WHY Are Downloadable Console Games The EXACT SAME PRICE As Retail Boxes?

[The Hustleman]

There's no logical reason for this, if anything Downloads should be cheaper.


There's no disc to make, no shipping costs to ship it, no artwork to design and print, no cut to give to game stores (e.g. gamestop, wal-mart etc).


If anything, downloaded games should be AT LEAST 10 dollars cheaper, especially since you don't get a disc, manual, and booklet and MUST download it and keep it on a hard drive.


So why are they the same price?

 

[gollum18]

Lol my friend did a speech in our speech class over why downloadable contents is the same price as a retail copy. He too argued that downloadable content, etc... Was far to expensive. Really it depends on what store you get it from. Steam and darwin offer really big discounts on games that Ms and Sony can't offer. Also ms takes like 40% of the total sale of the game + the cost to release on the store. I don't know how much Sony takes but it probably up there to. I mean it's not like you are buying a retail disc.

But I guess there's the problem, if a disc breaks you have to buy a new one for another $60 or whatever. If your dlc gets deleted all you have to do is redownload it, no buying necessary.

Sprint GS3 Running TN's Msg and Chubbs

 

[ledfrog]

My understanding is that the stores in which digital content is being sold, take a nice chunk of change just for the privilege of them making your product available so to make up this expense, content creators will up their price. And since they can't charge more than the retail copy, the price usually ends up right there back at $60 for new games.

In the real world, creators don't pay stores to stock their products, but in the online world they do. I imagine the difference is that the online store can put your product in front of millions of people in short time as well has showing your product in many more places. For example, Best Buy can only show your product to people that walk into any one of their stores and/or someone who willingly decides to click onto their website, but stores like Xbox Live and iTunes can show your product to people on their consoles, tvs, cell phones, tablets, computers and anything else that connects to the internet at any time and sometimes without you choosing to see it. I guess the extra expense is worth the exposure.

Also, if you really want to get down to it, there are still many people that shy away from having everything always online...these are people who might want to play games or watch content offline where they don't have to rely on an internet connection. Or the gamers who like to have a physical disc that they can take to friend's houses or sell them when they beat the game. None of these things are possible when you buy a game online.

 

[Farish]

The answer to this question is Money.

 

[The Hustleman]

Not talking about services like steam which are retailers in themselves but things like live and psn downloads.

You don't have to pay a retailer a cut so drop the price

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[garublador]

Not talking about services like steam which are retailers in themselves but things like live and psn downloads.

You don't have to pay a retailer a cut so drop the price

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Live and PSN are retailers.

 

[The Hustleman]

Live and PSN are retailers.

Company owned.

It's owned by Microsoft and Sony, still no third party

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[garublador]

Company owned.

It's owned by Microsoft and Sony, still no third party

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I could be off on how it all works, but they don't write all of the software. Other companies write games as well. If they undercut all of the other game developers no one would want to write games for them and the console would fail. If they didn't make money on third party games the online game store wouldn't be viable. I suppose it might work differently than that, like the game companies sell the rights to Sony, and they do all of the distribution and take all of the profits from the sales themselves, but that doesn't seem like a great way to do it.

My guess is that a vast majority of the cost of each game goes towards R&D. Either way distribution isn't horribly expensive. For physical media you have to make the discs (which is cheap) and pay people to drive the discs around. With downloadable games you have to pay for servers, bandwidth and people to maintain the servers. What is very expensive is the R&D and maintenance of these games. It costs millions (~$20M is the estimate I found of producing a game in 2010) to make a game and you have to make all of that money back before you see any profits. Even if they're making 100% margin that's 400,000 games at $50/game before they make a single penny. Knock that down to $40/game and you're up to 500,000 games before they make any profit at all. They'd have to sell a half million games just to pay for the game to be made and that's assuming that servers, bandwidth, maintenance and support staff are all free, which they are not.

 

[The Hustleman]

I see what you're saying but what I'm saying is this....


New games are 60 bucks each for the full retail package and that includes paying Walmart, gamestop, best buy, play n trade, steam, or whatever retailer is selling the game. It also includes shipping, printing, making the disc, packaging and everything else.

Now fast forward to digital download from your own company (E.G. Psn Xbox live) and not third party online distributors.


You're no longer on the hook to pay the stores to sell your games since you're selling it yourself.

You no longer have to pay manufacturing costs due to no physical media.

No more paying to ship a disc

You just got rid of ALL of those fees.

