By Matt Baker, January 31 2012
So the other day I wrote an open letter to game developers in defence of used games and, somewhat surprisingly, some people have actually read it. Not only that, but there has been a fair amount of discussion about the subject on Twitter lately. As a result of some of the responses I got and some of the stuff that I read online I have decided to revisit and clarify/correct some of the things I said. Additionally I want to suggest some solutions that might be amenable to both sides of the argument.
First off: the comparisons I made. I talked about getting games for $20 instead of $60. Clearly this is not the same game. When a game is brand new it tends to sell used for only five to ten dollars cheaper, which is not enough of a difference to entice me to buy used. I would rather pay the extra $10 for the new game. However, if there is a new game in a series that looks interesting but I have never played any games in the series I may opt for a used copy of an earlier game. And even then, I’d prefer to buy the earlier game new, but it is with old games where the real value of used games lies. By the time a publisher drops a price to $20 you can probably get it used for half that. I know it is still only a $10 difference but at that price point it seems like so much more.
Now I can spend all the time I want complaining about prices and developers can complain about used games, but that is never going to get us anywhere. So I have spent some time thinking about this and I want to put forward some potential solutions. I would love to get people from both sides involved in a discussion and tossing some ideas around.
I think that digital distribution is the most promising solution. After all, if people are just downloading their games they don’t even have a copy to sell (and it’s more environmentally friendly, to boot!). But this has a caveat: if developers really want online distribution to work then buying the game online has to be cheaper. As it is, buying a new release through Steam, PSN, or XBL costs the same as buying the disc. If I’m going to spend that much money I might as well get a version that comes with a lovely copy I can put on my shelf or maybe even sell/trade for another game down the line. Let’s be clear though, I’m not talking about making the game five, or even ten, dollars cheaper. It has to be cheap enough to separate people from their desire to have a physical copy (and let’s face it, there are a lot of collectors in the nerd community) and to compensate for not being able to recoup some money by selling the game (for those who aren’t collectors). I think it needs to be a minimum of $20 cheaper if developers are really serious. I could be wrong, but I don’t think this should be too much of a hardship for developers as it virtually eliminates distribution expenses and much of the overhead costs. At the very least, it should significantly reduce these costs.
Unfortunately, for the time being it is still standard to buy physical copies of games, but there are still some things developers can do to curb used games sales without alienating their fan base. There has been a lot of talk about “incentivising” purchasing games new and I think this holds a lot of promise, but again, it has to be done right. I think it is important that whatever incentives are used, they are a reward for buying new, not a punishment for renting or buying used. Granted, this is a pretty fine line and it could be argued that it is just a matter of perspective, but I think there are a couple ways that it can be done that most people will agree are rewards, not punishment (some people are always going to complain, but you can’t please everyone). Some might ask, “why should the developer care if they are punishing people who buy used?” and this is an understandable question. To me, it all boils down to respect. Developers need gamers to respect their work by making sure they get paid for it and gamers need developers to respect the fact that there is nothing legally wrong with what the gamers are doing. Remember, they are still spending their money on the game. This shouldn’t be punished. However, developers have every right to try to sway the gamers’ choice of where that money goes.
So how can developers sway the choice without punishing people for making the “wrong” one? First of all, no codes to unlock stuff with the initial release (like in Arkham City with the Catwoman content). If it was important enough to the game experience that it was initially just part of the game but then a decision is made to make it DLC, then you are punishing people, not rewarding them. Yes, you can play through the game without the Catwoman missions, but they were clearly intended to be part of the full experience. This is in contrast to most DLC, which you would never really notice the absence of. Second: if it comes on the disc you shouldn’t have to unlock it. I haven’t heard of anybody doing this, but that would just be awful.
Although I may not be a fan of how the Catwoman situation went down, I do think that a free DLC pack has a lot of potential as a reward. A better way to do it, however, would be a code for DLC of your choosing or even for a specific value, like $10. Personally, I think the freedom to choose your DLC reward would make a better incentive than having to go with specific content. The developers could also have an exclusive DLC pack for new buyers, but I don’t think this is as good an idea. While it would feel very rewarding to those who bought the game new it rules out the option of making any money from those who bought used.
