
Valve has just started the PC games race to zero - kayoone
http://www.gamesbrief.com/2014/03/valve-has-just-started-the-pc-games-race-to-zero/
======
jere
>There is an issue with Bertrand Competition: it excludes the impact of
marketing; it assumes that one pair of shoes is as good as another pair of
shoes; it doesn’t factor in the cost of comparison, or the cost of switching,
all of which are real.

Well that's an understatement. There's definitely a race to the bottom and it
saddens me. At the same time, games aren't commodities. Shoes is a pretty
laughable analogy.

I've been excited about some devs recently fighting against the race to the
bottom:

 _868-HACK_ \- $6 on the App Store.
[http://indiestatik.com/2013/09/11/868-hack-
sales/](http://indiestatik.com/2013/09/11/868-hack-sales/)

 _The Castle Doctrine_ \- $16. No sales ever.
[http://thecastledoctrine.net/seedBlogs.php?action=display_po...](http://thecastledoctrine.net/seedBlogs.php?action=display_post&post_id=jasonrohrer_1389812989_0&show_author=1&show_date=1)

 _Democracy 3_ \- $25 for an indie game and I think has only had one 50% sale.
[http://positech.co.uk/cliffsblog/2013/11/19/lessons-from-
lau...](http://positech.co.uk/cliffsblog/2013/11/19/lessons-from-launching-
democracy-3/)

 _Minecraft_ is a similar example (~$27) but people tend to blow that off as
not relevant to the conversation because any other game _isn 't Minecraft_.

~~~
jtfrench
>> Minecraft is a similar example (~$27) but people tend to blow that off as
not relevant to the conversation because any other game isn't Minecraft.

so true

~~~
jere
People have no sense of history. When Notch announced he was doing an
increasing pricing model, Minecraft _wasn 't Minecraft_. He had only been
working on the game for a few weeks, it wasn't popular, and it had almost no
features (e.g. no crafting). Now when someone suggests the same kind of model,
like Rohrer is doing with _The Castle Doctrine_ , gamers are outraged.

------
com2kid
To be fair, Steam has been in a race to zero for quite some time. I know
multiple people to refuse to buy games unless they are hugely (80%+)
discounted. Their new expectation of price is "cheap". This seems to be
regardless of what the regular retail price is. $60? Wait until it is $10. Oh
it is normally $10? Wait until it is $3.

Steam helps this along with its nice email reminders when a game on one's
wishlist is on sale.

That said, Valve's earlier policy of "we can put you on sale whenever we want"
was interesting. A lot of developers objected, but from what I read
(admittedly not much more than a handful of blog entries) Valve's knowledge of
how to do pricing meant that their seemingly chaotic sale methodology
(generally? always?) resulted increased revenue for games which had been put
on sale.

~~~
DrJokepu
Is it not possible that this is just market segmentation? Like, the people you
are referring to would never pay for those games otherwise. With the discount
mechanism in place Steam gets to take their money too. People who are more
flexible regarding game prices are not going to wait months for a discount and
just pay the full price.

~~~
ansible
When the price drops enough, I sometimes buy something because of the "ooh,
that's a good deal, I might play that someday".

And... sometimes I don't get around to playing those games, because something
more interesting comes along before I get around to it.

So yes, the developer isn't making as much per user, but I believe the
increased volume would often make up for it.

~~~
bentcorner
I love Steam sales but I feel pain for the developers.

The number of AAA titles in my steam library that I've barely played is pretty
high. I could go without buying any games for at least a year before I would
consider buying another one.

My time for playing games has become so small that I'm well behind the release
curve, so games that I do want to play are frequently < $15.

------
iamthepieman
The article makes an analogy with shoes but in order for it to hold developers
would have to be making identical games.

Many people wait for the next release in a series and many people buy on
release day.

If you just want to kill a couple hours then sure, any game might be good
enough for you as the consumer. But if you want to play Action Game 9: The Bad
Guys Lose then that's your only option.

The authors big mistake is in equating a commodity good like shoes with a
creative good like games. If you want to read the latest Game of Thrones, you
aren't going to say, "That's 30 bucks! I'll just buy Harry Potter."

