News Digi distribution destroys old pricing models

I've got to say Steam plays well on people's need to feel they've gotten a good deal - I'm 99% sure that if the price didn't go back up after the weekend they wouldn't get as many sales. I bought S.T.A.L.K.E.R. a week ago in the full knowledge I won't be able to find the time to play it for weeks, basically because it was so cheap I couldn't say no, and because I knew it wouldn't stay that way.

The main advantage of Steam is that it's EASY - I don't have to worry about problems with additional services or lost discs, and given how often I start my entire computer from scratch that's more important than it might be for other people. The Steam community and the access to servers is also neat and tightly integrated for the most part, and I like it. I'd venture to say that the system is so neat and compact it may actually be worth paying over the odds for. Steam is also widely likeable - anyone who knows it knows that it runs with a staff of less than 20, and that Valve is just Valve - it's not backed by telephone-number budgets, and that gives people the feeling that they are supporting the underdog even though that may not be true.

Certainly as Astral points out at any moment this could all go wrong, but I invite him to consider the user response if it does. Valve rely on Steam as much/more than they rely on their games. If this was a little service, they could be cowboys. As it is, the body politic can to some extent dictate terms - think about the Facebook backtracking over user data in their terms of service. The inertia against them going MW2-style batshit insane is huge - the loss of their customer goodwill, and the collapse of the revenue stream should dissuade them for some time...

 

Some parts of me like the digital distribution system - not having to remember to take CD's to places with me being one.

However, I do agree that we are being ripped off for games on there, Look at Call of Duty 4 for an example, STILL £30 on steam, yet on Amazon for £18 here. The orange box is £17 vs £11 on Amazon. Other games on Steam are way over priced too, especially older ones. Grid for a prime example here, £15 on steam, and for a fiver on Amazon.

Sometimes i wonder if its an excuse to keep the prices up, "users don't need to go shopping around" and while I know they have offers, that doesn't give them an excuse to keep prices artificially so high!

 

As much as I enjoy using Steam, I totally agree with what you're saying. The biggest problem with Steam is that its only major competitor is rubbish, Valve also prey on geek laziness to not bother shop around.

What I'd like to see Valve do is effectively open up wholesale partnerships (similar to what BT was forced to do in England after it was decided they were a monopoly). For example, say GAME wants to join Steam, they have to buy ~50,000 digital copies of any game they wish to sell on the service at wholesale price. If they have a few thousand remaining in a years time, they might knock the price down to less than what they paid for it just to 'clear inventory', a virtual bargain bin essentially.

So while everything on Steam would look exactly like it does now, the difference will occur when you go to buy a game. Instead of just one 'Steam' price, you'll see a list of prices from various e-tailers. Pick the lowest one and you're good to go.

 

I'd like to see Valve improve their practices before opening anything up to others... L4D crash course, was patched three times in 3 days after launch? The Steam Client has had 3 updates now for L4D2 stuff, and L4D2 has been updated even tho its not technically out yet (20th).

Valve aren't the only guilty ones - Infinity Ward have patched MW2 4 times on the PS3 since launch.

While I like the simplicity of patches here, I HATE having to wait EVERY time I start it up while it works out what its doing / updates half the games.

Digital Distribution has added another gripe in my opinion - patching. Its now so easy to patch, that games are released and patched and patched - rather than big bundles of fixes we get a constant dribble patches.

 

Most people are sensible enough to look elsewhere and compare prices. If you're too lazy to do that and end up paying over the odds, well then all I can say is it's your own damn fault. Do you know the amount of their savings as a result of their digital distribution model? I assume you do, seeing as you speak so authoritatively on the subject. I would assume (yes, I don't know) that the cost of producing a disc and distributing it to retailers only amounts to a small fraction of the cost of a game, and don't forget Valve has to pay to maintain the servers through which you download your game.

Oh, and while I'm at it, who are you to say what you should be paying for games? It's up to the company who produces the game to decide how much they want to charge for it, not the consumer. That's like going into Asda and saying "No, I don't want to pay £1 for this loaf of bread, I think it should be 50p". In fact, it's not like that at all, since games are a luxury item rather than an essential commodity. If you don't like the price, then don't buy it. It really is as simple as that.

You have paid for the games, therefore you presumably have receipts of your purchases. Just because you don't own the physical disc it doesn't mean you don't still own the product, and they don't have the right to deny you access to it (unless you happened to break the conditions of the EULA, I suppose). Though I haven't heard of a single case of this happening, I presume you would be protected under law if it did. The same goes for a subscription-based fees - they can't charge you more for something they have contractually sold to you and which you have already paid for.

