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PC Games: The Best of Times, The Worst of Times

PC Games: The Best of Times, The Worst of Times

Wed 02 Jul 2014 7:28pm GMT / 3:28pm EDT / 12:28pm PDT
BusinessGames

PC games aren't dying, they are bigger than ever, but the $60 PC game is rapidly vanishing

By some measures, PC games are dying out. You can barely find boxed PC games in retail stores any more. That product category used to fill long shelves in many retail stores, and accounted for a sizable amount of revenue back in the day. Those halcyon days of decades past are long gone, and what little PC software you can find on shelves in retail stores tends to be casual titles like Deer Hunter tucked away in an odd corner, usually marked down.

Yet PC games have never been more popular, when you look at it another way. There are now far more games you can play on your PC than ever before, in a variety of ways. There are native PC games, of course, but there are also games you can play on Facebook, or in any browser window. Kongregate has a vast array of Flash games to choose from. Some of the most popular games in the world, like League of Legends or World of Tanks, are PC games - and many are games you can't find on any other platform.

While traditional physical retail space for PC games has shrunken, the digital distribution of PC games has exploded. No company exemplifies this better than Valve Software with its Steam service that now reaches somewhere north of 75 million gamers. Steam hit a record number of concurrent users recently, with over 8 million Steam members online at the same time.

Steam originally began as a way for Valve to better distribute its games and patches for its games. Gradually adding other games from other companies, Steam overcame a number of obstacles, such as the sheer time it takes to download some games over a typical broadband connection, or users needing to be online to play their games. The biggest driver to Steam's growth, though, has been the remarkable sales and discounts that Steam offers on games.

Steam's usual summer sale is under way, with an array of discounts on games that sometimes are 75 percent off or more. What Steam has shown us is that gamers have a vast desire to collect games - if the price is right. Sadly, far too few games are really worth $60 to gamers these days, especially when there are high-quality free-to-play alternatives handy. Or DLC for a game you already own that can make it a new experience again.

EA's Origin has learned the discounting lessons taught by Steam, and has moved away from its initial stance of never discounting games for fear of harming the perceived value. Games are worth what people are willing to pay for them, and reducing prices can mean an increase in volume of 10x or more. You can also find GOG.com engaging in regular sales, with even more compelling sale prices on games that were published long ago that have found a new life.

For back catalog games, the hard lesson to learn for long-time publishers is that the price of the game is no longer the key thing to maximize. What publishers should be looking to maximize is revenue. When you no longer have cost of physical goods to worry about, your costs are primarily transaction costs and whatever licensing fees or royalties you have to pay. There's no up front pile of capital needed to produce a mountain of discs, nor any need to ship them or store them.

So, if you can sell 1,000 copies of a game at $60, or 100,000 copies at $6, which is better for the company? Don't take too long to figure out the correct answer, because while you do that someone may be stealing your market share. There are ancillary effects of price cuts to consider, too - with huge numbers of the game out there, you can sell a lot more DLC. The game's brand becomes much more widely known, making future games an easier sell.

Preserving value by keeping to the $60 price point is a fool's errand. Gamers are quite well aware than not every $60 game is a $60 value; few rise to that level. The $60 price point for PC games is rapidly becoming a museum item.

Of course, the ultimate end point of this price reduction frenzy is the free-to-play game, where you completely remove initial price. Free-to-play games are becoming dominant in the PC space, at least as far as overall revenue is concerned. League of Legends and World of Tanks are each rapidly closing in on $1 billion in annual revenue.

Not all games are suited to the free-to-play business model, as we discussed earlier. That requires a different approach to design and product development, and a commitment to an ongoing games-as-a-service model. At least, though, digital distribution opens up a full range of price points for games, from $0 to $60 and even beyond. Publishers are still exploring the benefits of pricing at different levels.