~~~
dragonwriter
> The article makes an analogy with shoes but in order for it to hold
> developers would have to be making identical games.

Shoes aren't identical.

Competing shoes may be closer substitutes for each other than competing games
(or, maybe _not_ for popular cookie-cutter genres of games.)

------
coldtea
Race to zero? Well, games are an obsolete industry then, they should find
something else to make money instead of complaining. Why not play their games
live for an audience? Or sell game merchandize, like t-shirts.

Sarcasm off.

Yes, I'm making a sarcastic parallel to what people say about the music
industry. My real opinion is that we should structure industries such that
people who create value for us can profit from it.

I don't believe in the "invisible hand" and the market adjusting itself always
better than with policy intervention (which is cargo cult economics, not to
mention a historical impossibility, for there was never any market observed
outside of policy intervention).

I also don't believe that just because some technology exists, people should
adapt to it. I believe that people, or societies, should shapewhat technology
they use and how they use it according to their will, and not the reverse
(each new technology presented as inevitable fatalism).

~~~
sanderjd
It seems like more people are making music than ever before. Why is that the
case, if the conventional wisdom is that it is a terrible industry in which it
is impossible for musicians to make a living? Same question for free apps.

~~~
coldtea
> _It seems like more people are making music than ever before. Why is that
> the case, if the conventional wisdom is that it is a terrible industry in
> which it is impossible for musicians to make a living?_

First, "making music" and "making a living from music" is not the same.

Second, the reason is that the friction to recording and publishing is lower
than before.

~~~
sanderjd
I don't think I conflated making music and making a living from making
music...

Your "second" point seems like a good thesis to me: the amount of musical
recordings made is correlated with the ease of making musical recordings
rather than with the ease of making a living off of them. Thanks.

------
staunch
It's all Steam's own dumb fault for having no refunds, turning Steam games
into lottery tickets. My Steam library is made up of 90% junk I wasted money
on and 10% good stuff I got a fair value from. That means I have to pay less
for _every_ game just to get a fair value out of Steam as a whole. THAT is why
people want to pay $20 for games that truly are worth $60.

~~~
kevingadd
Better reviews and player feedback would help; Valve recently started showing
user reviews on game pages, which might be useful. Previously all you had was
a metacritic score (nearly useless) and the utterly meaningless 'friends who
own this game' UI, which has been broken and displaying incorrect data for
years.

Steam also has virtually zero discovery features, which makes it hard to find
games that actually fit your interests. The new tagging feature might solve
this eventually, once it stops being complete noise.

~~~
ShardPhoenix
User game reviews are pretty worthless due to the trend of angry users
spamming bad reviews to punish the developer whenever they're upset about some
small thing.

~~~
stonith
It shows how many hours the user has played, which is a very effective
mechanism for filtering reviews. It was suggested on HN that this could be
used for the mobile app stores as well and my own experience is that reading a
review and rating from someone who has provably put a lot of time into a game
is invaluable.

~~~
kevingadd
Yeah. In my opinion, Valve should be using statistics like time played and
number of achievements to try and measure player engagement so they can at
least get a rough idea of how popular a given game is (along with things like
how long an average playthrough is, whether it has replay value...)

------
vezzy-fnord
I'm not sure, but I think I do recall a rumor (from the recent Gabe Newell AMA
on Reddit) that Valve are intending on phasing out the Greenlight system in
favor of an all-inclusive model, similar to Desura.

This might just be the beginning.

I think it's a shame, because quite honestly, I've always seen Steam as a
badge of honor for game developers. To get on Steam means you have a well
polished end product ready for major distribution. Of course, with the advent
of Greenlight, crap did start getting past the radar from time to time, but
overall there was still an equilibrium maintained.

I'd hate to see Steam head the same direction as Google Play. There's plenty
of other distribution platforms to pick from if one wants to instantly submit
their games for sale.

~~~
crummy
I didn't read that as implying everyone would be publish to Steam. In the
context of related comments from Valve, I believe they're considering allowing
others to more easily use the Steam distribution system to build their own
storefronts.