You have to pay all the costs of a game EXCEPT those associated with the disc and you just cut out another middle man (the retailer).

So why shouldn't those savings be passed into the customers?

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[gollum18]

I see what you're saying but what I'm saying is this....


New games are 60 bucks each for the full retail package and that includes paying Walmart, gamestop, best buy, play n trade, steam, or whatever retailer is selling the game. It also includes shipping, printing, making the disc, packaging and everything else.

Now fast forward to digital download from your own company (E.G. Psn Xbox live) and not third party online distributors.


You're no longer on the hook to pay the stores to sell your games since you're selling it yourself.

You no longer have to pay manufacturing costs due to no physical media.

No more paying to ship a disc

You just got rid of ALL of those fees.

You have to pay all the costs of a game EXCEPT those associated with the disc and you just cut out another middle man (the retailer).

So why shouldn't those savings be passed into the customers?

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I think the word you're looking for is business. Personally I think physical copies of disc's are to expensive. I just recently heard they may be shooting the price up to 70 for retail copies.

My friend recommended game fly to me. For 22$ a month you get to take out two games at a time, and you can keep them as long as you want. On top of that, he also gets discounts on games that they are selling. He was able to get dishonored for $15 brand new, granted they dont sell all of the big name franchises but they rent out all of them. And the games are never all scratched up and unplayable like the old blockbuster days.

Sprint GS3 Running TN's Msg and Chubbs

 

[Farish]

I see what you're saying but what I'm saying is this....


New games are 60 bucks each for the full retail package and that includes paying Walmart, gamestop, best buy, play n trade, steam, or whatever retailer is selling the game. It also includes shipping, printing, making the disc, packaging and everything else.

Now fast forward to digital download from your own company (E.G. Psn Xbox live) and not third party online distributors.


You're no longer on the hook to pay the stores to sell your games since you're selling it yourself.

You no longer have to pay manufacturing costs due to no physical media.

No more paying to ship a disc

You just got rid of ALL of those fees.

You have to pay all the costs of a game EXCEPT those associated with the disc and you just cut out another middle man (the retailer).

So why shouldn't those savings be passed into the customers?

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Because the Royalty percentage is higher with regards to online distribution versus physical medium. That offsets a lot of the costs associated with this.
Remember when you buy that game for 59.99, it carries a 20 percent royalty. When you buy that same game online it carries a 30 or greater royalty. At 59.99 that royalty went from 12 dollars to 18 dollars, and your savings from physical medium and distribution costs just went away.

You also make the assumptions about retail distribution channels, that do not exist on electronic gaming items.
The companies are not paying GameStop, BestBuy, Walmart etc to put games on their shelves. If you make a display sure that might be an additional charge but slotting fees only exist in the Supermarkets.

So there is no added costs there. Also remember that Games are made by replication services so in theory you can put out a fix number of discs at release and if you have a shortage quickly get out a few million more copies.

By the way Wal Mart doesn't charge for placement of food products on their shelves. Instead they demand that they have the best retail pricing.

So basically the savings you think exists isn't that great.

Indie Developers sell games at a lower price because the cost of entry is lower. For example Microsoft will allow you to publish (it is either 5 or 10) games free as an indie developer through Xbox live. But these games also sell for much less.

Btw on new games the retailer average profit margin is 5 percent. Gamestop makes a majority of its money from use game sales which is why they had threaten not to carry the Xbox One.

 

[The Hustleman]

Because the Royalty percentage is higher with regards to online distribution versus physical medium. That offsets a lot of the costs associated with this.
Remember when you buy that game for 59.99, it carries a 20 percent royalty. When you buy that same game online it carries a 30 or greater royalty. At 59.99 that royalty went from 12 dollars to 18 dollars, and your savings from physical medium and distribution costs just went away.

You also make the assumptions about retail distribution channels, that do not exist on electronic gaming items.
The companies are not paying GameStop, BestBuy, Walmart etc to put games on their shelves. If you make a display sure that might be an additional charge but slotting fees only exist in the Supermarkets.

So there is no added costs there. Also remember that Games are made by replication services so in theory you can put out a fix number of discs at release and if you have a shortage quickly get out a few million more copies.

By the way Wal Mart doesn't charge for placement of food products on their shelves. Instead they demand that they have the best retail pricing.

So basically the savings you think exists isn't that great.