How many people do you know who still use Windows 98? A better question might be: how many gamers do you know who still use Windows 98? It's an obsolete piece of software, so why should Valve go out of their way to support it? It's like trying to play games on a Pentium II and 3DFX video card, which I'm pretty sure most people aren't stupid enough to attempt. Are you?

Not really, you're twisting their words quite considerably there. It's a legal get-out clause to prevent them getting sued, and I think you'll find nearly all such services would have a similar clause. It would be quite prudent to include one too, because like it or not, no company (or even the Government for that matter) can claim your details will be completely safe and that their software will be impervious to hackers and bugs for all eternity. It would be stupid to do that. What about the hundreds upon hundreds of breaches in security in Micorsoft's OSes? Is that their fault? Some of it may be, but are you going to stop using it because of that? No, you take precautions to make sure it will be a mere inconvenience if it does happen.

Yeah, but their collection of games is pitifully small, and the reason they're so cheap is because they're old games, so it's not comparable to the service Steam offers.

Honestly, I think some people must go out their way just to find fault with anything that's remotely successful, even to the point where all logic seems to fly out the window

Don't forget Impulse

 

So you are complaining the games are getting patched so soon after a bug has been found?

To paraphrase your words, "Why do they keep the game working so well when they could just leave it in a state that is unplayable for a month and release a giant patch to make it work again"

And for those who complain that games need so many patches and that back in the old days you didn't need patches, while some companies (EA for one) do release games before they are ready and need too many patches, you have to remember, back before the internet and widespread popularity of the CD to allow larger games the code base was quite small and could be bug free without too much difficulty. Now the code is reaching into the millions of lines of code and it has to work on thousands of different configurations.

A few patches here and there are a good thing, especially with the automatic update OPTION you don't even have to worry about having the latest version of the game as Steam will do it for you.

 

But Valve's Post-Christmas deals have me holding off buying anything until then.

 

Why is everyone complaining about the prices on steam? If you dont like the price they have on there THEN DONT BUY IT FROM THEM. No one is forcing you to purchase it through steam so whats the deal, they sell it at a price they want to. IF the market is there at that price then fine but if not then so be it.

 

I love Steam, because of them I've bought a ton on indie games I would have never known about before and yeah their sales are great but I think they let other companies screw up their pricing, for instance, who's gonna pay $50 for a bug ridden year old copy of GTA 4 when you can get it at Amazon for $19.67? I'd rather not deal with a CD but I'll do it every time to save that kind of money especially on that title. D2D has the same pricing so I'm betting it's Rockstar keeping the digital distribution price high for some reason. So I wonder if Steam decides when a product goes on sale/drops the price or does the company behind the game keep control indefinitely.

 

The company that publishes the game is the ones who decide the prices. Valve has no control over what prices they set.

 

steam has 2 problems for me.
1 , it should be the cheepest place to buy games as it has nothing to sell or post to you and some how I can allways buy cheaper else where and have a physical copy in my hand.
2. Till we get proper internet speeds in the UK its quicker to walk to town , buy game, have dinner , walk home and instal from disk.
1/2 Hr is as long as I am willing to wait to down load any thing. want 10 mins though not Hr's.

I have a question though, how do people loss disks any way lol. It's a £20-£30 disk handle with kid gloves and take care of them.

 

I see where you're coming from and I agree with new games but they do ACTUALLY have some good prices, example: I wanted to play KOTOR because I've never played it before, I went on gamestracker to find the cheapest price brand new was £9.99 and yet I went on steam and bought it for £7 brand new, that's a nice saving if I do say so myself

I don't get all my games from steam because of some of the prices are a bit off, I just got STALKER Clear sky for £6 on the hut and it's £19 on steam, I'll go with the cheapest provider and sometimes steam are actually just that so yes you can slag them off for certain stuff but every now and then they have some good offers, especially the developer bundles, I bought the valve pack for £52.99 which includes Left 4 Dead 1 which was incredible value considering all the brilliant games I got with it like the counter strike games and the entire half life series which I don't own

 

they really would make me proud if they do a 50% weekend deal for L4D2. lets say next week...

 

If you don;t like the prices on Steam buy elsewhere. Simple.

If enough people buy elsewhere they will change their prices.

Me, I find it quick easy and convenient to buy some games from there, I save money more often than not even when they are a bit higher than the shop price.

Because then I don't have to get off my lazy ass, use the petrol in my car and drive 20 miles to town, pay for parking, probably get soaked into the bargain and stuck in traffic behind some moron in a caravan on the way back.

I just click the mouse a few times confirm my payment details and go and watch the TV for a bit.

That is why it is a good service, and why I will continue to use it. If you don't like it - FOR ANY REASON - don't bloody use it!