This would allow third parties to create their own Steam-like stores, built on
Steam, collating games from whoever submits them - imagine Humble Bundle, or a
store that exclusively sells 3d platformers, or a publisher with a storefront
with only their own games. Valve could still pick games out of these to put
them on the official Steam store front. Plus Valve still gets a x% cut of each
sale.

------
basicallydan
Obviously, this isn't going to happen for every single game.

If you look at either the Google Play or iOS App Store you'll see that there
are plenty of well-known games in both free and PSID categories.

I myself was playing a riveting game of Kingdom Rush (a Tower Defence game)
which I paid £1.29 for. Considering how much time I spent playing Tower
Defence in WC3 as a teenager I'd say I got a real bargain to be able to play
this for only £1.29.

I am not alone in my ability and in fact desire to pay. Just look at those
charts. People still do and always will pay for games as long as this fact
continues to be true:

 _All games are not created equal._

------
abrenzel
This article is sensationalism dressed up as economic reasoning. In the
opening paragraph, the author fails to make the distinction between _profits_
trending toward zero versus _prices_ trending toward zero in a free market.
This undermines his argument even without the very real and substantial
caveats he waves away later in the piece.

Second, while the _marginal cost_ to sell one copy of a game is effectively
zero in electronic marketplaces, the _gross cost_ of making a game is never
zero, not even for indie developers, because if nothing else it costs them
their time. What we should then expect to see is a situation where, assuming a
game is successful, a game sells at some non-zero price the market will bear
until it earns its costs back, with steep discounts following. Of course, it
is more than possible the game will simply lose money.

We should expect this to be true even in a world where games are sold purely
in electronic form and those markets are flooded with free content (which is
to say, developers willing to sell their games at a loss). Come to think of
it, that's pretty much precisely what we observe in the games industry today.
Where's the beef?

~~~
JDShu
Gross cost is basically irrelevant when you are talking about pricing in a
perfect competition. The point is that producers cannot set their price
because if they set it any higher, somebody else will undercut them.

I think the correct mainstream economic interpretation is that games are
highly differentiated, meaning that no game can completely undercut another
game because they are never the same. This means that the perfect competition
model and argument do not apply and thus MC != MR in the game industry.

------
beggi
Good articles to read on this topic:

[http://stratechery.com/2013/open-source-
apps/](http://stratechery.com/2013/open-source-apps/)

[http://www.marco.org/2013/09/28/underscore-price-
dynamics](http://www.marco.org/2013/09/28/underscore-price-dynamics)

[http://tapity.com/yep-paid-apps-are-dead/](http://tapity.com/yep-paid-apps-
are-dead/)

------
JimmyM
One thing I don't think many people have realised yet is that in addition to
the cheap games and freemium model, Steam is selling other goods too, under
the guise of giving away virtual goods for free.

These goods are given away for free - trading cards, for example. However, in
order to actually trade them you have to transfer your money into Steam to buy
them from another player. That money cannot be withdrawn, it can only move
around the ecosystem and eventually get spent on games. Effectively, they have
already made the sale, it's just a matter of waiting for you to redeem the
money - or not.

I find it interesting that people are willing to pay other users real money
for these goods, when (I assume) they wouldn't be willing to pay the money
directly to VALVE - even when this is effectively the end result. It's an
extension to the freemium model in my eyes.

------
asra
I buy a lot of shoes and games and it is NOT the same thing. I go crazy when
shoes go on sale because as a woman I can never have enough shoes but I have
learnt not to spend money on games that I will never end up playing or play
for a few hours and get bored - just because they were on sale.

Games have been experimenting with pricing models for a while and subscription
based models are tricky, unless you are WOW/EVE. As a developer your cost does
not diminish once the game has been published, specially if you are doing this
as a longterm business. Pricing integrity and a model that generates revenue
through virtual and in-game economies would be a good mix, in my opinion.

------
basicallydan
Obviously, as the author alluded to at the end, this isn't going to happen for
every single game.

If you look at either the Google Play or iOS App Store you'll see that there
are plenty of well-known games in both free and PSID categories.

I myself was just playing a riveting game of Kingdom Rush (a Tower Defence
game) which I paid £1.29 for. Considering how much time I spent playing Tower
Defence in WC3 as a teenager I'd say I got a real bargain to be able to play
this for only £1.29.

I am not alone in my ability and willingness to pay. Just look at those
charts. People still do and always will pay for games as long as this fact
continues to be true:

 _All games are not created equal._

------
mahyarm
Then how about humble indie bundles with steam keys then, where you can get
game bundles for $1 and even bigger game bundles for an average of $4.50? The
price of the games end up being less than $1.

------
mbateman
But there's no limit on fixed costs for games. Presumably production could
cost as much as a Hollywood blockbuster and be priced accordingly. Marginal
costs aren't always everything.

