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Valve is pushing price of PC games to free - Lovell

Valve is pushing price of PC games to free - Lovell

Tue 04 Mar 2014 7:52pm GMT / 2:52pm EST / 11:52am PST
Business

Author says letting devs control Steam sales will drive prices to iOS/Android levels, give Steambox edge over traditional consoles

Last week, it was revealed that Valve would start allowing developers to set their own Steam sales, giving them freedom to change their games' prices at will. In a post on his Gamesbrief site yesterday, industry author Nicholas Lovell pointed to the move as a sort of starter's pistol, setting off a race to the bottom for PC gaming prices.

In his piece, Lovell cites economist Joseph Bertrand's idea that barring outside factors, competition will drive the consumer cost of a product down to its marginal cost. And because distributing PC games digitally is cheap and falling bandwidth costs will only make it cheaper, Lovell reasons that competition will push the cost of games down to virtually nothing as well.

"There is an issue with Bertrand Competition," Lovell acknowledged. "It excludes the impact of marketing; it assumes that one pair of shoes is as good as another pair of shoes; it doesn't factor in the cost of comparison, or the cost of switching, all of which are real. But what it does say is that the thing that drives the cost of products down, particularly in the case of digital products with low marginal costs, is competition, not piracy. And by removing itself from the pricing process on Steam, Valve has just made its platform hyper-competitive."

Lovell sees Valve's Steambox as a competitor to consoles, and pushing the price of games down as low as possible is in the interest of a company unwilling to employ the razors-and-razor-blades business model favored by the traditional console market.

"[W]hat if Steam's [unique selling proposition] was thousands or tens of thousands of games for free," Lovell asked. "What if it competed with consoles by taking the Steve Jobs approach of an open platform with the price set by developers (and hence likely to tend to free, according to Bertrand Competition)? What if Steam wants the PC market to go to free because it will be a powerful competitive weapon as it battles the console manufacturers? Then I would expect [Valve] to open Steam to many more developers (Greenlight), to make games available fast (Early Access) and to give the market control over pricing (developers set their own sales)."

60 Comments

I have to think that valve is willing to sell out its developers to make steambox a success.

However I don't see the PC market accepting F2P.

Posted:5 months ago

#1
Out of all the ideas Steam has been implementing (most of which I agree with) this one could prove disastrous and even though it's Valve we are talking abouf I can't help but think they are not entirely aware of what this could mean for pc gaming as a whole.

The first few to abuse the system will get all the sales while destroying whatever full priced games come out at that time and we can expect this to turn into a snowball and make middle priced games without the marketing and pr muscle of AAA games and unable to compete with thousands of 0.99$ games in an even more uncomfortable middle ground.

Moreover, many developers time their pc releases to avoid the Steam sales, and now that they can occur pretty much 365 days a year what can we do ?
We see more and more people saying "I'll wait for a sale", what's going to happen once ridiculous sales become even more common?

If Steam, with the massive influence it has on PC sales, becomes significantly less profitable for developers (and likely force other portals to adapt and follow suit) it's easy to guess this will only further drive developers away from the PC.

As a developer and a consumer, I'm worried.

Posted:5 months ago

#2

Alan Resnin
Journalist

19 15 0.8
The game industry is doing bad SPECIFICALLY because the price of games is so low, the value of games is close to 0

Posted:5 months ago

#3

Curt Sampson
Sofware Developer

596 359 0.6
We're all right to be worried, but keep in mind that PC gaming is not at all in the same situation in which mobile gaming started.

The PC gaming market has a long and ongoing tradition of expensive games that are large, rich experiences for which people are willing to pay substantial amounts of money. There's a continuing demand for these sorts of games in a market consistenting of what you might call the "core" gamers, and these gamers are ready and willing to spend reasoanbly substantial ($100/year or more) amounts of money on these games. These gamers are also fairly astute critics, with the ability to tell whether or not a game is giving them what they want, which makes it difficult to produce cheap knock-offs to satisfy this market.

Mobile never developed such a market (probably in part because the computing capability to support these richer experiences lagged far behind consoles and PCs until recently). Instead, it's predominantly what you might call "casual" gamers. For these folks, gaming is a way to pass some time rather than an experience to seek out to which you dedicate large chunks of time. Thus, logically, they're not willing to pay nearly as much (perhaps a few tens of dollars per year, if that) for the experience and the games themselves have a greater degree of fungibility.

The more I look at this, the more I'm convinced that these are two utterly different markets, and products for the casual market will never be able to satisfy the core market. (Note that I'm not saying that a single individual may not be a member of both markets, at different times. Just that when he's got his core gamer hat on, a casual game will not satisfy his need.) Conflating these two different markets is what leads to conclusions such as, "the console is dead."

So the real question is, what's going to happen to that core market. We may be able to glean some clues by looking at where the market is now. Cheap games in that market are not new: Steam is currently telling me, on its front page, that it has 2059 games under $5. Why is Thief still selling reasonably well in this environment?

I'm not saying that there's nothing to be worried about here, but I think that saying Steam is going to go the way of the mobile app stores seems to me like an overdramatic assessment.

Another thing that worries me a little: sale prices on Steam have to this poiknt been used to implement differential pricing: capturing the part of the market not willing to pay a high price for a game while still being able to sell at that high price to the part of the market that is willing to pay that. (Clearly this doesn't work perfectly, but it does do a reasonable job.) But with developers now able to set their own sale pricing, how does Valve prevent them from setting an artificially high retail price and having it always 75% off, in order to both create an impression of value and make sure that it's always on the sale lists I (and probably others) regularly look through?

Posted:5 months ago

#4

Paul Johnson
Managing Director / Lead code monkey

808 1,010 1.3
Curt, plenty of people tried to make "full experiences" on mobile, including ourselves. Maybe not as full as AAA but for sure fuller than a $3 pricetag would imply.

The reason you don't see them much, is because the race to free (and beyond) killed them off as a viable way to earn money and stay afloat. Sadly I do see this as inevitable on PC also because people out there really do expect good stuff for free or dirt cheap. That a game took a lot of development is simply not a factor people understand or care about.