Personally, I think the best idea I have come up with is a discount on DLC for people who buy new. The basic idea would be that you would have an account with the distributor (e.g. EA) and when you buy the game you enter a one-time use code that gives you a discount on any DLC for that game. The best part about this is that the reward can even be scaled based on how much you spent on the new game by using the date at which you register the code. Let’s say you bought the game in the first year when it is still $60 (or before whenever the price is dropped), then you get 20% off DLC. If you wait to buy it and register your code after the price drops to $40 you still get a discount but now it is only 10%. If you wait longer still and buy it at $20 you just get $5 worth of DLC. As long as the developer doesn’t just raise the cost of DLC, everybody wins. Everybody gets the proper, full game and has access to all DLC, but the prospect of repeated discounts instead of a single download will be more enticing to buy new even if the actual dollar value ends up being about the same. Not only that, but there are a lot of people who probably don’t take advantage of DLC because they don’t want to pay extra after they’ve already spent a bunch of money, who will be drawn in to spending that extra cash by the discount. As for people who bought used, they still have the option to buy the DLC at full price, because I’m guessing there are also a lot of people who buy the game used so they don’t feel bad about spending extra money on DLC.
Well that’s what I have come up with. What other ideas are out there? Feel free to share your ideas or comment on these ones in the comment section, especially if you work for a game developer.
Cheers,
Matt
My weakness is for swag. I bought Catherine new because it came with a little art book and soundtrack CD, and I own my fair share of collectors' editions. Heck, I still have my Warcraft II manual because of the artwork. Give me something extra -that does not affect the game in any way-, and I'm highly incentivized to buy new.
ReplyDeleteI had not really considered swag for videogames, although I love that stuff with my movies, haha. I can't say it factored in to my decision to buy it new, but the booklet that came with Catherine was definitely a plus. Roz recently mentioned to me that she wonders about the effect that moving to digital distribution will have on graphic designers and artists who will no longer have cover art jobs. I think that is an interesting consideration, especially since there are clearly customers who place great value in it.
Delete-M
Swag is interesting. But it's also expensive and IMO in the economies of scale world of videogames now, it's less of an issue as I think less people care about that sort of stuff now. A geek's lament that video games are now popular I think.
DeleteWhich sucks for people like us who appreciate it (I loved getting manuals like my Baldur's Gate manual which was just quality reading as far as I was concerned). Manuals went through a really shitty time recently where they were nothing more than reference guides. For the most part they still often are, but I have noticed some games have improved manuals now - it's just that the manuals are now digital on the discs itself.
I think collector's editions will still exist, although as I've transitioned to a preference to digital media it's admittedly become less of an issue for me. I think part of the reason was simply because when I moved, I just had far too much shit to keep track of :\
As for graphics designers and artists, you can say the same for those that work in manufacturing. I don't know enough about how they do their work, but digital copies of games still have unique artwork done, and I still think that physical collectors editions that do come with swag will still have their place.
A bit of a restructuring of game development may be in order, as I find game development costs tend to be on the "skyrocketing" order while the cost of the games themselves to consumers have remained pretty static for the last 25 years. The only way for this to survive is to compensate with volume sales.
I think digital distribution is inevitable. I used to resist it at first too, but I've since bought in enough that I actually prefer to pay the same price for a digital copy of a game than to be bothered going out to a store and picking up the boxed copy. My position may be influenced by the fact that I don't resell my games though.
ReplyDeleteI like digital distribution for a lot more than just the convenience though, and (at least right now) strongly support it because the ROI for it enables greater ROI potential for game devs. For Call of Duty this doesn't mean very much, but for games that aren't considered licenses to print money, overcoming the risks associated with developing a large AAA game because it doesn't appeal to the mainstream is a huge thing to consider. I can understand the perspective of someone that likes the boxed copy wanting to feel they are getting the same value for their dollar, but I think that there are other advantages to digital distribution that make it hard for me to feel that devs/publishers should release digitally at a significant discount.