So don't lament the death of the $60 PC game - celebrate it. The ability to reduce the prices of games and still make a profit has greatly lengthened the commercial lifespan of many games. Yes, it makes it harder to recoup a massive investment right at the time of launch, but there's now a greater lifetime potential for a game. There's more opportunity for games to be published in the first place, with a vast array of fascinating indie titles to choose from. It's truly a golden age for gaming.

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6 Comments

Lewis Pulsipher
Game Designer, Author, Teacher

23 26 1.1
It's the rush to deep discounts that reduces the perceived value of every game, new or old, that leads to the gradual disappearance of $60 (and less) games. Consumers become accustomed to sales to the point that they will never buy at full price. We see it in many spheres - for example, who would ever buy anything at JCPenneys at full price, when they send sales notices nearly every day? We see it in online non-credit courses, where deep discounts on individual courses are driving creators to subscription models. We saw it in mobile games, where it's very hard to sell anything for more than 99 cents and most games are free. We see it in the cost of digital-format books.

If enough games are sold at very low prices, manufacturers ultimately suffer, but when everyone pursues their own interest to the detriment of the group as a whole. It costs nothing to make more copies of digital product, so the temptation always exists to reduce the price in hopes of selling more.

With everyone pursuing their immediate self-interest, I don't see any solution to this, but ultimately it will become very hard for anyone to make money selling games in a digital marketplace.

Posted:26 days ago

#1

Steve Wetz
Reviewer/Assistant Editor

165 368 2.2
Consumers become accustomed to sales to the point that they will never buy at full price.
Pure nonsense. I am constantly on those Steam sales, but you better believe that if you've piqued my interest enough, you're getting my money on Day 1. There are a lot of examples in which it is detrimental to join a game too late - multiplayer games (of every kind) are a great example of this. After all, there is no point in buying a game with a healthy multiplayer element when no one else plays it anymore.

Steam's Friend Activity portion is also tailored in this direction. Watching your friends complete games and get achievements is impetus enough to be an early adopter.

Finally, and I think a lot more developers need to accept this, the majority of people who buy your games in a sale will not buy your game at full price. You know this for a fact, because before the sale they had ample opportunity to buy it at full price and DID NOT. If we were talking about purely physical copies then discounting might be an issue. But you don't run out of digital copies. Be content with those discounted sales - you very likely would not have had them otherwise. If anyone has the data to back these assertions, it's Valve - they've been meticulously tracking these trends since Steam went online.

Posted:26 days ago

#2

Chris Wray
Freelance

7 10 1.4
As Steve says above, I'm not completely convinced in the (lack of) logic that a sale at a discounted price is a lost sale at a full price. I have a steam library of 1758 games at time of writing (possibly played 400 of those games? Foolish, I know, but this is part of my point) and the vast majority of those I bought discounted, with next to no intentions of buying at full price.

Now there are huge benefits to having a sale. The increase in sales is a major one and the first that will come to mind, but it's the knock on effect that truly makes a sale worthwile. From personal experience - I bought the game Recettear on sale. I played this game, adored it. I bought the next game by the same publisher (Carpe Fulgur select specific foreign games to localise) at full price, love that, rinse and repeat. My point is that a discounted sale on an older release, provided it is a good game, can lead to a direct full price sale of a later game.

It's not just that though. Getting a game out there is much harder now that there is more competition. A lower price is essential because, myself included, has only so much disposable income. Let's say you have 150 disposable. You're going to look at a game for 30/40 (you want some cash left over), but there are five games that interest you. If you buy one at full price, then the other four games get no love. Two of those games are half price, I would argue that you are more likely to buy two games for the same price as one of the others.

I rambled a little here, I do hope that people understand the point I'm trying to get across though.