So devs will chase those eyeballs and it'll all end in tears the same way as mobile. Nobody wanted this, it's just inevitable. But Steam are going to earn big.
and make sure that it's always on the sale lists I (and probably others) regularly look through?
Because it starts here.

Edited 2 times. Last edit by Paul Johnson on 5th March 2014 8:02am

Posted:5 months ago

#5

Alfonso Sexto
Lead Tester

782 588 0.8
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This general "there can be only one" attitude I see amongst professionals in the industry is getting a bit tiresome.

Edited 1 times. Last edit by Alfonso Sexto on 5th March 2014 8:13am

Posted:5 months ago

#6

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
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Developers/Publishers have had the opportunity to set prices on Steam since forever. Valve have never imposed prices; they have guided prices (that is, saying "This game would probably best fit at X price"), but the ultimate decision is down to the dev/pub. So, now that the dev/pub doesn't have to talk to a Valve rep to get their game placed on a discount, everyone assumes that there's going to be a race to the bottom on standard game prices? Preposterous.

There's already a push-back against the concept of Steam sales: discounting/deep-discounting near-constantly leads consumers to expect games for barely more than cost, and thus devalues the IP and leads to negilgible profit. Why on Earth would these self-same devs/pubs willingly drive the standard cost of games down? PC is the last bastion of full-price games with no second-hand market, since almost every game requires being tied to an account of some sort. And people think that devs/pubs are going to give all that up just for more installs and the possibility of IAP?

A core assertion of the article is that Valve want to dominate living-rooms at any cost, even if that means devaluing the worth of Steam by flooding the market with F2P games. That's a strong assertion to make with little evidence to back it up. No doubt some consumers want free. But to assume that Valve want to court that demographic so much that they are willing to drown out AA/AAA paid games on their market with F2P, and in so doing drive away both the devs/pubs who want to keep their profit margins high, and the consumers who don't want to be forced into being nickle-and-dimed? There's no value in having Steam everywhere, if no-one uses it. I don't look at games on the Play Store, even though I have my S3 on me at all times. Why? No value in wading through crap to find the good stuff. People think PC gamers - the guys who want Star Citizen, Pillars of Eternity, Fallout 4, the next single-player Elder Scrolls - are going to wade through F2P crap on Steam?

Edited 17 times. Last edit by Morville O'Driscoll on 5th March 2014 8:55am

Posted:5 months ago

#7

Anthony Gowland
Lead Designer

173 530 3.1
However I don't see the PC market accepting F2P.
Yeah, there certainly aren't any hugely 0successful f2p games on PC already.

Posted:5 months ago

#8

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
(posting is kinda broken here, guys. Hence my double-digit editing and deleting of post above. Something to do with hyphens, semi colons, and currency signs.)
I do mean that Valve seems likely to open the market to more developers, to more experimentation and to more price points to see what works for consumers and businesses alike.
Steam has the most pricing tiers of any games retailer, digital or bricks and mortar. Valve are open to devs/pubs from the iOS/Android market coming into the Steam ecosystem, but to assume that those pubs and devs would want to go F2P on the largest PC digital distro retailer out there assumes a lot. The recent release of Major Mayhem actually counters this. It's free on iOS and Android, 3.99 on Steam. I do actually wonder if Valve - remembering EA's "Sales devalue IP" kerfuffle - are actually forcing devs/pubs to place a price on games unless they truly fit the F2P model. It would make sense to, both from an economic and a curation POV.
[The] Bertrand Competition[...] assumes that one game is as good as another game
I have no problem using imperfect economics models to understand digital distro, but can anyone say that the above is true? Or, to put it another way, if we were talking about restaurants and hotels, would the Bertrand Competition help us or hinder us?

Edited 8 times. Last edit by Morville O'Driscoll on 5th March 2014 9:31am

Posted:5 months ago

#9

Christian Keichel
Journalist

626 853 1.4
Lovell sees Valve's Steambox as a competitor to consoles, and pushing the price of games down as low as possible is in the interest of a company unwilling to employ the razors-and-razor-blades business model favored by the traditional console market.

"[W]hat if Steam's [unique selling proposition] was thousands or tens of thousands of games for free," Lovell asked
Doesn't make any sense, Valve isn't selling any Steam Boxes, so how should the company earn any money from "thousands or tens of thousands of games for free"?

Posted:5 months ago

#10

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
Doesn't make any sense, Valve isn't selling any Steam Boxes, so how should the company earn any money from "thousands or tens of thousands of games for free"?
They'd presumably take a cut from IAP. Though, I'm not sure if they already do that, or if IAP are excluded from their revenue stream. I know Valve take a cut from DLC bought in the store, and items purchased on the Marketplace, but I'm unsure about IAP. If they're excluded, then a new contract with publishers might make them think twice, like EA and the DLC contract update.

Posted:5 months ago

#11

Jakub Mikyska
CEO

199 1,091 5.5
Popular Comment
I still don't get, how can anyone consider the race to the bottom, abundance of nickel-and-dime F2P games and overcrowded markets full of crap, a good thing.
Sony let's you set your sales prices for as long as I remember and you don't see everything going free there.

PC is the home to some of the most successful F2P games, but only because these games are done "right". Or at least most of them. Release the new Dungeon Keeper on Steam and get ready for a s#!tstorm.

And finally, Greenlight isn't a tool to get every garage developer to Steam. It is a tool to keep the crap out.

Why, oh why still so many people consider the mobile market as the perfect one? Who makes money there? Apple, "mobile marketing agencies", and a few lucky developers. Everyone else is struggling. Especially indies. If that is the future of the game industry, I am off it.

Posted:5 months ago

#12

Paul Johnson
Managing Director / Lead code monkey

808 1,010 1.3
@Jakub. Can you point to someone who did? I think you have your wires crossed.

There's a big difference between "desired" and "inevitable"

Posted:5 months ago

#13

Renaud Charpentier
Lead Designer

64 138 2.2
World of Tanks, League of Legend, Hearthstone... there are already plenty of excellent AAA PC games operating under a F2P business model and making a lot of money. And yes, you can apply it intelligently to almost any genre, shooters (Planetside 2), hack and slash (Path of Exile), DotAs (Dota2) or MMORPGS (well, list is too long here). Expect racing, sport and sim games to follow soon.