I also think that there's an important clarification to be made. You call out "nerd collectors" but I think that, in general, gaming is a decidedly "non-nerd" activity now. It still has that stigma associated with it, but many of our decidedly non-nerdy friends still picked up and played a game like WOW. The huge money makers like Call of Duty are games that probably more appeal to non-nerds than nerds.
I think collectors editions will always exist though. Many of them already buy their copies to be shipped to their home directly anyways.
I think the Catwoman situation is too far too though. She was a character that was principally advertised during the marketing campaign. Although I heard that Gamestop ended up making arrangements with publishers to allow people to get a free DLC code for Catwoman if you bought the game used from them. In this sense, publisher still gets their money and person still gets savings, and aside from the inconvenience of authorizing the content it's not functionally much different.
As for "on disc" stuff. I'm ambivalent. I suppose if it's fully completed, functional content, it's more justifiable that stuff was removed simply to monetize the product differently, I can understand justification. Although sometimes content is cut because it isn't fully featured and evil deadlines loomed. I think Stone Prisoner was the most interesting, fleshed out DLC for Dragon Age, and large chunks of the content shipped with the disc. We just needed to finish it off with DLC. But because it was originally planned, it's so much better integrated into the final product IMO. And apparently it was still pretty successful as a DLC seller, even though it was free for new owners.
Your DLC discount is an interesting idea. Although DLC sales plummet the later in the project cycle. Even if a DLC is higher quality a year after release, it's overlooked simply because less people are playing the game. So it'd have to be investigated. It's an interesting way of providing incentive for people to buy the game earlier though. Especially if they are typically DLC fans. My only question mark is the logistics of it all. I will post some suggestions after this as apparently there’s a 4096 character limit >.>
Some possible thoughts I had while writing my first wall of text:
ReplyDeleteI think that publishers should look to leveraging the digital medium a bit more. Provide discounts to people periodically when they own X number of games within the last year or something to that effect. Steam occasionally does this I think (might be a different online seller), where owning say, Splinter Cell 1 and 2 would provide a discount for buying Splinter Cell 3. Since purchase history can be easily tracked, you can provide similar scaled incentives to those that bought the game when it was priced higher. Like, receive a 10% discount of your Splinter Cell 1 price off of Splinter Cell 3. Someone that bought the game at $50 gets a $5 discount. Someone that bough it for $20 gets a $2 discount. This does have internet privacy/security concerns though.
There might be opportunities for them leveraging their own "used game" platform by allowing people to put their access up for sale for others to purchase. They can then take a small cut, and it prevents the idea of companies like Gamestop making a killing reselling used games at the expense of the developer's work. I haven't really fleshed this out, but since I strongly feel digital is the way of the future, I think seeking ways to leverage it in a mutually fair way is the way to go.
I have a weird double standard with digital distribution where I am all for it when it comes to games, but anti it for books, movies and music. But I think that it has been done better for games and DRM is never really problematic, but iTunes constantly pisses me off when I move stuff to a new computer or try to load the music I bought on to my non iPhone.
ReplyDeleteGaming may have reached a more mainstream audience, but I think that the need to collect physical copies still resides mostly in the nerd segment.
-M
I think that's fair. I just think that the nerd segment may be becoming marginalized.
DeleteAt the same time though, I think using Steam requires a certain nerd-factor. So I don't know.
DeleteI think the non-nerd segment probably buys mainly at retail stores, not digitally. That said, I have nothing on which to base that as most of my friends are nerds.
ReplyDeleteI still stand by my opinion that online sales should be cheaper than in stores, as the costs are lower. Personally, it has nothing to do with the ability to sell the game because I never do that anyway. I don't really consider it inconvenient to go out and buy the game and I like having something to hold in my hands and display on my shelf. I need incentive to give that up and I think most people do as well. As much as I dislike buying things on iTunes I think the biggest reason it has taken off is because it is generally cheaper than buying a physical copy. If game developers really want to encourage digital distribution then it needs to be the cheaper option, not just for people who like to sell their games when they are done. I think people tend to budget not for 2 games, but for $120, so if that will get them 3 of the games they want they will buy 3 hot new games instead of buying 2 and waiting for the other one to get cheap. Digital distribution will lower costs for the developer and lower prices encourage people to buy more new releases while curtailing availability of used copies. Everyone wins.
