Are Digital Games Too Cheap?

Steve Anderson : End Game
Steve Anderson
The Video Store Guy
| The video game industry has gone from a mole hill to a mountain in no time flat, Chris DiMarco is your Sherpa as you endeavor to scale Mount “Everquest”

Are Digital Games Too Cheap?

It's not surprising that we see some significant differences between the price of digital games and the prices of their disc-based equivalents. But word from Tony Bartel—GameStop's president—suggests that the discrepancies between prices for digital and disc-based games may have farther-reaching consequences than anyone expected, and one of those consequences may be some significant damage to the gaming industry itself.

Bartel, while talking to investors on a conference call, revealed that consumers expect to pay just a little over half the cost for a digital game that they would pay for its disc equivalent, expecting just $35 on the price tag instead of $60. Naturally, for a company like GameStop that does most of its business on disc, the idea of customers getting digital downloads for almost half the price would probably drive most of its operation out of business, but GameStop thinks that it's not just its own operations at stake, but game developers' as well.

Bartel noted that the industry is potentially courting disaster, by making what Bartel called “the same mistake as other entertainment categories by driving the perceived value of digital goods significantly below that of a physical game.” Huge sales from places like Steam are driving some serious price degradation, Bartel noted, but it wasn't alone. Nintendo, Sony and Microsoft have all been giving away games and also offering discounts; there's a new set of games for discount every week on Microsoft, and GameStop estimates that the companies are giving away nearly $100 million in games just for this year.

It's not surprising that GameStop would have a problem with this. After all; GameStop's business is largely comprised of disc-based gaming, and that means the more discs in the system, the more available stock is on hand for the company to resell. That just makes sense. Indeed, gamers should expect lower prices with digital games because there are lower expenses; when you no longer have to pay for the disc, the disc's packaging, the prices to ship discs throughout the country—even the world!--why would you charge the same rate?

But by like token, it could be that GameStop has a point. This is particularly noticeable with books; prices have dropped thanks to the e-book market, where it's not difficult to find full novels running around the dollar price point. The move to all digital has driven down the prices, but how much of this is a matter of perceived value and how much of it a matter of reduced costs? Indeed, gamers should expect lower costs; but should those gamers expect half off? That's more a matter of perception than anything else, but here it almost sounds like sour grapes from GameStop. Digital gaming, if it ever really catches on, is going to destroy the used game market, and given how much of GameStop's market is located right there, well, it's not out of line to believe that GameStop has a vested interest in keeping the disc market alive and well.

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