It's just a change in our business model, it's just no longer asking players to pay before they know they like the game; nothing to be afraid of if your game is strong and relevant to a given audience.

Posted:5 months ago

#14

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
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it's just no longer asking players to pay before they know they like the game; nothing to be afraid of if your game is strong and relevant to a given audience.
*cough* Demos *cough*

:D

Posted:5 months ago

#15

Robin Clarke
Producer

300 684 2.3
PC gamers see the value of premium games. It's strange that while warning against viewing games as interchangable sacks of potatoes the author seems to be doing exactly that. A free to play MMO is a very different value proposition to a crafted action-adventure game or indie title.

Posted:5 months ago

#16

Christian Keichel
Journalist

626 853 1.4
They'd presumably take a cut from IAP. Though, I'm not sure if they already do that, or if IAP are excluded from their revenue stream.
Even if they would do that (and even if publishers would decide to release their game on Steam, as there seems no need to do so, if you are already F2P), it's important to put things in perspective. As Lovell himself pointed out, the Appstore generates only 1% of Apple's revenues this means 99% of their revenues are generated by hardware sales. It's the opposite with Valve, they make almost all their money by providing a digital store front to sell games. a cut from in-app-purchases wouldn't replace the cut they can get from the sales of a game right now.

Edited 1 times. Last edit by Christian Keichel on 5th March 2014 10:19am

Posted:5 months ago

#17

Nicholas Lovell
Founder

185 170 0.9
You don't see the PC market accepting F2P?

The three top most popular games on Steam are DOTA2, Counterstrike Global Offensive and Team Fortress 2. Two of the three are free.

The most revenue generating PC game in 2013 was almost certainly Crossfire, a PC first person shooter that is estimated to have raked in $957 million. League of Legends was #2 with $624 million. Counterstrike Online scraped into the top ten with *only* $121 million of IAP revenue. (http://venturebeat.com/2014/01/15/chinas-crossfire-is-bigger-than-league-of-legends-and-world-of-tanks/)

Then there are small studios making decent livings from free-to-play games like Path of Exile or Stronghold Kingdoms. And there are many others that we've never heard of because F2P is a business model that enables a company to make a successful profitable game with only a few hundred thousand players, only a fraction of whom are dedicated.

I am not saying that all games will be free. But I am saying that the PC audience unequivocally accepts free.

I think that the evidence says that you are wrong.

Posted:5 months ago

#18

Nicholas Lovell
Founder

185 170 0.9
@alan What is the evidence that the games industry is doing bad? Certain studios and publishers with a particular way of doing things that have not adapted to changing market conditions have struggled, yes, but the industry is growing, more consumers than ever are playing and we are getting games ranging from GTA V to Papers Please via Candy Crush Saga, Plague Inc and FTL. All looks great to me.

Posted:5 months ago

#19

Nicholas Lovell
Founder

185 170 0.9
I love the elitist, narrow-minded assertions that "PC gamers see the value of premium games" or "free=crap". Some of the most successful, profitable, popular games in the world are free, but generate hundreds of millions of dollars. Games like League of Legends. (er, not crap), TF2 (er, not crap), Crossfire (er, not crap), and many more.

I believe that free is a great way to find an audience. You can then offer variable pricing within the game to make more money than you used to with an upfront price.

If you are a developer wanting to keep the price high, you have to compete with free. Or you have to assume that every other developer in the world will tacitly collude with you to keep prices higher than the marginal cost.

I think it is sensible to compete with free. I think it foolhardy to imagine that "oh, this time it will be different."

Posted:5 months ago

#20

Jakub Mikyska
CEO

199 1,091 5.5
@ Paul: I am not sure to which part of my post you are referring to? Then I will gladly point to someone who did.

I disagree that Steam going completely free is inevitable. Yes, we will see more F2P and yes, there will probably be some race to the bottom by indies. But premium games will prevail. All the AAA games, most of which are released via Steam, would have to go F2P and I simply don't see that happening. Not in the foreseeable future. The big publishers are so risk-averse that they release a sequel after sequel, they even try to rise the price of games. Even the most popular indie games tend to be outrageously expensive on Steam (Gone Home comes to my mind). That is the complete opposite of going free.

What would Steam get by becoming another AppStore? Only on a significantly less popular platform. They understand that a big part of their audience hates F2P and if they went F2P, they would be handing their customers over to Sony and Microsoft.

Edited 1 times. Last edit by Jakub Mikyska on 5th March 2014 10:59am

Posted:5 months ago

#21

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
To be quite honest, it seems a very confused article. He starts off using an economics model which is imperfect for gaming to imply that all games provide the same (enjoyment) value, which is patently untrue. He goes on to state that
The only reason that ebooks are not yet free is that Amazons core business is retail, not hardware
Neatly avoiding the fact that a) writers and publishing houses value their work far above what the basic cost is and b) Amazon is not the only seller of eBooks and mobi is not the only format. Then the Steambox
is supposed to provide an out-of-the-box PC gaming experience, although it struggles to compete on either price or on marketing with the consoles. It doesnt seem as if Steam is keen to subsidise the costs of the box, not to the level that Microsoft and Sony are
When Steamboxes were only recently revealed, and have yet to be marketed. This statement also assumes that Valve are not going to attempt to subsidize costs or drive them down in the future, something which I believe was partially disproved by Gabe Newell's AMA yesterday.

Then:
What if Steam wants the PC market to go to free because it will be a powerful competitive weapon as it battles the console manufacturers.
Games sell consoles. Business models do not. This is why Sony and MS vie for exclusives, and price those exclusives accordingly. Lots of free games is great, but a couple of amazing games? That's better. They sell systems. Unless hes saying that people buy iPhones and S4s for the games, and the games alone?
Then I would expect Steam to open Steam to many more developers (Greenlight), to make games available fast (Early Access) and to give the market control over pricing (developers set their own sales).
As I note above, the market already had control over pricing. Conflating "control over pricing" with "control over when sales happen" (neatly avoiding the limitations that are in place for those sales) confuses the issue, and implies one has the same value as the other. In addition, it avoids the stated reasoning for all these things: Greenlight was an answer to the bottleneck of Steam's approval process. Early Access allows users to participate in development and bug-testing (like an extended Beta, that EA have done in the past, for instance), and setting sale prices allows developers to be more responsive with PR campaigns (like the "Recently Updated" page that Nicholas doesn't mention).

