It has been a while since my first attempt at blogging here on Destructoid but here I am trying it again, this time on a very different matter and that is the price you pay for your PC games or rather the lack of difference between different places.
Lets start with looking at how much money a publisher gets for a game sold retail versus a game sold on steam. I think most people kind of figured out that steam is cheaper for the publisher but lets see how much cheaper it actually is. Because I live in the Netherlands I am first going to look at the Dutch prising and I am going to put all prices standardized in Euro's for convenience.
Firstly the steam prices in here are pretty much the same as the rated prices of games sold retail which is around 50 per game or 49.99 if you want to be more precise. Now steam generally has a fee for the publisher of around 30% per game sold. When you buy a game on steam you will still pay the vat for it which is 21% same as retail, you will also have fees for payment providers however if you where to buy retail taxes and payment costs would also be there (handling cash is not cheap) so I will just ignore those two as they should be pretty much the same for every purchasing method.
On to the retail, I know that generally the cheapest way of getting physical copies is via webshops the cheapest webshop is generally 25% cheaper including shipping then the rated price so you would generally get the games for 37.50 I am taking the average price of one of the cheapest shops for new games and not the cheapest shop for every individual game as that could have given a twisted image. Now I can assume they have around a 10% margin of the rated price on their games to cover all their costs including shipping which is not very expensive by mail. So this would amount to around 35% margin per copy however that is not all as manufacturing and distributing the game is also not free and is estimated to cost around 3 per copy(I found that amount or rather 4$ quite a few times on different places)
Comparing the two you will get the following figure, a game sold Retail would get the publisher 35 where a game sold retail would give the publisher 29.50 this may look like a reasonable difference but if you where to actually balance the two so the games would cost the same you would be looking at a 4 increase on the retail price and a 4 decrease on the steam price which really is not a lot. It would be even less of a difference when you where to look at the US situation as the market there is a bit difference as there are a few big players which have to deal with very strict price deals with the publishers on bigger games. This means they have a margin of around 25% (source: on live presentation on gdc 2010)
which is significantly less then the margin in the Netherlands. This would make the money the publisher gets for his game almost identical to that of steam (34.50) now it is in dollars so the fixed cost for manufacturing and distributing would be $4 instead which would on a $50 game make the difference a tiny bit bigger but lets ignore that for now.
I think this actually shows that the difference between the two for a publisher are actually not that big and really charging the same for both on that matter is not as fucked up as people including me may have thought. This is however not the whole story, as steam is not the only digital distributor and actually the 30% percent they charge is actually quite a lot.
Looking outside of steam there are quite a number of digital distributors on pc many of which may be charging lower margins then steam however the price you pay for a new game would still be the same. GreenManGaming is the best example here they don't really have lower margins then Steam however what they do is offer a practically permanent 20% off coupon on almost all of the games they sell. This means they are actually having a 10% margin but are hiding it behind coupon codes. Now if they would have just given a straight up margin of 10% publishers would just have made it so the full 50 is paid for a game which would give them around 45 for every game sold.
I think Steam would also still make a profit with such margins considering the insane profits they are making now, and its also not like they are having a lot of costly deals on their games or at least not really more then GMG Following this Reddit
they appear equally well on the deal department
Worse still are the publishers themselves in their own stores like Origin and Uplay, I have no doubt that selling games through those is significantly cheaper then selling them through steam or retail, Origin doesn't have to turn a profit and a lot of games activate on origin already so I doubt that selling a game on origin would cost EA much. Yet they quite often even ask more then the rated price. Like selling it in a place which is cheaper for them to sell in is a premium.
Now naturally I would say the prices are there so the publisher gets maximum profit and that may be true however I don't think it is smarter on the long run because it creates some serious issues. First of all Steam can fairly relaxed charge 30% on their games because they don't have to fear from other distirbutors even if they would charge a 10% margin the publisher would still have to sell it on steam to please their customers or origin for whatever it is worth, selling it to some more obscure store only would not really work. Now what if the obscure store would be a lot cheaper? If the publisher would just ask a fair price for the game sold there the smaller distributor selling at a margin of 10% would grow in following and while I doubt it would overtake steam anytime soon it would still sell a reasonable amount of games.
Now remember this if games are cheaper people will buy more games so when games are cheaper like on a store that only holds a margin of 10% it could very well mean more sales for the publisher which gives them more profits so in that sense it is beneficial. Now imagine the cheaper store coming out with a service that is quite on par with the Steam and Desura now that would mean there is fairly little hold for Steam to hold its 30% margins on the longer run, practically forcing them to get cheaper. In the end it would mean cheaper games for the consumers and more profits for the publishers which is something I think everyone would like.
Now even the 10% could be improved upon, who knows maybe when the prices are charged fairly who knows maybe a service starts working with peer to peer downloading of games which would lower hosting costs significantly and maybe they would give the user back credits for seeding. Such a store could only grow if publishers price compared to what money they get for selling a game rather then looking the price a gamer pays.
Some notes in the end:
1: I want to say again I ignored taxes and transaction costs because they only confuse things and apply to both retail and digital distribution.
2: I used Euro's even for the Gamestop stuff but that is just to simplify things, I could have gone with dollars but that would not have added much and would only had me make the text bigger.
3: This is mainly for pc games and while it can be used for consoles as well the situation is different there as there are not multiple digital distributors, For handheld games the production costs for the physical copies would be significantly higher also.
4: I am talking about publishers here but the same also applies to independent developers however they do not have the freedom to distribute retail without huge costs, the same applies to publishers that don't have the means to do retail themselves.
5: please consider the margins of retail very rough estimates with lots of stuff cut out as making it perfect would overcomplicate things needlessly and would have been almost impossible to figure out.