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[scitek]

The way my brain works: "Margins over 2x physical? So you're saying digital games should be less than $30."

 

[JeffG]

The way my brain works: "Margins over 2x physical? So you're saying digital games should be less than $30."

Its the new math

 

[Vanillalite]

They certainly are now because the music industry has seen such a drastic shift, but things were much closer 10 years ago. In 2005, the industry did about $12 billion in sales in the US.



I'm just eyeballing this chart, but it's at about roughly $12.5 billion over the past year here in the US from August 2014 to August 2015.



Using this comparison, it actually would be a very ripe time to see a transition to digital.

Again the music industry shares what with the gaming industry again? Why are we even comparing the two when the situations are totally different?

Let's compare apples to actually apples.

 

[wachie]

can't touch the 90% digital ratio for halo 5 tho!!!

This joke is old now.

 

[Meier]

Again the music industry shares what with the gaming industry again? Why are we even comparing the two when the situations are totally different?

Let's compare apples to actually apples.

Well, firstly, you should probably offer a little mea culpa but it doesn't appear that's forthcoming.

Secondly, the comparison was initially solely brought up to answer the question that was posed by someone. But beyond that, it is the a scenario where the medium transitioned to digitally sold goods primarily largely due to the fact that digital goods were made notably cheaper than the physical goods. At the time of the transition, it was an even greater difference ($17.99 or thereabouts was the typical MSRP of a CD). Retailers just had to grin and bear it and then over time they accepted that there was less of a market for them. It's sad to see how tiny the CD area is at Best Buy nowadays. Gets smaller every year.

 

[DarkTom]

Digital copy margins are over x2 the margins of a physical copy.

Then why is it so much expensive ? I still buy a lot at retail because it's usually cheaper. If they want people to go digital they need to lower the prices.

 

[Vanillalite]

Well, firstly, you should probably offer a little mea culpa but it doesn't appear that's forthcoming.

Secondly, the comparison was initially solely brought up to answer the question that was posed by someone. But beyond that, it is the a scenario where the medium transitioned to digitally sold goods primarily largely due to the fact that digital goods were made notably cheaper than the physical goods. At the time of the transition, it was an even greater difference ($17.99 or thereabouts was the typical MSRP of a CD). Retailers just had to grin and bear it and then over time they accepted that there was less of a market for them. It's sad to see how tiny the CD area is at Best Buy nowadays. Gets smaller every year.

Again one guy asked about regulations, and I said in my first reply to him it wasn't about regulations. Go check the receipts. Every other response wasn't about that. It's on you if you choose to ignore that though. Maybe you just chose to not read.

Secondly none of that applies to the games market as they aren't the same thing. You could compare music to movies cause it's mass market media that isn't hardware locked to one specific device.

 

[Percy]

Where'd the other 70% go?

 

[Beautiful Ninja]

Then why is it so much expensive ? I still buy a lot at retail because it's usually cheaper. If they want people to go digital they need to lower the prices.

If publishers started undercutting retailers by 50%, the retailers will refuse to give them retail space. Then you have to hope that consumers will buy your products digitally, instead of just ignoring them. Retail space is important for marketing, not having your stuff in Gamestop is going to cause you to lose significant mindshare.

 

[GhostTrick]

Then why is it so much expensive ? I still buy a lot at retail because it's usually cheaper. If they want people to go digital they need to lower the prices.

Because retailers would be pissed off. That's why. The problem is, when digital will be the main source of game sales, prices will remain the same because of people getting used to it.

 

[tattooed_dwarf]

can't touch the 90% digital ratio for halo 5 tho!!!

GAF really needs new jokes, this is so overused it's starting to tuen against itself.

 

[Lionel Richie]

As soon as you guys stop buying physical games it will happen.

Lol yeah sure thing man, instead of having competition between different retailers let's just center the distribution of the whole catalog in a system to a single distributor. That should make the prices go down.

 

[ethomaz]

DAT 90% digital.

I don't understand that because all my friends bought digital.

lol

Being serious of course digital is a small part yet most guys that says anecdotal like these are people that are extreme focused on internet to even pass most of the time posting on a niche gaming forum.

The normal gamers that didn't follow news or post on gaming forums buy retail... most didn't even know how to setup PS Store or Live Store to buy things.

 

[goonergaz]

If publishers started undercutting retailers by 50%, the retailers will refuse to give them retail space. Then you have to hope that consumers will buy your products digitally, instead of just ignoring them. Retail space is important for marketing, not having your stuff in Gamestop is going to cause you to lose significant mindshare.

no-one is suggesting 50% and online is already substantially cheaper than shops yet they co-exist fine

 

[ethomaz]

This joke is old now.

GAF really needs new jokes, this is so overused it's starting to tuen against itself.