He goes on to say that Valve make tons of money from their own F2P games (TF2, etc), whilst implying that other games make Valve as much:
Other games like Stronghold Kingdoms from independent UK studio Firefly have been consistently high in Steams F2P charts.
One of the last paragraphs is "We can all live together"
That doesnt mean I expect Valve to stop supporting paid games, in the same way that I dont expect Apple or Google to do so.
But this is contradicted by
It is my expectation that free, driven by the iron laws of competition, economics and technology, will win out.

Edited 6 times. Last edit by Morville O'Driscoll on 5th March 2014 11:17am

Posted:5 months ago

#22

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
@ Nicholas
If you are a developer wanting to keep the price high, you have to compete with free.
Compete has different meanings, though. Compete on price, and compete on value. Value is what the consumer assigns to a product, price is what the publisher thinks (or expects) the product is worth. I have no doubt F2P has its place - I am not going to say it doesn't, when World of Tanks exists - but to say that all pubs/devs should compete on price is, to my mind, foolish. Again, use this line of reasoning on restaurants, or admit that not every product/service can be forced into the competitive behaviour that Bertrand requires.

Edit:

Because it's useful for this discussion, list of the most played games on Steam currently: http://store.steampowered.com/stats/

Edited 3 times. Last edit by Morville O'Driscoll on 5th March 2014 11:19am

Posted:5 months ago

#23

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
PSA:

If people find parts of their comments missing after they hit Post, then its because of the backend GI are now using. It occasionally does not like:

Apostrophes. Square Brackets. Hyphens. Currency signs. And possibly semi colons?

Edited 2 times. Last edit by Morville O'Driscoll on 5th March 2014 11:23am

Posted:5 months ago

#24

Dan Tubb
Investment manager

23 112 4.9
Popular Comment
I apologize for having to edit so many times. I had to strip out all punctuation and symbols otherwise whole paragraphs were missing. So sorry for the crappy grammar below.

The Bertrand model is a total red herring. Lets be clear, it does not apply here because games are not homogenous. Where the Bertrand model would apply is when you are picking an electricity supplier all electricity is the same so you go just on price. But you dont need to move very far from that before perceived quality trumps price. So have any of you ever bought toilet bleach did you by Domestos or the shops cheaper own brand? Well lots of you buy the more expensive version although we are still basically talking about homogenous products.

Now if all games devs did is churn out the same generic bejewelled clones then yes price would dominate but they dont. So in my particular case I have never bought an Assassins Creed because for some reason it does not appeal to me yet I spent 300 pounds backing Elite Dangerous. I probably would have paid more for ED and if you try and sell me the complete AC series for 99p Im not going to because I wont play it. No offense intended I hear its really well made.

What should happen is devs follow a profit maximising strategy. That means if you have a reputation and a following you charge more. If this is your first game you charge less so the game gets in front of a lot of people in the hope of becoming a thing. And if you have an older game you crash the price to ramp the install base just ahead of launching an expansion pack.

The reason mobile tends to low or free pricing is because the small screen is not a great medium for emersion. Its a great medium for anywhere anytime distraction. If someone actually made Skyrim for the mobile I would not buy it because of the limitations of the medium. So that leads to dominance of causal games with less scope for differentiation. Also given the mass audience, the profit maximising strategy is more likely to focus on mass uptake, and then do monetisation after. Your average casual mobile gamer is not surfing Steam thats where you sell to core gamers. Its a very different proposition and just because the 230m core gamers also usually play casual mobile games does not mean that the average mobile/causal gamer is a core gamer and therefore the trends on mobile are instructive. Its one of those All bears are animals not all animals are bears type distinctions.

So essentially I have to disagree entirely. It wont cause all PC games to trend to free. It will just make it easier for everyone to follow their own particular profit maximising strategy.

What I think it will do is make it easier for niche games, and this has already happened. So in the last 15 20 years there has been a lot of FPS following in Wolfensteins footsteps, but not many Theme Hospitals, but now I can buy Prison Architect, which might only appeal to a minority of core gamers but with a democratised open platform where pricing is tailored to the product then I am more likely to get offered the subsets of games I want to play because a greater variety of devs will be able to earn their dinner this way.

And if you think its a bad thing just stop for a moment and consider if it had been like this all along and now Steam were going to take away the ability to set your own sales there would be an uproar.

Edited 9 times. Last edit by Dan Tubb on 5th March 2014 11:41am

Posted:5 months ago

#25

Christian Keichel
Journalist

626 853 1.4
The most revenue generating PC game in 2013 was almost certainly Crossfire, a PC first person shooter that is estimated to have raked in $957 million.
World of Warcraft had about 7.5 million subscribers in 2013, which most likely leads to revenues above $957 million (Superdata estimates about $10 million per month).

Source;
http://venturebeat.com/2013/09/11/analyst-world-of-warcraft-revenues-drop-54-in-7-months/

Posted:5 months ago

#26

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
@ Dan
What should happen is devs follow a profit maximising strategy. That means if you have a reputation and a following you charge more. If this is your first game you charge less so the game gets in front of a lot of people in the hope of becoming a thing. And if you have an older game you crash the price to ramp the install base just ahead of launching an expansion pack.
This is almost the situation on Steam currently. A lot of sales are timed to coincide with expansion packs or sequels due for release in the coming few days. Currently, The Walking Dead Season 1 is 66% off, Season 2 is 33% off, and Season 2 Episode 2 was just released yesterday. Dishonored has stuck in my mind for having sales on the base game a week or so before the DLC dropped. And Mike Bithell is currently aiming for 13GBP/20USD for Volume, after his acclaimed Thomas Was Alone was set at 6GBP.