~~~
InclinedPlane
Games are already priced _much higher_ than hollywood blockbusters. To see a
blockbuster in the theaters costs about $10 per person, to buy a AAA game on
release date costs $60 or more. And it's not as though the market is rejecting
these prices, GTA V made around a billion dollars in revenue within its first
week of release, games are already some of the biggest entertainment launches
in history.

~~~
sukuriant
GTA V is also a game that easily costs a dollar an hour for play. That's much
less than $10 for 2 hours.

When looking at the price of games, you have to remember you're normally going
to be spending much more time playing that game than you are watching a single
ticket's worth of a movie.

A similar argument could be made for physical movie media vs movie tickets.
You pay $30 for a dvd, sure; but, you and 5 of your friends can all sit down
and watch that DVD in the comfort of your home. 3 years later, you can watch
it again, and again. The cost per hour of that DVD can easily, if you're an
avid, repeat movie watcher, drop down to the same price per hour that you're
paying for a game.

On the other hand, if you're buying a modern FPS for the story only and hate
multiplayer, then you're getting about 6 hours of play for $60; and that's
about the cost of a movie.

~~~
PeterisP
Coincidentally, there are many story-based single player games that in
practice (and IMHO deliberately) are just that - consumed like movies; where
the pacing, player input, difficulty and choice-options are tweaked so that
for the things that most players will do, they in fact get a reasonable action
movie on their screen for those 6-10 hours.

------
jmgrosen
I wonder if the final, low price here will end up empowering consumers more or
instead just reduce quality. HN often laments the rise of free-to-play games
with IAP, and I wouldn't be surprised if even more of the industry tends
towards that with this change.

That said, hopefully I'm wrong, and this change will decrease prices for
consumers, increase sales and revenue for developers, and make everyone happy
:) (But that doesn't seem likely, IMO.)

~~~
Ronsenshi
> That said, hopefully I'm wrong, and this change will decrease prices for
> consumers, increase sales and revenue for developers, and make everyone
> happy :) (But that doesn't seem likely, IMO.)

I very much hope that would be the case instead of turning Steam into
something akin to App Store with thousands upon thousands of "free" games and
their cheap clones riddled with advertising, boosts and so on.

~~~
angersock
Nah, gamers deserve that hell.

------
nickstinemates
4 typos in the opening paragraphs. Credibility of author/editor/article has
been shot.

That being said, it's thought provoking.

~~~
kevingadd
I'm not even sure the premise is accurate. I'm pretty sure developers have
been setting pricing on Steam for a while; we have control over the price of
the game we're about to release.

~~~
winslow
True, the developers/publisher has always been the one to set the discount
during steam sales too.

------
reiichiroh
I bought a game last week on sale from Steam that used UPlay DRM and the CD
key was found to be "already used." Opened a ticket with Ubisoft Support after
Steam said they could do nothing for me and it took a week for Ubisoft to say
"sorry we can't get you a new key" and yet Steam is still selling it.

------
downer77
Man. I had to re-read the title of this article five times, before I
understood the intended meaning. What a terrible wording.

------
bitJericho
I would pay 20 bucks for an awesome game any day over 2 dozen f2p pieces of
garbage.

------
InclinedPlane
Hardly. Most people just have completely no understanding of the concept of
consumer surplus and the difference between per unit revenue and total
revenue. People will still pay a lot of money for games for the foreseeable
future, but they'll also sometimes pay less money for games, and the result
will be more total revenue than if there were just one fixed price.