I think the principal cost for the developer is still in the IP, not so much the manufacturing costs, so the appeal of selling those games at the same cost is still there. If people buy it, then it's less of an issue. The biggest advantage of digital sales is price flexibility though. It's more difficult to suddenly drop your price to 75% off for a single day in retail.
DeleteI may be misremembering but I thought I had heard resistance from some retailers in Europe that refused to stock games if they were available cheaper digitally. I do know that many PC retailers take a dim view of a game that utilizes Steamworks since the product makes the user more aware of a competitive distribution service, but that's a different issue. I can't find evidence to support my price point issue though, so I'm not sure.
I know Sony is entertaining making Vita games purchased through PSN as much as a 40% discount to the cost though. Although they face extreme competition from mobile phones for gaming now.
I certainly won't complain if the costs go cheaper. I'm undecided if it's necessary or not. I don't buy music (or even download it illegally), but my impression was that digital music was good because you didn't need to buy the whole crappy album for the one good song lol.
You yourself talked about the appeal of digital being better ROI, which implies that it is cheaper for the dev. But lowering the price for digital versions should also increase sales volume without increasing any costs to the dev, so there should theoretically be a net revenue increase even if manufacturing is not where principle costs lie (and it certainly isn't).
DeleteAs for the resistance of retailers to lowering digital prices, these are the same people that devs are complaining sell their games used, but devs are still willing to cave to their pressure on this? If EA decides to lower prices online, Gamestop is not going to stop selling EA games, that would be terrible for their business. And if EA does it, Activision is going to have to do it, etc. Retailers can complain all they want but what can they really do about it that won't end up shooting their own foot?
There definitely would be costs savings going full digital yeah. Sorry if that wasn't 100% clear. I just don't know how much there is to justify how much of a price drop. Going past $20 discount, the price elasticity might not be good enough.
DeleteI'm also not sure of the price elasticity for games as they transition from retail to digital. So I can't say for certain if there would or would not be a significant enough increase in sales to cover the lower price point. Games are definitely a luxury though which tend to have more elastic prices which would support your theory.
Note that the digital distribution controversy in Europe is almost exclusively towards PC games, which is a smaller market compared to the console game market. Game companies like Gamestop already have greatly diminished their PC stock over the last several years (I used to shop at the EB Games in Kingsway all the time until their PC section was pretty much one shelf of MMO games and The Sims).
I do know that PC game retailers in the UK have made a stand about stocking games with Steamworks though. The new Space Marine game is not available for purchase on Steam in the UK, even though the game uses Steamworks and requires Steam to be installed to be run. You can actually still use an activation code to activate the game if living in the UK. It's just not for sale there.
http://www.rockpapershotgun.com/2011/09/09/space-marines-mysterious-steam-uk-absence/
Retailers will be able to take that kind of stand only as long as things are done piecemeal like that. If EA just announced that digital versions of all their games, PC and console, were cheaper online there would not be much Gamestop could do. As it is, PSN and XBL charge the exact same price and don't even really do sales like steam. As far as I'm concerned there is no reason to buy any console game digitally, but I use steam all the time for all my PC gaming needs because of their sales.
DeleteI can't imagine the devs making anything more than $20 cheaper online for new releases, even I think that would be crazy. But I also think that anything less than that would not be enough incentive for the gaming community to fully embrace digital distribution.
That's probably part of the problem. You could get an EA (note THQ is a company that is probably struggling, and hence more willing to cave) that would do it, and then Activision comes along with Trollface and says they'll happily do it and they get all this prime real estate at retail for cheap without any presence from their prime competitor.