Posted:26 days ago

#3

Morville O'Driscoll
Games Blogger & Journalist

1,484 1,254 0.8
I am constantly on those Steam sales, but you better believe that if you've piqued my interest enough, you're getting my money on Day 1.
Absolutely. Right now, the Top Seller on Steam is Divinity: Original Sin. It's been available to pre-order/on Early Access for months, had 2 discounts during the Summer Sale, and is still the Top Seller, even after the sale's been finished a few days. The Witcher 3 shot to the top of the Top Seller list as soon as the Steam pre-order was up. Both games are from well-respected developers, and the word-of-mouth on both is that they're worth the money.
It costs nothing to make more copies of digital product, so the temptation always exists to reduce the price in hopes of selling more.
*frown* Well, no, Steam keys cost nothing to produce. But every developer/publisher has the intrinsic costs of development to cover, as well as future game dev. Plus, being able to eat decently is always good. There's the push-pull of more sales vs higher selling point, but that's with every item out there (generally speaking :) ).

This is a good read, by the way, and very relevant (don't be put off by the Tumblr, it's the developer of Cook, Serve, Delicious :) ):

http://chubigans.tumblr.com/post/90478977094/steam-summer-sale-2014-it-happened

Edit:

In fact, every time a publisher says that pre-orders have been through the roof, or they've been the highest for the franchise (Rome 2, for instance), it's possible to dismiss those who say only that "Consumers wait for sales". It's not possible to argue that pre-orders for Watch_Dogs are astounding, and in the same breath argue that people don't believe in dropping full-price on something. Unless, of course, you are willing to except the point of the article, that
Gamers are quite well aware than not every $60 game is a $60 value; few rise to that level.
(Btw, using "you" as a general you, not anyone specific. :) )

Edited 6 times. Last edit by Morville O'Driscoll on 3rd July 2014 6:52pm

Posted:26 days ago

#4

James Ingrams
Writer

215 84 0.4
There's only one way AAA game prices can go, when we have an exploding $10-20 Indie market that quite often manage to release if not AAA games, then at least AA games!

CD Projekt Red (owners of GOG.com) got it right all those years ago, with their first AAA title, the Witcher. It came with a map, an art book, a proper manual and a soundtrack for $45 - and this was at retail!

The writing is on the wall for $60 10 hour corridor shooters, like Dead Space,etc. The future for $50-60 games, if there is one, is the open world 100 hour plus RPG's like Skyrim, bu even there, if sold only though distribution gamers are bright enough to know that means almost zero distribution cost compared to retail!

Posted:26 days ago

#5

Curt Sampson
Sofware Developer

595 355 0.6
Chris, I understand exactly what you're saying. With "only" 460 games in my Steam account (and probably only about 420 of those bought outside of Humble Bundle) I'm not quite as spendy as you, but that's still a fair amount of (a couple thousand dollars or more) invested in PC games over the last three years or so. Of those, just over fifty have two or more hours of playtime, and fewer than 100 have been played at all. Like everyone else, my list of Games to Play is huge.

Games being so inexpensive quite changed the way I buy games. I switched my main platform from PS3 to PC a few years back, but low prices make me happy to buy a second copy of a game such as Fallout 3 or Far Cry 2, both of which I played from start to finish on my PS3, so that I can go back to it again when I feel the urge to replay it, not to mention throw a bit more money the way of the developer to encourage them to do more in the same vein. (Fallout 3 saw about 300 hours on PS3 and 15 hours so far on PC; Far Cry 2 perhaps 40-50 hours on PS3 and 6 hours so far on PC.) Fallout 3 and New Vegas in fact sold two copies each to me on Steam, so that I have a spare to give to someone to spread the word, as it were.

Beyond that, I also tend to pick up games that look interesting even if I won't have time to play them any time soon, and am unsure about how much I'd like them. That $5 or $10 sale is one the developer in most cases simply wouldn't make to me otherwise, not because it's not worth more, but because it would otherwise go on my list as "download the demo one day and check it out," and in most cases never get high enough in the list to actually get checked out.

I don't know how widespread this sort of attitude is, or how much it does (or does not) help game developers stay in business, but my feeling is that I spend more or less a fixed amount on gaming every year regardless of the price of individual games, so the games industry as a whole, at least, is seeing the same benefit from me regardless of the prices they set.

Posted:20 days ago

#6

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