Gabe Newell's DICE Opening Presentation

[GullyFoyle]

This is an interesting read. Article at www.gamasutra.com

?Last weekend, we decided to do an experiment,? he says, referring to this past weekend?s Left 4 Dead sale, which brought the game down to $24.99 through Steam ? sales rose 3000 percent, and revenue far eclipsed the game?s sales during its launch window.

Meanwhile, Newell notes, retail sales did not change at all (full Steam integration allows Valve to monitor retail sales as well) ? defeating the assumption that Steam sales cannibalize retail sales.

?One thing that really annoys me is the inefficiency of pricing we have in our industry,? Newell says.

When Valve held its recent holiday sale, titles discounted by 10 percent (the minimum) they saw revenue (not unit) increases of 35 percent. At a 25 percent discount, revenue was up 245 percent.

At 50 percent off, revenue was up 320 percent, and at a 75 percent discount, revenue was up an astonishing 1470 percent. Newell stressed again that those revenue boosts represent actual revenue dollars, and not unit volumes.

 

[Slew Foot]

Id jump at heavily discounted DD titles. If youre charging the same for DD as retail, most people would go retail. The majoe drawback to DD is that you cant sell your copy when your done.

 

[frostedflakes]

When I saw they had extended the sale another day, I figured Valve must have been raking in the cash on L4D. Pretty interesting stuff.

 

[DaveSimmons]

They got $5 out of me for the X-Com pack, even though I already owned 1 and 2.

I've almost bit at some of the other sales, but I have so many unplayed games to work through I need to take a 6-month vacation from work to catch up.

 

[RallyMaster]

Lots of good points in that article.

 

[lupi]

Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

I just can't wait for the day when he finally decides to sell steam and someone like ea picks it up and then promptly dumps support for half or more of the catalog.

Originally posted by: DaveSimmons
They got $5 out of me for the X-Com pack, even though I already owned 1 and 2.

I've almost bit at some of the other sales, but I have so many unplayed games to work through I need to take a 6-month vacation from work to catch up.

Same here with my steam related buys. Even though my steam listings are probably valued at about 500 or so, what I payed is much closer to 85.

 

[BFG10K]

If Newell is so smart, why is he charging $59.95 for Fear 2?

 

[frostedflakes]

Valve doesn't set the price for other publisher's games.

 

[videogames101]

I :heart: Valve.

 

[Stuxnet]

Gabe Newell understands economics, why can't our government?

By the way, I haven't purchased a retail game in I don't know how long. Steam is the shizzle.

 

[SunnyD]

Originally posted by: Slew Foot
Id jump at heavily discounted DD titles. If youre charging the same for DD as retail, most people would go retail. The majoe drawback to DD is that you cant sell your copy when your done.

Yes, but consider - at 75% off retail you'd be paying ~$15 for a title over digital distribution. In retail you'd be paying ~$50, only to resell it later and recoup maybe 50% of your original investment at best. Being out $15 is better than being out $25 in my humble mathematical economic opinion.

 

[videogames101]

Originally posted by: SunnyD

Originally posted by: Slew Foot
Id jump at heavily discounted DD titles. If youre charging the same for DD as retail, most people would go retail. The majoe drawback to DD is that you cant sell your copy when your done.

Yes, but consider - at 75% off retail you'd be paying ~$15 for a title over digital distribution. In retail you'd be paying ~$50, only to resell it later and recoup maybe 50% of your original investment at best. Being out $15 is better than being out $25 in my humble mathematical economic opinion.

See, some of us don't like to sell our games, and would rather be able to always download perfect copies of them on any computer with an internet connection.

 

[minmaster]

L4D was grossly overpriced at $50 anyways. they're out of their mind if they think that's a reasonable price for that game.

 

[CPA]

Originally posted by: DaveSimmons
They got $5 out of me for the X-Com pack, even though I already owned 1 and 2.

I've almost bit at some of the other sales, but I have so many unplayed games to work through I need to take a 6-month vacation from work to catch up.

I did the same with the Civ IV pack. I have all of the games, but having them on Steam at such a low cost was a no-brainer.

 

[BassBomb]

If two games same price, in store and download I will buy in-store. I have a small bandwith limit each month so I can't live with downloading a game always.

If im too lazy to go to the store I will pick it up via dl (I did that for WoW after activating my trial, because I already had all the files downloaded)

 

[videogames101]

Originally posted by: minmaster
L4D was grossly overpriced at $50 anyways. they're out of their mind if they think that's a reasonable price for that game.

Obviously not, because it sold better than most video games released today.

 

[Kabob]

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

 

[Lonyo]

Retail isn't dead, retail is cheaper.
Also not everyone has the internet/has the bandwidth required to download products from the internet.
When will people learn that just because products are available via download doesn't mean everyone can or wants to download them? There will be a market for retail boxed products for as long as there are people who want to game who don't have the internet/don't have super fast internet.

?One thing that really annoys me is the inefficiency of pricing we have in our industry,? Newell says.

That bit made me laugh so much.
I bought L4D through pre-order, from amazon.co.uk, for £20. The Steam price (full) is £27 (and it was more I think even for pre0order through Steam due to prices being in USD at that time), and discounted price at the weekend was £13.50.
Gabe talks about inefficient pricing, while being entirely guilty of it himself with his own products, not to mention that (in the UK) most Steam games are plenty more expensive than I can get them elsewhere.