Indie Developers sell games at a lower price because the cost of entry is lower. For example Microsoft will allow you to publish (it is either 5 or 10) games free as an indie developer through Xbox live. But these games also sell for much less.

Btw on new games the retailer average profit margin is 5 percent. Gamestop makes a majority of its money from use game sales which is why they had threaten not to carry the Xbox One.

5% for the retailer?

You have a source for that?

Also I never said game makers pay companies to stock games, I simply did they have to get a portion of the money.


Still, if I don't get something tangible, i shouldn't pay as much.



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[Farish]

5% for the retailer?

You have a source for that?

Also I never said game makers pay companies to stock games, I simply did they have to get a portion of the money.


Still, if I don't get something tangible, i shouldn't pay as much.



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This article should help but it is off.

Gamasutra - News - Party's almost over for GameStop's used games business

The guy confuses Mark Up with Profit Margin.


Profit Margin Formula is Item (Price-ItemCosts)/(ItemPrice)

New Titles/ Popular titles are around 50 dollars at whole sale (20 percent mark up. Profit Margin at 10 dollars for 60 dollars is 16 percent.

Of course this is Gross Profit Margin, I was talking about net and not making that clear.

When you sell a use Game to Game Stop even the hottest items, they typically buy it between 40-60 percent of their resale value.

If you bought Call of Duty for 59.95, Gamestop will offer you between 30-35 dollars the first week and sell it for five dollars less than the current selling price at 54.95.

Friend of mine owns Kiosks for Video and Movie rentals and he buys them in cases of 20. He told me that the price would be the same if he bought 1000 or 100000 of them.

 

[garublador]

I see what you're saying but what I'm saying is this....


New games are 60 bucks each for the full retail package and that includes paying Walmart, gamestop, best buy, play n trade, steam, or whatever retailer is selling the game. It also includes shipping, printing, making the disc, packaging and everything else.

Now fast forward to digital download from your own company (E.G. Psn Xbox live) and not third party online distributors.


You're no longer on the hook to pay the stores to sell your games since you're selling it yourself.

You no longer have to pay manufacturing costs due to no physical media.

No more paying to ship a disc

You just got rid of ALL of those fees.

You have to pay all the costs of a game EXCEPT those associated with the disc and you just cut out another middle man (the retailer).

So why shouldn't those savings be passed into the customers?

Sent from my SGH-T999 using Tapatalk 2

So if constructing and operating a data center is free then you'll have no problem putting one up for my personal use.

Distributing digitally is not free. You still have to pay for software, people to maintain the software, a place to put the people who write and maintain the software, servers, a place to put the servers, people to maintain the servers, storage, a whole extra set of servers, storage, and people to maintain all that for redundancy in case something happens (e.g. power outage) and the bandwidth it takes for users to access the store and upload the game.

I think you're very much overestimating how much physical media costs to make and what sort of profit margin retailers get. There's a reason these stores don't survive as well as they once did and why the ones that do succeed sell a lot of used games. Their margin is way higher on used games than new one.

My guess is that the video game market will follow what happened in the music market. To get reasonably priced games you'll have to go online. Buying a game in a store will cost 1.2-1.5 times as much as it does online and there won't be very many of those stores around.

 

[gollum18]

This article should help but it is off.

Gamasutra - News - Party's almost over for GameStop's used games business

The guy confuses Mark Up with Profit Margin.


Profit Margin Formula is Item (Price-ItemCosts)/(ItemPrice)

New Titles/ Popular titles are around 50 dollars at whole sale (20 percent mark up. Profit Margin at 10 dollars for 60 dollars is 16 percent.

Of course this is Gross Profit Margin, I was talking about net and not making that clear.

When you sell a use Game to Game Stop even the hottest items, they typically buy it between 40-60 percent of their resale value.

If you bought Call of Duty for 59.95, Gamestop will offer you between 30-35 dollars the first week and sell it for five dollars less than the current selling price at 54.95.

Friend of mine owns Kiosks for Video and Movie rentals and he buys them in cases of 20. He told me that the price would be the same if he bought 1000 or 100000 of them.

Um the call of duty games never drop in price. Last time I checked the original black ops is still $60, with mw2 being $40.

Sprint GS3 Running TN's Msg and Chubbs

 

[Farish]

Um the call of duty games never drop in price. Last time I checked the original black ops is still $60, with mw2 being $40.

Sprint GS3 Running TN's Msg and Chubbs

Gollum I have reread my post I don't see where I talked about price dropped.



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