Edit:

As an aside, I am genuinely curious if Nicholas plays PC games himself, or if he is a mobile (or even console) gamer.

Edited 1 times. Last edit by Morville O'Driscoll on 5th March 2014 11:42am

Posted:5 months ago

#27

Robin Clarke
Producer

300 684 2.3
Pointing out that a particular business model isn't suitable for the entire spectrum of games that people want to play isn't elitist. Resorting to insults to defend an absolutist view doesn't suggest confidence in that view.

Posted:5 months ago

#28

Renaud Charpentier
Lead Designer

64 138 2.2
@ Morville

Nope: a demo is just the beginning of the game, a limited subset of it that abruptly stops after a short amount of time/contend.

This is completely different from a proper F2P model where most players only start spending after they have experienced the mid and even high end gameplay. You can fool ppl on a well cut out demo, it's nearly impossible on a fair F2P game.

And the one that are so successful on PC are fair in their business model, I can tell you. Players are intelligent human being, they are very capable of evaluating the value of a F2P offer. And they are even keen on giving money to a game they enjoy as they clearly understand it supports its development. Same way you actually buy the music of a band you like, to support them.

Posted:5 months ago

#29

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
Nope: a demo is just the beginning of the game,.
Doesn't have to be. :) But I take your point on that, as well as your point on fair F2P. I havent played it yet, but I do have Path of Exile installed, and that is supposed to be pretty fair. Like I say above, I don't deny it has its place, but arguing that F2P is (all of a sudden!) the only way? I don't buy it. (So to speak :D )

Posted:5 months ago

#30

Curt Sampson
Sofware Developer

596 359 0.6
I am still seeing a lot of people here treating the "games" market as one monolithic market.

Does anybody really dispute that, for a large number of "gamers" out there, just looking to kill a bit of time on the bus, games are very nearly fungible in that there are many, many games that can adequately serve the need? And yet, there's another large market (though doubtless not as large as the first, at least in terms of number of consumers) where games are not fungible at all, where Football Manager 2014 isn't a substitute for Battlefield 4, and vice versa?

Even with a large retailer like Amazon doing its best to drive the prices of e-books as low as possible, they've not managed to kill that market. There's no real indication that anybody in the core gaming market is even trying to do the same thing. And the book market survives against similar competition: the vast majority of reading material these days is read for free on the web.

Posted:5 months ago

#31
"However I don't see the PC market accepting F2P. "

When I said that I didn't mean that a few big games with huge marketing budgets wouldn't be successful or that a few niche games couldn't make a living I just meant that as a market i.e. the games in between, it wouldn't be healthy. I don't see any reason ultimately why PC will be any different than Facebook and then mobile before it.

As for console pricing. If Sony do allow total control over pricing I'm surprised a developer with a year old game who's sales have slowed to a trickle haven't tried discounting heavily.

Ultimately Nicholas Lovell is right it's pretty much impossible to compete with 99c if you're selling at 9.99. I'm against F2P but I don't think anyone can dispute that and that's the problem.

Edited 1 times. Last edit by John Owens on 5th March 2014 1:31pm

Posted:5 months ago

#32

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
Even with a large retailer like Amazon doing its best to drive the prices of e-books as low as possible, they've not managed to kill that market. Theres no real indication that anybody in the core gaming market is even trying to do the same thing.
The bolded part is something to remember and keep ahold of in this debate. The article is, I think, quite inflammatory in the sense that its trying to argue something that not only hasnt happened yet, but seems very unlikely to happen when you consider developer and publisher attitudes in the Core Gamer market. Nicholas underlying argument for it happening now - devs/pubs can suddenly set prices on their games - is... incorrect.
As for console pricing. If Sony do allow total control over pricing I'm surprised a developer with a year old game whos sales have slowed to a trickle havent tried discounting heavily.
I would guess its no different than wondering why certain games on Steam have never seen a discount. Because no-one says you have to discount. (That is only a guess, though).

Posted:5 months ago

#33

Samuel Verner
Game Designer

131 243 1.9
You don't see the PC market accepting F2P?

The three top most popular games on Steam are DOTA2, Counterstrike Global Offensive and Team Fortress 2. Two of the three are free.
this shows a lack of knowledge of the pc market. there are 2-3 golden exceptions which created a pretty good monetization model, like mobas (for example dota2) in general. but there are tousands of games you probably never heard of because the pc gamers hate the cheap rip-off mechanics. pc gamers accept only very fair f2p games with a very high quallity. but fair and high quallity is nearly always the opposite of what the productions are focussed on. even if the companies state different, they are using "proven" monetization mechanics, which leads to pay2win and the quality is always much lower than in AAA retail games, because every company is going for a cheap rollout with a very limited set of features/content because they plan to expand the game in the live service between the release and never.

oh and team fortress 2 was created as a paid game and ran so for years, till they decided to transform it into a f2p game. at that point it already had a huge community, an endless list of updates, new maps and so on. so your argument pro f2p on the pc market is based on one of the golden exceptions and on another game which was developed as a high quallity paid game and ran so for years.

Edited 6 times. Last edit by Samuel Verner on 5th March 2014 11:06pm

Posted:5 months ago

#34
I suppose the only thing I can think of that might make the two markets different is the cost to make successful steam games which means that there won't be an oversupply of games that will risk being heavily discounted and gamble on huge downloads and therefore that critical mass is never reached.

I'm just surprised developers haven't tried it with their back catalogues and that hasn't started the whole thing off.

So maybe they will be able to coexist.

Regarding F2P - I think you're right Samuel. F2P came about on mobile because the race to zero left it no option however I don't think that's even an option with PC gamers.

Edited 3 times. Last edit by John Owens on 5th March 2014 2:13pm

Posted:5 months ago

#35

Neil Young
Programmer

279 319 1.1
Confused by some comments treating pc gamers as somewhat homogeneous - surely the vast slew on successful genres on PC suggests they aren't, and in turn that what business models people will prefer or avoid will vary?

