That pricing analysis is fascinating, and hopefully encouraging for businesses like Stardock. I guess it was only a matter of time before commodity software caught up with commodity hardware. My first internal hard drive was just 10 megs and cost a couple-few hundred bucks, IIRC. I still work with the guy who helped me put together that old box, and he just bought a 500 gig drive for about $60, which would have been about $30 in 1985 purchasing power.

I only pay full price for PC games if I really want to support the developers.

Otherwise the industry gives me no reason to pay more than $10 for a game.

If I wait a few years, I can buy a fully-patched deluxe version for a fraction of the cost. I pay less and get a superior product.

These days, PC games cannot be resold (Impulse, Steamworks). If they don't work, I can't return or exchange them. Both of these factors decrease the value of the game. Why pay $50 for a 6-hour game like Mirror's Edge when I can rent a console version for a few bucks? Steam and Impulse should both have rental features, but that's another story...

Digital distribution also puts dozens and dozens of old games at my fingertips, each for less than $10. For $50, I can buy one new game or 5-7 old games from GOG or wherever.

The last new game I bought was The Orange Box, but I've spent around ~$200 on PC games since then.

So I'm spending less money per game, but more money on PC games overall. All of that $200 went to Steam and Impulse, btw.

So bandwidth, office space, and employee paychecks are not fixed costs?

Sorry, I mucked up the link on a previous edit.  Should be fixed now.

I don't know if you're allowed to say this, but can we get an estimate of how much more?

I tend to prefer buying DD, as I think it supports the industry more.  I pretty much won't by a PC game in a store anymore, and that would only change if I had internet caps forced on me.

Yea I was talking about that with my friend.  It's be an interesting experiment (of course, something with the costs of a AAA title would be one helluva expensive experiment!) to see what profitability would look like if a AAA title sold for $20 instead of $50.  I'm curious as to where the perfect price point is.

Would a game company be shooting themselves in the foot for releasing an AAA title for $20 out the gates?  With all the hype, there are going to be a LOT of people willing to shell out $50, so why sell for $20?  On the flip side, Valve saying they made 15% more profit at $20 long after release than they did on release day... so who knows??

All I know is that if more games were $20, I'd buy a lot more games.  $20 is nothing to me psychologically.  When we start talking $40 or $50, I start really picking and choosing what titles I buy, and I pass up those that I don't feel will have much in the way of longevity.

A perfect example was Supreme Commander: Forged Alliance.  I actually played SupCom back in the day, but I was plagued with constant crash issues and it prevented me from really getting into the game.  SupCom had a very negative connotation in my mind, so when Forged Alliance came out I completely skipped it.

However, when Forged Alliance was on Impulse for $19.99, not only did I buy the expansion but several of my friends did as well, despite my previous negative review of the game.  I took the plunge because i had heard from some people that FA was much better, and for $19.99, why not?  For my friends, dropping $19.99 in order to try a game out was trivial.  If the game sucked, they were out the cost of going to a movie, no big deal.  Turns out we really got into SupCom, and now it's a regular on the LAN party.  That right there was probably almost $100 in sales they would have never seen at higher price points.  But it doesn't just end there, with positive experiences with both Sins (Ironclad/Stardock) and SupCom (GPG / Stardock), we got interested in Demigod and all ended up pre-ordering the game.

Digital distribution adds more flexibility to pricing.  I hope, even if it's just for the sake of my own curiosity, someone is able to experiment with game prices on bigger name titles in the future.

Woot! I love articles like this. It's nice to see that companies (at least one anyways) are trying to understand the customer. We're not the enemy. We should be encouraged to buy the product and we certainly don't wish to be viewed as potential criminals. Companies, like EA, tend to side with DRM technology and it always turns out the same: The pirates wind up being happier than the customer. The pirates avoid the DRM and spend nothing, while the customer has to live with DRM and occassionaly confront it, all after spending fifty dollars.

Of course, it's a little funny that Steam still hasn't dropped their prices in light of this recent information.

First off we'll assume a $50 base orice for a game, that seems fair enough. Now we multiply the base price by one minus the discount to find the on salesale price. We multiply that by one plus the sales increase to find the gross in Dollars (Euros, Yin, whatever currency we're using). We can then devide the gross in dollars by the base cost to find out how much more we're grossing.

Here's a nice poorly done chart.

Hmn, something isn't right here. He says they make 15% more at a 75% discount, yet they gross 367.5% as much. It seems they're only netting $3.91 out of the $12.50 price. Perhaps there is a $8.59 overhead? Perhaps they aren't making pure profit on every sale?

Or maybe I just can't do math or they're lieing about how much more they make.

Goodgimp,

That's what I was saying in response to Alfonse saying it was pure profit. I was trying to show that the math and what Gabe Newel said did not add up unless they had overhead that was eating their profits. I didn't say what would be eating into the profit, but what I said pretty much agrees with you about it not being pure profit.

So basically, I agree with you.

I believe this is the only way to fight piracy. If you pirate a game you download it from a torrent. Brick and mortar stores will never be able to compete with the convienience or the price. Digital download however can. You purchase the game and future updates all from the same site. Plus with piracy you have no idea what you're loading onto your PC. The problem now is that's true with buying a retail game. You've no idea what other crap is being loaded onto your system to "protect" the publishers profits. The gaming industry needs to change with the times and they're going about it all wrong with their DRM, limited activation BS.

It's no great surprise that when you drop the price through the floor people flock to buy something.  On the other hand the Steam system of being able to 'gift' people spare copies of your games; plus selling things like Left 4 Dead in a 4 pack is a nifty idea.

That final one is perhaps something Stardock should look at doing... I mean you sell a multiplayer game like Sins... why can't I buy two, three, four copies of it all at once and punt them to different people.