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Newell challenges PC pricing standards

Valve founder talks of experiments in pricing and how sales can boost revenue beyond expectations

Videogame pricing may be too expensive, according to Valve's founder Gabe Newell, who cited evidence from sales experiments on Steam, at the DICE 2009 event.

Valve recently offered its co-op shooter Left 4 Dead via Steam at the reduced price of USD 24.99. During the offer, sales rose 3000 per cent, with revenues that vastly exceeded those of the game's initial launch.

Similarly, when the developer held a holiday sale, titles that were reduced by 10 per cent saw revenue increase by 35 per cent, while those with a 25 per cent discount saw a growth of 245 per cent. Titles with a 50 per cent and 75 per cent discount saw revenues climb 320 per cent and 1470 per cent respectively.

"The pricing issue, I think, is really misleading," he said, reports Gamasutra.

"In the PC audience, these people are spending thousands of dollars on their PCs and their internet connectivity. They are perfectly happy to spend money, so that's not the issue. But when it comes to the service, that's where the pirates are way ahead of us."

Newell attributed much of the piracy currently plaguing the PC platform, and to a lesser extent consoles, on out-dated practices on interacting with customers.

"The old way was using intermediaries," Newell said. "The product would be sold through retailers or other intermediaries… You were really focused on spending three years to build value for your customers to get through the friction of the retail experience."

He said videogame developers and publishers should start viewing their products as services, which they need to continually support in order to win customers.

"You will use your customer base to reach new customers, and your focus is much more about providing ongoing value to your customers – maybe every three weeks, or even more often than that."

Team Fortress 2 was held up as an example, since the game shipped the PC version has seen 63 updates, and recently Valve announced plans to provide free updates to the Xbox 360 and PC versions of Left 4 Dead.

"That’s the frequency you want to be providing updates to your customers,” he added. “You want to say, 'We'll get back to you every week.'"

According to Newell, consumers respond to this and see the value in purchasing legitimate copies, and as a result companies have to change their practices.

"We think our customers are ahead of us on the notion of what kind of entertainment company they want us to be," said Newell.

"They’re saying, you can't be a game company anymore, you have to be an entertainment company. …The successful entertainment companies are the ones who have product development groups who are successful at making cross-media entertainment choices that are the most valuable."

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