Posted:5 months ago

#36

Nicholas Lovell
Founder

185 170 0.9
@Robin. I'm not an absolutist. Saying the PC gamers value "premium quality" is a value judgement. I'll stick by calling that value judgement elitist, but am happy to accept that you are not elitist. :-)

Posted:5 months ago

#37

Nicholas Lovell
Founder

185 170 0.9
@Morville The five games I have been obsessed with in the past year are XCom Enemy Unknown (iPad); FTL (Steam); Pocket Trains (iPad), Candy Crush Saga (iPad) and Hay Day (iPad).

I'm on my second playthrough of Xcom. I've got 275 hours logged on FTL, and I've unlocked all the ships, all the achievements on easy and all but two of the achievements on Normal. I reckon I've nearly completed Pocket Trains (I've got every city, every railroad, every train and just one achievement left to get). I'm level 207 on CCS, although I've quit playing now and about level 40 on Hay Day.

By background I'm a PC gamer more than a console gamer. My favourite game of all time is Jagged Alliance 2. I own a PlayStation 3 but increasingly only turn it on for DVDs. (And to play Disney Universe with my young kids. Although frankly they prefer FTL, Pocket Trains and most things by Toca Boca)

Posted:5 months ago

#38

Nicholas Lovell
Founder

185 170 0.9
@everyone

You may think I am making a big mistake in assuming one monolithic market (I don't think I am doing that, but fair enough).

I think you are making a big mistake assuming that mobile players = casual gamers who are only playing on the bus, or when they can't play "real" games. The prime time for playing mobile games is 7pm to 10pm. The prime location is the living room, on the couch. These are people who *could* play games on console/laptop but choose to play mobile.

And "mobile" is misleading, because it includes tablet, which is a closer experience to laptop gaming.

And the ESA has shown that the primary spenders on "mobile" overlap heavily with the demographic of young males who self-identify as gamers.

In other words, I am not arguing that Candy Crush Saga is going to dominate Steam. I am arguing that when developers start figuring out how to make more money from giving their games away for free and charging elsewhere in the ecosystem, you will need to have a damn good strategy to fight that price point. A great product might do it (but is hard to execute). Reducing the price to free is, unfortunately for many people, the easiest of all the competitive marketing strategies to execute.

Posted:5 months ago

#39

Klaus Preisinger
Freelance Writing

1,071 1,005 0.9
Trying to make the argument about games being free or not is missing the point about abusive methods of monetization.

f2p games are never free, they come at a cost. You can try all day telling me it was free because it costs no money, but what are we? Five years old? If it is wasting my time, it is wasting my life and it is doing that for the sole reason of get to my money, which is the one thing the f2p game allegedly does not want, since it is free, which it isn't.

From this point on, every f2p games is unique. Some games are sneaky smart, some are dumb and blunt (looking at you Dungeon Keeper), some are rather fair to their users and some are plain abusive. In the end, it is always a muck with no moral high-ground to be found. Just look at the many types of business models EA is operating on mobile platforms, the wildly varying degrees of monetization they try and how feedback is treating them.

While no business model is inherently evil, no type of business model shall ever be the one to rule them all. Far too many gamers are groomed to make conscious, yet utterly arbitrary decisions about the products they buy. The competition amongst games is way too high. I can easily reject the notion of buying an Xbox right this moment based on the fact of me not liking the particular shade of green the packaging has, without ever having to regret it. Money has nothing to do with it. I have the money, I do not like green, it is as easy as that. No Xbox for me and it will never have any negative consequence in my life whatsoever, because this is a planet brimming with games

Now substitute green for whatever BS reason you heard and substitute Xbox with f2p, EA, Valve, Sony, Nintendo.... and you have gaming culture in a nutshell.

Just as it can be expected of some humans to campaign against companies producing food and clothing made by slaves, it can be expected that some humans campaign against games abusing players with devious psychological traps. Again, any individual can easily make the case that any of the many f2p business implementations did not impact his life. But what would you think of me, if I told you I was for the legalization of crystal meth based on the fact that it does not affect my life in any negative way, since neither I, nor anybody I know was a consumer of this drug.

Posted:5 months ago

#40

Brett Ballow
Director of Development

5 8 1.6
@Nicholas

I follow current industry news and trends, and don't think F2P is inherently evil. I even subscribe to your newsletter (due to some bit of trickiness on your part, I suspect), and noticed that you have announced The FTP Toolbox. Back to that in a minute... you see, I have a dilemma of two parts.

Part I:
I have just begun prototyping a very neat action adventure platformer that probably should have been created in the 80's and linger as a classic in our collective memories, but for some reason no industry folk ever connected the dots and combined the two mechanics. The game will be brilliant, but I'm just a bit scared to spend the next 18 months of my life (and a lot of resources) making it, considering today's monetization trends... you see, I just can't wrap my head around how to make it F2P without severely sacrificing (er, adjusting) the basic gameplay. It's not that I mind free - I just completed a free browser word game that is hitting major portals soon, and monetized with unobtrusive ads.

Part II:
You seem to be one of the leading proponents of F2P and humbly offer your expertise and services even to lowly indies like myself... at a premium. Thus my dilemma. A part of me wants to reach out, try your services and see if you truly are a master of monetization - yet another part of me longs to try your services for free and pay happily and generously (to my own degree of whale-ness) as I move ahead after being so enlightened and assured of the path in which to follow.

If you can see even a small chance of alleviating my dilemma please contact me at bballow@tozaigames.com

Posted:5 months ago

#41
There is no real incentive for Steam to push the price of PC games to free. Apple did/does it, because it enabled higher sales of their hardware, which is where the majority of their profit is.

But for Steam, the majority (all?) of their profit comes from their cut of sales revenue. And if this drops to 0, their cut drops to 0.

SteamBox isn't going to be a high priced product, with a large profit margin on top of it - if that happens people will build their own PCs.

So I don't see the fuss - I think this is just extending a service already partially there to Steam devs.

Posted:5 months ago

#42

Nicholas Lovell
Founder

185 170 0.9
@brett will you be at GDC?

Posted:5 months ago

#43

Nicholas Lovell
Founder

185 170 0.9
Free upfront doesn't mean no revenue. Many of the most financially successful games in the world are free upfront, and free for many players, but make lots of money.

and 30% of a lot is a lot.

