incredible feat.

PC gaming has gone from a dying market to arguably the healthiest and most consistently profitable in the industry, and the only market that supports multiple levels of technological prowess and multi-tiered pricing, which is going to be a HUGE issue for consoles if they go for a big tech leap in the next generation. Almost all of this is because of Steam. So no, it's not hurting the industry's ability to charge premium prices... merely encouraging them to sell at many price ranges, which is better for everyone, and extremely consumer friendly.

Posted:A year ago

A lot of valid comments made here. What the industry should also learn to do more of is adding value to the product to increase perceived value, rather than simply resort to sale tactics. Price wars help no one.

Posted:A year ago

One thing that I think he fails to address is that GoG.com generally runs in an entirely different price bracket than Steam, and that alone makes a huge difference in how you manage your pricing and how consumers perceive it.

When your full retail price on a game is $6, you're already in "about the price of a cup of coffee" land, and consumers will treat that very differently from the full-retail-price $60 purchase of a game on Steam. For a lot of consumers, the difference between a 50% discount down to $3 and an 80% discount down to $1.20 is not terribly noticeable, but a difference between a discount down to $30 versus a discount down to $12 is enormous.

From reading the comments, I'm glad to hear I'm not the only one with a large pile of unplayed games bought on sale. A number of them are things that, if I'm honest with myself, I might never have bought because, much as I want to play them, I don't see how I ever would have found the time. So in cases like that, the $15 I spent on Bioshock 2 or whatever is money the publisher really never would have seen otherwise.

Edited 1 times. Last edit by Curt Sampson on 13th April 2012 3:21am

Posted:A year ago

It's correct that I and many others buy games we wouldn't have otherwise on Steam. Of course GOG's problem is that the very same money isn't spent at their shop. I don't mind that I 1) pay very little for software that I may or may not use later and 2) support devs whose games I would otherwise not have bought and 3) if the price is low enough I will buy the game again on more platforms for convenience. Something I would not do at GOG prices - which are often as high or higher than the same game in physical copies.

I do buy games from GOG, but it is rare. I feel my money is better spent on Steam sales or sale prices on console games. If GOG were to bundle their games more often (I have bought some of the ones they've offered), offer sales with steeper discounts and/or also worked on Mac support through Cider/Dosbox where applicable, I would give them far more money and feel great doing so.

Posted:A year ago

@Joshua

Yet Steam is the answer to the age-old problem; it makes no-cd cracks irrelevant and it turns Steam into a backup-service for your physical media. Since games are basically sold as a service rather than a product (by EULA), something like Steam basically HAS to be around. It would be nice with a neutral platform backed by all publishers, but what are the odds? I am just glad Steam picked up the gauntlet.

Posted:A year ago

@Rolf

My opinion is you couldn't be more wrong. Quality games can and do pull in higher prices. Those who are both high quality and extremely low price (and has the necessary visibility obviously) make a lot of money. The prices are not suicide by publishers either. It would be suicide not to follow market forces. Price is dictated by demand as always. The volume solves the rest.

This is in fact the dream scenario that publishers have been talking about: There are so many buyers that the market can carry these prices. Prices that publishers have been raising since the 8 bit days since there were "not enough sales". Codemasters, Firebird etc. solved the problem back then, but were mostly built to build a distribution chain for later - which was the wrong motivation. As you may or may not recall they were massively successful at selling fairly high quality games at prices that children's allowances could afford.

The industry cannot inflate prices artificially without hurting themselves. And there will continue to be a market for both Angry Birds and Gears of War in different price brackets regardless of spending 8 hours of Angry Birds at $1 or 8 hours of Gears of War at $50. Believe it or not; the average customer does know the difference in the value proposition. Don't think they are retarded. The industry makes this assumption far too often and comes off as the very same thing because lf it.

Posted:A year ago