 

Plus you are forgetting something, when you download the game through Steam, it comes with all the updates. So add the time it takes to download all the patches and install them in the correct order before you can play your retail game.

I am also not the kind of person who buys a game to play it straight away, I get the games when they are cheap and play them later. With the exception of L4D2 that I bought pre-release and pre-loaded it so i only had to decrypt the files on release. Took all of 5-10 minutes on my slow laptop HDD.

 

Earlyer in the year I brought the Rockstar collection from Steam for £30, Rockstar's entire games catalogue for £30 that was GTA IV all the way back to the original GTA how is that not a good price?
There have also been several other collection's at similar or lower prices that are not available in shops and then there are the indie games which are almost impossible to find in highstreet shops that offer great value and good entertainment.

Steam does an excellent job and the number of very happy users is a testament to that.
Every business has areas it can improve on, but some people will never be happy untill they are being paid to play a game brought to them on a gold tray by a bevvy of naked models.

 

Ah, the power of Public Vitriol versus the Mighty Buck...

It may be worth considering the amount of money at stake here. Steam claim to have 20 million accounts - let's assume 25% are dormant/abandoned and the remainder have an average value (in terms of purchased software) of $100.

What happens if a $5 annual fee is introduced? It's not much, and few people would be keen to risk losing $100 by not paying - but let's assume 20% do refuse. That leaves 12 million users paying (under protest, but paying nonetheless) $5, boosting revenue by $60 million/year.

I clearly can't speak for Valve on this, but I would happily sit in the Bit-Tech stocks for a week and be pelted with pig excrement if I knew I would receive that much money (note to mods: I'll want proof of your bank balances before accepting any related job offer!) so I would suggest that the idea of public feedback being a deterrent is somewhat optimistic.

Now let's imagine a couple of years from now - assume 20 million active accounts, average value $200. A senior beancounter pulls figures from the air and reckons they can get away with a $10/year annual charge (5% of average account value). 20% refuse again, but the revenue gain is now $160 million/year.

At some point, the potential gain will exceed $1 billion/year and how many companies are likely to ignore that?

Now Facebook almost certainly didn't have such financial incentives with regard to its T&C's, and like all social networking sites, has little to tie members in to its services in the face of competition. Banks and credit card companies (who also include examples where annual fees were introduced) face similar problems with customer retention. Steam however does have lock in - accounts aren't transferable to anyone else and the cost of replacing games is surely going to be a bigger deterrent for most than a small fee.

However the last word on this should probably go to Steam's subscriber agreement, section 4B:

B. Charges to Your Credit Card.

ALL STEAM FEES ARE PAYABLE IN ADVANCE AND ARE NOT REFUNDABLE IN WHOLE OR IN PART. Valve reserves the right to change our fees or billing methods at any time and Valve will provide notice of any such change at least thirty (30) days advance...

For a service where payment is made in advance for goods, what other point is there in including a provision like this?

You don't need digital distribution for that convenience - a no-CD patch from a site like GameCopyWorld will remove the need to have to carry your discs around. I've used them for over a decade without problems and nowadays check that a game is listed there before considering a purchase. There's no harm in being cautious and putting any downloads through a multiple-scanner service like VirusTotal though.

Servers and bandwidth can be rented pretty cheaply - a top end dedicated server from 1and1 costs £250/month for 100Mb/s "unlimited" bandwidth. That should be able to handle "up to" 32TB/month. Assuming a typical download size of 10GB (just over what a dual-layer DVD can handle), that means a cost per download of 250/3200 or just under £0.08 pence (about US$0.13).

That's with a British hosting company - bandwidth should be cheaper in the US and bulk discounts should drive the price down further.

Preparing the download package and patches is a task that can be left to the developer. The only updates Valve might need to take care of themselves would be for VAC and the Steam client.

In comparison, the manufacturing cost for a DVD (including colour print and case) from Discus Group would be £0.57 for a run of 5,000. Assume £1.00 for a nice manual.

You have inventory management costs (the need to store and protect stock, monitor levels, arrange new runs, handle damaged returns) and transportation - let's assume these come to another £1.50 per unit.

The biggest cost factors are margins for the retailer and distributor. This thread suggests £15-20 retail markup on a £5 distributor price - which would explain why large online vendors (Amazon, Play, etc) can offer such major discounts, even on new releases (in fairness to retailers, it should be noted that they have significant overheads - High Street rents, local tax/business rates and a higher staff-customer ratio than online stores).

So that would suggest a physical cost of about £3, distributor margin of £2 and a retailer margin of £15-20 which could all be bypassed with digital distribution.

Well I'm Joe Consumer, like almost everyone else here. I'll buy things I consider useful, desireable and good value and avoid anything that I see as overpriced.