Posted:5 months ago

#44

Brett Ballow
Director of Development

5 8 1.6
Unfortunately not. I'm right in the throws of releasing a game on multiple platforms and meeting candidates for the production of a physical puzzle... and all that goes with that. It's a rather busy month for me. I'm up in Seattle/Bellevue if you happen to make it this way.

Posted:5 months ago

#45

Curt Sampson
Sofware Developer

596 359 0.6
@Nicholas:
I think you are making a big mistake assuming that mobile players = casual gamers who are only playing on the bus, or when they can't play "real" games. The prime time for playing mobile games is 7pm to 10pm. The prime location is the living room, on the couch. These are people who *could* play games on console/laptop but choose to play mobile
.

Core gamers do indeed play casual games on mobile devices; of that I'm quite sure. I'm also pretty sure that when they do this they've essentially put on their "casual gamer" hats and become part of that market. I've played Candy Crush Saga myself, and enjoyed it, but I quit after level 30 because it wasn't worth even setting up a Facebook account and finding some friends so that I could play CCS further. (It was much easier just to download another game.) And I'm certainly not waiting for the next CCS installment, or keeping even $10 aside to pay for it, though I have $500 earmarked for a PS4 purchase when the next installment of Uncharted comes out on that platform.

I accept that there are a large number of people who play mobile games at home on the sofa for more than bite-sized lengths of time. This isn't new; in Japan this has been happening for a decade or more, not just with games but also with other things delivered over mobile phones, such as reading material, mail, discussion forums, and so on.

But you've unfortunately made a leap here that I don't think is justified by implying that these people are in fact core gamers who can and do play "core" games on PC or console, and spend the money it takes to do that. I don't see any evidence that this is so.
And the ESA has shown that the primary spenders on "mobile" overlap heavily with the demographic of young males who self-identify as gamers.
This, too, is consistent with my hypothesis that there's a market of "core" gamers that are willing to pay significant amounts for good games and this is unlikely to change. If by "primary spenders on 'mobile'" you mean people who spend the most on mobile games, I wouldn't be at all surprised if core gamers, when using mobile, fell in to this category. The average spend on games across the entire mobile population is so low that it doesn't take much at all to rise in to the 99th percentile there. I probably spend close to $100/year on mobile gaming just out of curiousity (and in a desperate bid to find something I like), but that's really a side effect of having a one- to two-thousand dollar a year gaming budget, making me one of those who's not pushing vendors hard in the race to the bottom.

Things like this just reinforce that there are really two completely separate gaming markets here, the race to the bottom was in the casual market (which is also on PC, if you have a look at things like Facebook games), and there's no evidence that the core market, which has already had ample opportunity for a race to the bottom on PC, is going to go that way. (I'm not saying it won't change a bit, but it's not going to become the mobile market.) You've misread a minor change on Valve's part (whether or not you have to talk to a rep when changing your game's price) as something it's not, and succumbed to panic.

Mobile has to this point not served the core gaming market well, despite attempts now and then by developers. This has been due to many factors over the last decade, including technological limits, poor discoverability and plain old ignoring the core gaming market because it's so much smaller than the casual gaming market. These are all issues that the PC gaming market didn't have. This is why there's no reason to think that the core gaming market that never came to mobile will suddenly vanish from PCs.

Posted:5 months ago

#46

Felix Leyendecker
Senior 3D Artist

181 200 1.1
F2P isn't going to suddenly take over Steam just because devs can time their own sales. Valve opening the floodgates, ditching greenlight, and letting everyone and their mum put games on steam is another story.

Posted:5 months ago

#47

James Grant
Commercial Development & HR Manager

7 7 1.0
Thanks for your patience with the formatting errors on some of your comments, this is indeed caused by certain punctuation characters.

Our tech hamsters are working on the issue and we will have it resolved as soon as possible.

Posted:5 months ago

#48

Eyal Teler
Programmer

77 77 1.0
I haven't read most of the replies, which seem to be only loosely related to the issue, so I apologise if I'm repeating anything.

It baffles me how anyone can think that giving more control to developers can be bad. I'm not talking about Lovell, how's article is stupid on several level (starting with getting the premise wrong as if Steam didn't let developers set the price before), I'm talking about people on the development side, which presumably are what people here are.

Finally developers will be able to sync sales with other places which don't offer control of the time of the sale, such as bundles.

Posted:5 months ago

#49

Nicholas Lovell
Founder

185 170 0.9
@Curt: I haven't succumbed to panic. I think this is a good outcome.

Posted:5 months ago

#50

Robin Clarke
Producer

300 684 2.3
Nicholas - PC and console gamers have shown that they want to buy into things that can ONLY be funded using the premium model. That's not a value judgement or "elitist", it's a statement of fact.

I agree with a lot of what you've said in your later comment #42. But the paid games won't be competing with the radically structurally different free ones, just as they aren't now, and never have done. They'll be competing with other paid ones.

Posted:5 months ago

#51

Mariusz Szlanta
Producer

31 27 0.9
I think that race to free is going to happen but it's going to be gradual process and not all genres will be affected the same way.

Dan, in his great post, says that he spent 300 backing single game. Let's assume for a moment that there are several games of Elite commercial pull competing at the same time. This is the point when Bertrand law or maybe just free market competition law kicks in and product that offers the same perceived value for the lowest price is in winning position.

To make things worse, losers are in imminent danger of extinction because winner can take all user base and keep it for a long, long time.

There is not only an abundance of content on PC horizon but also scarcity of attention.

Online players tend to stick with selected products for a long time and the longer they invest, the less probable is that they jump ship. Known scary line from 2010 was "I don't play games, I play WoW". It is now true for many other online games and that means that early user acquisition is key.

It's, of course, effect of digital era when content can be published easily and where product can be kept alive virtually forever. There is no reason to hop like in boxed model when games actually had an end and player who wanted more of similar, wandered to nearest game shop to buy another disc.