So why when you enter in any sales thread some guys still says their friends buy all digital? The joke is old but a lot of GAFer still says digital is huge on Xbone without any evidence about that.

Maybe it is easy to spin over digital then accept the low sales of a game.

 

[Trup1aya]

In this situation, that's exactly what it means. In terms of monetary value, it's literally worth nothing as soon as you buy it. The physical one drops maybe 10% if you sell it close to launch. I bought BlopsIII for £40, then sold it for £35. If I'd bought it digitally I'd have lost £40 and been stuck with it.

So so so false.

Again, you assume everyone equally values the ability to resell their products

Secondly, you ignore the fact that people primarily buy games to use them, not to resell them. The primary value is in the enjoyment you get out of the game; which doesn't change based on how it's distributed.

If reselling a game is if secondary importance to you, that's fine. But there are people who value the convienience of digital.

Sure your digital item has no monetary value. But that's the only way people perceive value.

Edit: for what's it's worth, I bought COD:AW for $60 digitally. Hated it and requested a refund. I got $60 back. Probably would have gotten $55 max if I tried to sell it at the time , minus the hassle of finding someone to sell that shit to.

 

[Cynar]

Don't sell them at same price then if margins are that much better.

seriously this. But EA is all about fucking consumers so makes sense. Just don't buy their games

 

[Plague Doctor]

So can we just agree that 20% is the working average (for right now) and move on even if the majority of your friends are digital download junkies?

 

[Trup1aya]

As someone who works in Product Design, that's incorrect. Manufacture & Distribution form a very important part of any design process at every level and therefore influence the price heavily from the off.
But we're getting off topic - My point is simple: A physical copy of a game/music/movie costs more to get to market than a digital copy. Ergo, to a 'knowledgable' consumer (ie enthusiasts, most of us) it does not represent good value to have them both available at a similar price point - because we know full well (see the OP of this very topic) that the margin on DD is much bigger than Physical given their current price ranges. HOWEVER; all of this is null and void if the majority of consumers are either willing to gloss over that or are not invested enough to consider it, and continue to buy DD at a pace (which is what has happened). So as far as Johnny Publisher is concerned, the average consumer now values DD at this price point.

Doesn't make the average consumer correct though

Again, when determining optimal pricing, manufacturing and distribution costs do not have an effect on the upper limits of pricing. They effect the lower limits. Unless of course volume sales are deemed to be more important than margins, which obviously isn't the case here.

Either way, in an entertainment product, distribution method is going to have a minimal effect on whether or not a customer enjoys consuming the product. The primary determination of value is going to be how entertaining the product is, not how much it costs to distribute .

I don't think average consumers are glossing over anything. They just don't think production costs override how much they demand the product. People know Michael Jordan shoes don't cost much (if any more) to make than Walmart shoes. But they REALLY want MJ shoes...

 

[BibiMaghoo]

Not sure you should be boasting about the double margins on digital copies, given the price difference, although with sharing it still works in my favour.

 

[leeh]

leeh, are you ok?

I'm wonderful thanks, just on holiday, sipping shorts by the waterfront.

Just seen the numbers for Fallout 4 as well, PC really dominates digital.

I want split numbers for release week.

If the margins are higher, drop the price for digital and move people away from physical, allowing for more revenue due to lower trade ins.

 

[Y2Kev]

LEEEEEEEEEEEEEEEH!!!

I love your post.

 

[Trup1aya]

I'm wonderful thanks, just on holiday, sipping shorts by the waterfront.

Just seen the numbers for Fallout 4 as well, PC really dominates digital.

I want split numbers for release week.

If the margins are higher, drop the price for digital and move people away from physical, allowing for more revenue due to lower trade ins.

You think the revenue made reducing trade-ins would offset the revenue lost intentionally reducing profit margins?

Doubtful

 

[Willy Wanka]

I'll be in the 60%, a month down the line, at half price.

 

[AnotherDayAnotherDollar]

I guess this means that, right now, it's fair to account for ~20% of sales for games once we get leaked numbers in NPD and UK numbers.

If we get to ~40% digital by the end of this generation (~4 years as he alluded to), then the "but digital sales" talk when a game bombs or under performs at retail will be very much valid.

 

[maabus1999]

They won't be able to really lower digital prices until publishers go "digital only" since the retailers wouldn't accept the publisher undercutting their possible sales.

There is a reason that steam sales get those huge discounts and that is because of the huge margins they currently enjoy.

 

[leeh]

LEEEEEEEEEEEEEEEH!!!

I love your post.

Hey

I'm worried that I'm not sure what's made me happier, a sunny break in November, or an admins excitement of my presence in a thread.

You think the revenue made reducing trade-ins would offset the revenue lost intentionally reducing profit margins?