I mean, I hate to go back to the devil (as someone has already implied in this thread), but EA launched Red Alert 3 as a full price title not too long ago, and they have already dropped it to $30 (on Steam).
If anyone is the king of efficient pricing, IMO it's EA. They know how to price products (keep the ones which will always sell high, drop the poor sellers quickly etc). Just look at $30 for Crysis: Warhead, $50 Spore (released Sept) vs $40 NFS: U (Nov) and $30 RA3 (Oct). The time since release isn't dictating pricing, sales of the game most likely are.

 

[SMOGZINN]

Originally posted by: kabob983

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

I have felt for a while now that the video game industry has not kept up with change in their market. Video games are still priced for maximum single sale profit when they should be priced for market saturation instead. The video games are no longer a niche market, it is now mainstream and needs to change its pricing strategy to account for that.

 

[zerocool84]

Originally posted by: videogames101

Originally posted by: SunnyD

Originally posted by: Slew Foot
Id jump at heavily discounted DD titles. If youre charging the same for DD as retail, most people would go retail. The majoe drawback to DD is that you cant sell your copy when your done.

Yes, but consider - at 75% off retail you'd be paying ~$15 for a title over digital distribution. In retail you'd be paying ~$50, only to resell it later and recoup maybe 50% of your original investment at best. Being out $15 is better than being out $25 in my humble mathematical economic opinion.

See, some of us don't like to sell our games, and would rather be able to always download perfect copies of them on any computer with an internet connection.

Yea not all of us resale games. I don't and I am happy with Steam but it is a valid complaint but that's why there is retail for those that do.

 

[Kabob]

Originally posted by: SMOGZINN

Originally posted by: kabob983

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

I have felt for a while now that the video game industry has not kept up with change in their market. Video games are still priced for maximum single sale profit when they should be priced for market saturation instead. The video games are no longer a niche market, it is now mainstream and needs to change its pricing strategy to account for that.

Speaking of market saturation, this same concept could be used to end (almost instantly) the "console wars." This is purely hypothetical, but lets say that instead of going Blu-Ray that Sony had instead decided to go full DD at a 25% discount for game titles. You've now got the ability to buy a 360 and spend $60 for a copy of Call of Duty vs. downloading the full game for $45. I know there'd still be a smaller market for the 360 and those who want the retail disc, but PS3's would have flown off of shelves like hot cakes (despite the higher initial price) and they'd be outselling the 360 2:1 or 3:1 like it was nothing.

I know all 3 consoles have the ability to download arcade games and such, but they're never blockbuster titles and they're no cheaper than getting the disc (especially the Xbox classic games for the 360, 99% of the time you'd find the game cheaper used at a retailer). If one of them bellied up and tried this, even though we're not a 100% internet ready society, they'd be selling consoles/titles faster than they could imagine.

 

[abaez]

Originally posted by: kabob983

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

They didn't forego profit margins, they made more money with the mass increase in sales at a lower price than they did with the higher price and lower sales.

 

[lupi]

Originally posted by: SMOGZINN

Originally posted by: kabob983

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

I have felt for a while now that the video game industry has not kept up with change in their market. Video games are still priced for maximum single sale profit when they should be priced for market saturation instead. The video games are no longer a niche market, it is now mainstream and needs to change its pricing strategy to account for that.

I'd say that pretty much sums up the situation to a nice point.

Imagine if unless of saying OMG it's costing XXXXX to make this, let's squeeze every penny out of each sale, how about cut the price in half and you'd probably sale more than twice the amount. Not to mention, that could also see a reduction in that nice piracy stuff.

 

[TantrumusMaximus]

Originally posted by: SMOGZINN

Originally posted by: kabob983

Originally posted by: lupi
Listening to gabe talk about digital sales is like being at an emporium where peta is discussion our emergence into the dawn of a no meat intake diet.

As true as that statement is, his numbers support what he's been saying for years, although I'm amazed by how much sheer revenue increases they saw with those discounts. Forego profit margins in favor of sheer volume and wow...

I'm very much a "wait to get it used so I'm not shelling out $60" kind of gamer and a "I love having the disc" gamer/DVD buyer, but I too would happily forego that to get games at a more reasonible price, even if over DD.

I have felt for a while now that the video game industry has not kept up with change in their market. Video games are still priced for maximum single sale profit when they should be priced for market saturation instead. The video games are no longer a niche market, it is now mainstream and needs to change its pricing strategy to account for that.

Nail on the head sir, good comment. It is very common now for homes to have more than one system. My wife games, I game, soon my kids will game.... am I going to buy games at $49 each so we can legitimately LAN play? F NO! At $15 I wouldn't have a problem.

 

[lupi]

The worse thing about these d/l services, and even steam suffers from this, is that you are only renting the title. It is up to the company to keep function so you can maintain access to the title you "bought".

Above that you have the price point; why isn't the d/l cheaper when no physical components must be produced.

And the third, which I truely love, is when you have a service that offers the d/l at the "standard" price, and then sells the physical copy for an even higher one.