There are two interesting games still with relatively low profile in racing genre: Project Cars and Asseto Corsa. Once they'll cross critical mass of users and arrive at quality level of paid games like Forza or Gran Turismo, then what magic can save the latter?

I would also be very interested in any data showing how paid competition of WoT fares (if there is any competition left).

On the other hand, next Uncharted or Heavy Rain will probably do well because there is no obvious way to apply F2P to them and, at least for time being, there are enough people interested in that kind of experience and ready to pay full price.

Edited 4 times. Last edit by Mariusz Szlanta on 7th March 2014 1:30pm

Posted:5 months ago

#52

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
Dan, in his great post, says that he spent 300 backing single game. Let's assume for a moment that there are several games of Elite commercial pull competing at the same time. This is the point when Bertrand law or maybe just free market competition law kicks in and product that offers the same perceived value for the lowest price is in winning position.
Interesting game to use as an example, and we can use it to see that Bertrand Competition hasn't yet taken affect (or even appears likely to in the near future). How? Star Citizen has made far more than Elite in terms of pre-and-post Kickstarter funding, and they are effectively targeting the same demographic - SF fans with large amounts of spare cash, and admiration for a developer/IP - with the same style game. Yet, no-one is arguing that one is going cheaper than the other. In fact, interestingly, the game with the most money is actually going the microtransaction route, as the increased funding has shown Chris Roberts that there are people who will pay for many additional features.

Factor in the recently announced Homeworld Remastered - again, going after the same demographic as SC and E:D - and it gets more obvious that Bertrand has (in my opinion) no place on PC. Collectors editions projected to retail at upwards of 75USD? Base digital release expected at 20USD? That's not racing to the bottom, that's aiming for the premium market, because developers and publishers know that the premium market has cash to spare. There's many people (anecdotally speaking) who are (or will be) purchasing all 3. I'm already a backer of SC (70USD tier, I think), and I'll pick up the other two as soon as they're fully released.
There are two interesting games still with relatively low profile in racing genre: Project Cars and Asseto Corsa. Once they'll cross critical mass of users and arrive at quality level of paid games like Forza or Gran Turismo, then what magic can save the latter?
Different games aiming for different markets. Isn't PCars aimed at the hard-core racing fan, with its perfectly simulated suspension physics? That's hardly likely to appeal to every XBox gamer who just fancies a quick race on Forza.

Again, the Bertrand Competition just does not work for certain aspects of this industry. It's like saying Harrod's prosciutto and Asda wafer-thin ham are the same thing, so they should be racing to the bottom. They're both ham, certainly, but they're not the same in quality, and they're not targetting the same demographic. (Which is not to say that the same people don't enjoy both, just that both company's brands aim to different sections of the population).

Edited 5 times. Last edit by Morville O'Driscoll on 7th March 2014 2:50pm

Posted:5 months ago

#53

Mariusz Szlanta
Producer

31 27 0.9
Bertrand competition is in full force on mobile (albeit some try to exit the loop like Rovio and other use scarcity of space in App store to buy presence) where there is enough similar products not backed by legacy IP to take effect.

What article argues is that Valve policy can have the same impact on PC, not that it' already there.

Back to examples.

All games mentioned have identity already established and use it to self-fund. They dont (and I think they should not) have to go F2P as long as there is no competition that will force them to. Consequently I dont view them as direct competitors yet. So far, they are seen by public like continuation of boxed products and will only start compete when they'll form online user base around multiplayer features, social aspects and physical goods. At that point, people interested in all three, will start choosing because of time contraints. There can be enough fans to support all three or maybe games start specialise to serve niches. Or maybe one of them turn out superior and pull most of users. It happened several times in MMO games already.

There is also strong nostalgia effect, visible in funding other games as well (Wasteland) that shields them and, in my opinion, create a bubble of high expectations as people back them out of emotion rather than need.

Special collectors edition is perfect example of targeting superfans willing to spend premium on product they like. Tailored editions like that are a must in F2P business and ideal user aquisition channel. Side effect of digitisation of services is that some physical goods can actually become much more valuable.

Of course that Project Cars will not appeal to Forza fans if it will not be similar enough to Forza. Maybe Asseto Corsa will take this space or a new product thats not yet announced.

The point is how premium game like Forza can compete with F2P game of similar quality that offers similar experience. That kind of competition was barred in times of walled gardens but its open now. Your wafer thin Asdas are upgrading fast to become new Harrods. World of Tanks already did it and I dont see any big publisher trying to make paid DOTA clone either.

Posted:5 months ago

#54

Morville O'Driscoll
Games Blogger & Journalist

1,512 1,294 0.9
What article argues is that Valve policy can have the same impact on PC, not that its already there.
Yes, this is what the article argues. And I admit I'm arguing that it should already be there, but that's for one good reason: The very foundation for Nicholas argument is flawed. He argues that Valve recently made a change which allows developers to set their own prices on games. This is incorrect. Valve have always allowed developers (and publishers) to choose the price at which they sell on Steam. Now, if Nicholas was right - that developers setting their own prices would cause the Bertrand Competition to take effect - we should already have seen this occur. The fact that it hasn't yet - and that PC pubs/devs continue with the premium economic model - leads me to believe that Bertrand isn't going to occur for awhile yet.

(Sorry if I sound rude - I'm genuinely trying not to be, and I do actually agree with your points about time constraints being an issue, and the value of physical in a digital age. The fact is, looking at Nicholas article, its frustrating to see something which doesn't see the difference between "setting prices" and "talking to a rep about a sale" being given the time of day. It's a mistake that I would be ashamed of if I had made it during my undergrad degree.)

Edited 3 times. Last edit by Morville O'Driscoll on 7th March 2014 6:25pm

Posted:5 months ago

#55

Mariusz Szlanta
Producer

31 27 0.9
No offence taken Morville.

I'm with Nicolas on this one. It can be argued that Sony also allows 3rd parties to choose between various price models but no one does that because market is heavily regulated by combination of production cost, delivery fees and business model (no monetization strategies to support product).



Valve behaved all the same so far and devs/publishers conditioned by years of working in previous business model, fallen into known safe shoes easily.

Posted:5 months ago

#56

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