Yes, a typical retailer is going to charge whatever they think the market will bear (the developers who write games rarely get a say in pricing) so critical consumers who shop around are an important counter-balance.

Go read the Steam subscriber agreement - look carefully at section 13.C.2.

Steam subscriber agreement section 4.B (as noted above) allows Valve to change their fees at will. To what extent you may be able to appeal legally against any changes (UK users should bear in mind that Valve has no UK presence, they would have to press any case in a US court) is an untested area, but my guess is as long as Valve can put forward a reasonable case for a change (and I don't doubt there are many justifications that could be used), they're not likely to be impeded.

The situation of having a low fee brought in initially and then ramped up in succeeding years would likely be even more difficult to secure a legal judgement on.

The question you should ask is how many gamers own software that won't run on Windows versions post 98? I have games dating back to early DOS days (SimCity 2000, Ultima Underworld II) but I can still use them thanks to emulators like DOSBox. I also have the option of setting up a dual-boot PC or even keeping an older system aside just for such games.

None of these would be possible had I purchased such games from Steam (if it had been around back then) since the games would not be usable without the Steam client. In a similar vein, should Valve also terminate support for current Windows versions in future, no-one would be able to run their current purchases via emulation or dual boot.

None of the banks I have an account with have such a clause, no does any ISP I have dealt with. The wording serves to excuse problems at Valve's end more than anything and that is my concern with it.

Rather at odds with the main article's focus on how Valve changes their prices at whim, isn't it?

As a more general comment, doesn't anyone find it odd that Valve claim their high prices to be a result of retailer pressure, when those same retailers happily discount themselves? Or how this retailer pressure seems to mysteriously disappear with weekend specials?

That was a Steam exclusive (Direct2Drive had a less complete version) so no comparison. However it does show that Steam can offer good prices, it's just they rarely choose to.

The main article is about Steam so it's not unreasonable to discuss it further. However the criticisms (high and arbitrary pricing combined with the online activation lock-in) apply to almost every other digital distribution system as well - Direct2Drive (who also encrypt game .exe files, breaking compatibility with any community-developed patches), GamersGate and even Stardock's Impulse. Only GOG is beyond such criticism, though some of their prices are on the high side given the age of the products.

Now if people want to splash out on Steam and are happy with having the rights of renters, rather than owners, of the games they buy - that's their choice. There is a downside though, and if Steam ever achieves a monopoly (or near-monopoly position) it's possible that its customers will pay far more than they bargained for.

 

You raise some good points Astral, and I must admit that I haven't looked at the Steam subscriber agreement in much detail (although how far you can read into those individual points is questionable).

I feel part of the problem with pricing is that we are in a transition stage from physical media to digital purchases, and companies (be it the publishers or retailers) are still setting a flat RRP across the board for the different versions of the same game. Once digital distribution of games really starts to take off and has a larger share of the market than physical media, then prices might come down. I'm also unsure of how much say Valve actually has in the price of the games they sell beyond their own productions - it's likely that publishers wouldn't be too happy if they went and heavily discounted their games, and probably have some sort of agreement to that affect.

I agree that it would be dangerous should Steam gain a monopoly of the market, but there will always be competition, and as long as the competition is there, you have choice. Look at iTunes - that arguably has a near monopoly of the music download market, but I haven't bought anything off there for about 5 or 6 years, when it was still in its infancy. But as it is, when their games are priced right, they offer a USP which makes it more beneficial for me to buy from there than anywhere else.

However, I can't think of any good reason why Valve would want to introduce a subscription-based payment system to Steam, not when they're already making so much money from it. It would be a suicidal move on their part if they were to do so, since they already have the backing of a vast proportion of the PC gaming community (i.e. their entire user base), and would go against the whole Valve 'ethos', which is the very thing that drew a lot of people towards them.

 

Yes they do talk about changing the prices of their own games at a whim, therefore they are the developers for those games so they set the prices.

 

You certainly raise some valid points about the SSA. However, first you have to remember that none of those clauses will ever have been tested properly in law. They are 'CYA,' 'Cover Your Ass' clauses that are intended to protect Valve in case of unpredicted problems and resulting lawsuits. That doesn't make them watertight and they certainly aren't the be-all and end-all of that issue.

I know I'm repeating myself here, but nobody needs Steam; it's an issue of convenience. Because of that users used to having something for free are unlikely in my judgement to take the sudden introduction of annual/monthly fees lying down. There are also many ways for Steam to raise revenue without resorting to something as predictable unpopular as taxes; higher tariffs on games or increased advertising will appear long before such desperate measures. What I'm saying is that it's definitely theoretically possibly legal justifiable for Valve to suddenly begin to charge for Steam, but that doesn't make it even imaginably likely.

QFT.