CriticKitten said:
MysticSlayer said:
1. Retailers will complain if they charge less for digital than they do for physical due to it being supposedly "unfair".
Tough.
It costs more to produce a physical copy than a digital one, so the price being higher is only natural. Retailers would really have no leg to stand on in this debate, and it would force them to start operating in more modern distribution methods instead of sitting comfortably on the brick-and-mortar method as the only "valid" way of getting games.
While I certainly think isn't entirely unfair, I do sort of semi-sympathize with them. In the current model, it would be very hard for companies like GameStop and Best Buy to actually get into the digital distribution market, in large part because, for the most part, they'd only act as a middle-man between the customer and whatever other distribution system is actually in control of the product. It isn't impossible by any means, and we even have systems in place now to help the two work together (ex. Steam Cards at GameStop, which still leaves GameStop as a mostly unnecessary middleman, but oh well...), but it is something to consider.
Again, though, I think that, on the whole, it is a weak argument from retailers, as they would do better to find a way to fit in with the system rather than simply declare it unfair and without even trying.
Actually they totally do "go away". You don't have to pay a fee for the creation of a box, box art, transportation, etc if the box doesn't exist.
If this is your attempt to argue that the money spent on boxes would instead go towards the creation of distribution servers and networks, I have news for you: the server costs are a hell of a lot smaller in the long run, which is why so many companies are able to self-distribute their own games now. Used to be that Valve's Steam was pretty much the only guy on the block because it wasn't all that affordable to make your own digital distribution center, but nowadays it's actually not all that high of a cost, and many companies are starting to take those costs onto themselves so that they don't have to pay Valve to do it for them.
My comment was based around the fact that, even though you have gotten rid of one set of fees it doesn't mean that that is now money you no longer have to spend. What may have gone to fee for the physical copies may go to fees associated with having your game on system. Unfortunately, no one actually releases this data. I mean, it makes sense that digital distribution would cost less, but at the same time, I think gamers look at the lower costs and automatically assume that all of them go away when you go digital. They don't, the funds are just transferred elsewhere. Still, it would be nice if companies were to actually release some data to indicate the real difference between the two.
Actually, customers are far more likely to wait and buy a game on discount after several months. There are a few exceptions, certainly (usually the biggest named games will be Day One buys regardless), but most of the time, your largest customer base is not Day One buyers. It's people who buy the game at a later date, and they're more likely to do so under a discounted price.
For example: Black Ops 2 sold 7.5 million copies on Day One, which is amazing. But now that you look at their sales figures, they're up to over 24 million. Meaning that most of their purchasers were folks who bought the game after Day One, not before. And the odds are pretty good that most of them did it under some manner of sale somewhere (for example, some copies on Amazon sell for under 40 bucks now). It's exceedingly common for this to happen even to the biggest of games these days.
That's a pretty bad example. For starters, Black Ops 2 still costs $60 at a lot of places, Steam included. Second, you are comparing day one sales to the number of sales that occurred over the next 300+ days. Of course BO2 is going to sell a lot more during that time period. Price cuts and sales have nothing to do with that.
But, speaking in a more universal sense, it is a common (and smart) business practice to start your sales off at a higher price point and lower it as time goes on. That way you will get the people willing to purchase the product at the full price (i.e. $60) while still eventually getting purchases from people not willing to pay $60 right away. This is not just in the video game market, though. We see it pretty much everywhere from electronics to appliances to furniture. It's just one way businesses maximize their profits. Are they aware that price cut or sale could help increase revenue through an increase of purchases for a time? Yes, but they'd also be foolish to not take advantage of the fact that some people are still willing to pay the extra money on a day one purchase.
In other words, look at it this way: You have 100 people willing to pay for a product at $10, but 25 of those people are willing to pay $15 and ten of those people are willing to go all the way up to $20. You know that, eventually, you're going to get all 100 people or nearly all 100 people, but you also want to maximize the amount of money you make. In that case, you'd start at $20 and wait for sales from the 10 people that will pay at that price, then lower it to $15 for the 15 extra people, and then lower it to $10 for the remaining 75 (I'm horribly oversimplifying this, by the way). In the end, you get $1175 instead of just $1000, allowing you to earn almost $200 more from that method than just selling it at $10 so you quickly get all 100 sales.
In other words, you are basically guaranteed the sales in time, but different people are willing to pay at a different price. You would be foolish not to charge those willing to pay more extra, as you essentially lose sales in the long run. This method has been so successful in the past that businesses pretty much all accept it at this point, and economists aren't about to argue against it.
Now, translating that back to the lower costs of the digital distribution over physical copies, you are even further maximizing sales in this case. You still get the people willing to pay at $60, but it costs you, say, $5 less to make that copy available to them. That's an extra $5 for you that only gets compounded by the potentially thousands to millions of sales, and the consumer, again, hasn't been cheated, as they got the product at a price they were willing to pay for and which was no more expensive than what they would get from a physical copy anyways.
And since the costs on digital copies are much smaller, they'd be encouraging more purchases via their digital marketplace if they offered the game at a lower price range right from the start, which in turn would yield more profit.
Sorry, but consumers are hardly concerned about how much it cost the producer. They're only concerned about how much they have to pay, so this comment doesn't make much sense.
Also, nowadays there's a lot more attraction to the so-called "Valve" model, that of selling their games at discounts as often as possible under a limited time span. This encourages far more impulse purchases from potential customers and works much better than keeping a steady price, and is actually possible to do across the board in a digital model (whereas it's not possible to do with separate brick-and-mortar retailers, who can set their own prices). Guild Wars 2 has made a killing in this regard by offering sales on their digital copies on a semi-regular basis, which has no doubt sparked a lot of impulse purchases.
I'm not arguing against the Valve model of running plenty of sales. I'm saying that we shouldn't expect to see price decreases from digital distribution just because companies are saving money on reducing physical copy fees. The Valve model makes sense from a business standpoint and is backed up by plenty of data. Lowering your price just because it costs less when plenty of people are still willing to pay $60 doesn't make a whole lot of sense.
The only issue you really run into is if people aren't willing to pay $60 for your product. In the case of Ghosts, that isn't a concern Activision needs to have. Other companies would do well to start considering price cuts because not enough people will pay $60 for the game to justify starting at $60, but Activision, at least when dealing with Call of Duty, is the last company that needs to concern themselves with whether or not they can sell their game at $60.
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