DeleteUnfortunately I don't really know how much manufacturing would cost on a per box basis which is what I'd need to really make an estimate. Chris and I were just chatting on FB about it and our guess is that it might be around $1-$5/copy (numbers pulled out of our bumholes haha). Though that's still decent savings especially if you expect to have to make a lot of units.
My best guess with some quick researching is that Microsoft and Valve take likely around a 30% cut (a number that consistently came up, but could inaccurate) and that is what many feel is about par for digital distribution packages. So we can't completely pull back the markup factor from retail. I'd need to see a more detailed price breakdown to really make some definitive statements, but it's still fun to speculate.
There might be some differences between MP3s and phone apps because market penetration for systems that can play those is also so huge and the "eh what's this about" factor is high.
I don't know if Modern Warfare 3, which sold 6.5 million units its first day at $60, would necessarily see much additional revenue had it gone full digital at $40. At 70% that's $28 a copy digitally. I don't know, what magic number should we assume is "take home" from retail? Haha.
There might be exposure restrictions for digital too (although Modern Warfare should be able to overcome that...)
Meanwhile Gamestop doesn't get to sell any EA games, which is a huge blow to them, and consumers are like "well I have could buy a $40 EA game or a $60 Activision game". That's not a difficult choice.
DeleteI don't think MW3 is really a valid comparison to anything else.
Devs can make all the excuses for prices that they want, but the problem they are facing is that people don't have the money to spend on their games and nothing they can do will change that. They are choosing to spend absurd amounts of money developing a game that realistically has little chance of being the next MW3. The market is just not big enough for this many AAA games, especially with the US economy in the state it is in. My suggestions are all compromises and are intended to get consumers to spend the money they have where the devs want, not to give devs their way. You can't get blood from a stone but you can use that stone to beat your enemies to death and take their blood. That may be an imperfect metaphor.
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Delete(Blogspot needs an edit function...)
DeleteJust be careful though. If it's as simple as "I could buy a $40 EA game or a $60 Activision game" not being a difficult choice, then it's still going to be an easy choice if it's a $40 EA game or a $60 EA game. It would just make sense for Gamestop not to stock because they wouldn't sell any regardless. No sense buying inventory.
If the solution is as simple as "They should just do this" then it leads to the one obvious answer of "Then why don't they do this?" It's dangerous to take your perspective of the situation and apply it to the rest of the gaming population. You yourself state that most "non-nerds" probably don't do much digital purchasing. Digital distribution for games is still new, and if you factor in markets like Australasia which can have prohibitive download caps (especially New Zealand). I think another potential barrier is that the idea of downloading a 30 GB game is still foreign to some people.
This all assumes that selling the game at $40 digitally would net them more revenue and profits. Neither you nor I know this. I'd be surprised if there wasn't some overpriced executive that also checks these numbers, especially since a company like EA has publicly stated goals of pushing digital revenue streams as their priority.
Yes, large corporations have a ton of inertia and seem to be resistant to change, but I don't think game developers have this issue with respect to digital distribution. EA has actually come out with their own digital distribution service, and I wouldn't be surprised to see Activision follow suit (they already pull in a ton of digital revenue through WOW). I think if they could tell pubishers to pike off and sell their games digitally for $40 and make more money, they would be. Maybe I'm naive like that.
The TL;DR is mostly that I think the digital marketplace is still too young to make a decision like that right now. I don't think the current generation consoles adequately support it in terms of hard drive space as well (especially since you can still get shitty XBOXs that don't even have an internal hard drive... such a nightmare....). Rumor is next gen is slated for 2013 or so.
Anyways, good discussion. Maybe it's the internet but I couldn't tell if I had annoyed you in your last message and I didn't mean to do that if so. One popular conspiracy theory is that the industry is slated for another crash where the more cost effective indie games are the ones that survive. Could just be hipsters saying that though B-|.
Cheers
You guys are talking like people are buying directly from the game developers. With the exception of EA, I'm not aware of any gaming company where I can bypass middlemen and buy directly from the developer. Even with EA, I image the digital distribution division is run separately from the rest of the company.
