The biggest promise of the new generation of consoles – the one that was truly “next-gen” – has nothing to do with increased power or integrated social connectivity or new control methods. No, it has nothing to do with console hardware or operating systems or extra buttons and touch screens and second-screen integration at all. It has to do with content distribution.
Namely, digital distribution.
The promise of next-generation was that digital distribution would become available to all, ushering in a brand new age of instant gaming for rock bottom prices. Hell, Microsoft even gambled their future on the ubiquity of digital distribution, announcing at the reveal of the Xbox One that digital distribution would replace traditional disk-based media. This garnered a hell of a lot of consumer backlash (and rightly so – there should be a focus on expanding and adding options, rather than enforcing a new status quo that is out of reach for many at this point in time), resulting in an abrupt reversal of policies and a messaging mess on a scale that has not been seen since, well, the Sega Saturn. But it wasn’t just Microsoft – Sony threw its hat into the digital distribution ring by enhancing its PSN storefront and requiring a PS+ subscription for basic online functionality. This “incentivises” the shift to online purchasing through making it more visible, more necessary, and creating consumer investment in the online infrastructure.
I was skeptical that the move to digital distribution would happen, and that it would mean cheaper games for all. And so far? I’m right.
New games on platform specific digital distribution storefronts are priced at exactly the same as retail. And that’s fair enough, since digital distribution has extra overheads like physical media, shipping, printing, design costs… oh wait.
So what’s going wrong? Why are digital prices on proprietary platforms so high? Why aren’t we seeing our cheap and available price utopia we were hoping would happen?
By my reckoning, there are three main reasons.
One, the Xbox Live Marketplace and the Sony PSN Store are monopolies. They are the one and only portal through which you must go to get digital content. As such, they can set their prices at any point and be secure in the knowledge that if customers want a product delivered digitally, they must go through that proprietary store front. And even worse, these stores are controlled by the platform owners themselves. A total and complete monopoly. Sure, Amazon has recently started selling digital keys for games, and select online stores have the option of selling digital keys rather than a traditional disk (like ozgameshop.com), but these services are in their infancy, and the key redemption process still has to go through the proprietary platform store, making the monopoly unavoidable. In contrast, PC digital distribution has options. Sure, Steam is by far and away the most dominant – mainly due to its fantastically competitive pricing, regular sales, and feature-rich executable – but it’s not the only option. Humble, Desura, Green Man Gaming, even Origin, uPlay, and whatever Squeenix’s is called – all offer alternatives to Steam. Competition between distribution services breeds competitive pricing, and the first party Xbox Live and PSN stores do not (and probably will never) have competition.
Two, publishers control the price of their products. Publishers ultimately set the price of their games for digital distribution. This is across all platforms – PSN, Xbox Live, and PC platforms. This is where things get tricky – publishers are greedy. Well, that’s not fair. Publishers are after the highest return on their expenditure. Actually, it is fair – publishers are greedy. And while they have control of the price of their product, which is completely reasonable, and a number of distribution channels to juggle, then they will do their very best to achieve price parity across formats. Remember when a new game cost $50? And then MW2 came out at $60 and prices for all new games went up to $60? Because Activision proved that a game at $60 would sell gazillions, everyone else decided to do that too, and it became the norm. And remember when a game at retail would cost $50 on launch but $40 on Steam? And now Steam and retail are at parity, even though Steam has zero physical production and distribution overheads? Publishers pushed for this, because they saw that consumers would consume regardless. The market dictated that a new game would cost $60 across all platforms and distribution methods and the market bore that price.
Three, brick and mortar stores have huge market power. No matter how ubiquitous digital game distribution becomes, there will always be one unassailable fact – you cannot deliver console hardware digitally. Brick and mortar stores, such as GameStop and EB and Game and K-Mart and Walmart, will always be necessary (well, until consoles can be 3D printed). And as such, console manufacturers will always have to keep physical retail stores on side. The simple fact is, if you offer games instantly, more conveniently, and $10 cheaper through digital distribution, that eats into the retail store’s bottom line. And, when you eliminate the ability or necessity to resell games – either through disabling licence transference like Microsoft were going to do, or adding a share or resell digitally option, like Steam and Microsoft are talking about implementing – then you further undermine the viability of retail, which profits hugely from reselling games. Eventually, if brick and mortar stores get too grumpy, then they might just forget to stock some consoles, or not advertise them, or mark the price up. And that would be a devastating blow for console manufacturers. It’s not just speculation on my part, either – Sony has even released a statement that they want to keep brick and mortar stores on side, specifically during the console launch window. We’ve already seen what happens when physical stores exert pressure on publishers to achieve price parity with Steam, which is no longer the pricing powerhouse it used to be. Brick and mortar stores are petrified of losing profit to digital platforms, and console manufacturers and publishers are terrified of losing physical outlet options.
This, of course, is focused on the US. US prices for digital distribution on PSN and Xbox Live are at the same price as retail. There is no conceivable justification for digitally distributed goods to cost the same as a physical copy, at all. Period. Pricing digital at the same as retail is unforgivable, and needs to stop.
Of course, this is mostly only to do with US stores. UK/EU/Australian prices are extra outrageously high. Digital pricing is ABOVE retail. Why? Who knows. All I definitely know is that it definitely, definitely is not “price gauging” or “collusion”, because that would be illegal and immoral and retailers or publishers or tech companies would definitely, definitely never engage in that kind of deplorable behaviour.
We can only hope that digital distribution options can eventually reach the point where everyone can get a game for cheap. Paying less for more convenience is the promise of digital distribution, and I hope that it will one day be fulfilled.