DeleteIn the grand scheme of things, the difference between buying digital and buying "physical" is the same as purchasing your game from Walmart or from Gamestop. The developer sells the game to a retailer for a set price and the retailer then decides how much they need to sell it for. If steam can sell if for less because they have less overhead, then they have that option. If steam decides that selling it for less will do nothing but decrease their bottom line, then they will sell for the same price as Gamestop. Because they can.
Ultimately the market will drive the price. No matter what the industry, the price is not determined by the cost, but by demand. Price and demand are extremely related. As one goes up, the other goes down. The point on a graph where they meet is the optimal selling price. If that point is the same for digital downloads as it is for physical copies, then they will sell it for the same price.
If they look at the curve and determine that they can sell it for more than the physical copy, then they will sell it for more.
If a company cuts costs, they are under no obligation to pass those savings on to you. Nor should they be.
Either way, bitching at the developer is pointless because they do not set the price, like 99% of the goods you purchase, it is the middleman that sets the price.
Do you bitch to Dairyland that your milk is too expensive?
I'm not bitching that games are too expensive, I'm stating the fact that the price they are at is prohibitive to purchasing many of them for many people and that this is something developers have to acknowledge instead of complaining that people are opting to buy completely legal cheaper versions of the game. If one is to listen to them, they can't actually sell their games sustainably at these prices and yet they are not changing anything.
DeleteNo, they are not obligated to pass any of their savings on to the customers, but by the same token customers are not obligated to buy their games new. At no point do I say devs are obligated to do anything, I merely make suggestions for how they may approach THEIR problem of gamers buying used copies of the games.
As for developers setting prices, they actually do have a lot of influence on the price as they assign MSRPs to everything and, in the case of the book industry, the publishers DO actually set the price. Granted they haven't gone that far for games, but publishers do have influence over the retailers, especially when there are so few major retailers involved in online distribution.
Since Valve is a private company there's not much info on how their prices are set. I found a link which I'll share below, but the gist of it sounds like "it depends."
ReplyDeleteThe general idea seems that a publisher has control over what price they set, after discussion with Steam where they discuss how much Valve gets as a percentage and other things like that. Though it does sound like Valve will make price recommendations and unless they receive specific instructions (sounds like it can be an issue for pricing in different regions), Valve will set the prices at what it thinks is appropriate for the game.
I guess it's a pretty big issue in Europe because prices often don't get discounted over there as a US publisher will only think to drop their local price. Still some improvements needed.
Although ironically, based on Steam usage data, peak usage is usually around noon our time, so the impression most have is that it's probably more popular in Europe. Go figure.
Anyways, a link to a blog that has quotes from actual developers that have released games on Steam:
http://www.spilljenta.com/2009/07/steam-who-sets-the-prices/
It seems that Steam sets the price with feedback from the developer, either way, in that same post it comments that steam takes a cut of 40%. So only 60% of what you spend on steam actually goes back to the developer. I suspect that the physical market is similar.
ReplyDeleteBut, my point is that your vengeance towards developers is misguided. If you think that prices are out of whack, blame the stores.
If you think that developers are pushing for the death of the used market, direct your vengeance at the gaming systems that allow it to happen.
I would be shocked beyond belief a console ever directly blocked used games. You would have to get every system on board with it or Sony would just advertise it as a feature and if people actually care about used games then the Xbox would die or remove the "feature."
What we are really seeing in all of this is the free market in action. If people want to buy used games, the system that allows it will win. If people want to buy digital games, eventually the market will kill the traditional retailer.
Blockbuster died because the market deemed their business model outdated. We have already seen the shift in PC games to digital. It is virtually impossible to find used PC games and, other than the AAA titles, it is getting harder to find new games. I'm guessing the console market is not far behind.
Buzzkill :P
ReplyDeleteI found this link interesting from Extra Credits:
http://penny-arcade.com/patv/episode/mailbag-3
Specifically at 4:20 in, where a fan asks why Australians pretty much get boned on exchange rates and pay upwards of 1.5x the amount of a game compared to the US.
Kind of a shitty deal for them, but at the same time, I can understand why the corporations do it.