Doubtful

Is there any numbers on the quantity of trade ins? If the price is lowered and they still kept 20% more or so margin, then people would flock to digital. I think it would be a good move personally.

I'd love to carry on, but I'm leaving a free WiFi zone chaps.

Last edit: I suppose PC is a prime example of what I'm referring to.

 

[BokehKing]

GAF really needs new jokes, this is so overused it's starting to tuen against itself.

It's less than a month old though
And the excuse has been used in countless sales threads
Until people stop saying silly things like "but the digital"
People will keep making comments like that

 

[Trup1aya]

Hey

I'm worried that I'm not sure what's made me happier, a sunny break in November, or an admins excitement of my presence in a thread.

Is there any numbers on the quantity of trade ins? If the price is lowered and they still kept 20% more or so margin, then people would flock to digital. I think it would be a good move personally.

I'd love to carry on, but I'm leaving a free WiFi zone chaps.

People flocking to digital due to lower prices, would just push retailers to lower their prices AND the price they'd be willing to pay wholesale (they want their margins too). It would put downward pressure on prices in general, thus devaluing IP altogether. I don't see how increasing the volume of digital sales would offset that reality, if the margins are shrunk significantly.

 

[BokehKing]

Speaking of Digital


I would love more big names coming out digital only
I want people put into that position where they have to stop being stubborn and hanging onto old tech

I want a digital only console that's not a PC become a reality

 

[Psymatiq]

For me digital prices are cheaper but ofc i cant sell the game back. Yet that is enough for me to be 100% digital. I got around 125 games so far on my XB1. No more hassle with game discs and having stupid boxes all over the place.

 

[Elandyll]

The way my brain works: "Margins over 2x physical? So you're saying digital games should be less than $30."

But then their execs would have to live a life of semi-luxury and not have a blu-ray player in the bathroom of their privet jets.

Surely you can't be that inconsiderate, right?

 

[AndyD]

With the dlc and microtransactions model most games are employing this is likely to happen to some extent.

Yep. If game sales start faltering, it will be the first thing to happen. 10-20% off on digital to get you hooked.

 

[dr_rus]

The way my brain works: "Margins over 2x physical? So you're saying digital games should be less than $30."

Well, there are plenty of digital games which are less than $30.

 

[CrimsonCrescendo]

And this is why they push Origin so hard and why so many companies would love their own digital distribution platform. Higher margins, fewer consumer rights, lower production costs due to lack of physical distribution. And no, don't expect lower prices in the near future.

 

[Zee-Row]

I only buy digital if the games are $20 or less. I have no desire to pay $60 for a digital game i'm renting.

 

[Synth]

Good to know prices are 2x too high

That's not how margins (or math) work.

And here I was thinking good business meant reducing costs! Silly me!

You appear to be confusing reducing costs with reducing price. One a company would love to fall to zero, the other they'd want to keep as high as the customer is willing to pay.

 

[viHuGi]

And this is why they push Origin so hard and why so many companies would love their own digital distribution platform. Higher margins, fewer consumer rights, lower production costs due to lack of physical distribution. And no, don't expect lower prices in the near future.

Speaking about Origin, how is it doing?

 

[icespide]

since I moved to the bay area earlier this year, I've got a much smaller place so I've gone completely digital. no need to store a bunch of physical junk.

I also really enjoy preloading and unlocking at 9pm

 

[mrklaw]

20% right from a horse's mouth. But wow at the margin expansion. Extra content sales show how publishers are really monetizing core users. Pretty smart and maybe cynical. I'm not sure.

I could use the increased margin as a catalyst to complain at how expensive digital games are.

However i'mgoingto take a different tack. The large increase in margin, combined with the anticipated growth in digital from 20% to 40%, should offset the pressures to increase prices. Games have been $60 for years while costs have gone up. Accepting higher margins from digital games is arguably a reasonable compromise. Effectively if/when physical finally dies off, new games will be the equivalent to $120 if you purely consider the margins for the publisher.

 

[Synth]

Edit: nvm actually, lol

 

[mckmas8808]

Speaking of Digital


I would love more big names coming out digital only
I want people put into that position where they have to stop being stubborn and hanging onto old tech

I want a digital only console that's not a PC become a reality

Most consumers don't want a digital only option. Why are you shoving your current way of playing games down our throats? Why can't you let us choose?

 

[Conduit]

Dude it's passed 15m shipped by now. Should also be past 15m sold through by now.

Dude, MS doesn't have good sold-trough/sold-in ratio with Xbone like Sony with PS4. Outside US/UK Xbone is selling like.....hm... ( shit isn't appropriate word ).

 

[ethomaz]

Speaking of Digital


I would love more big names coming out digital only
I want people put into that position where they have to stop being stubborn and hanging onto old tech

I want a digital only console that's not a PC become a reality

It is the same tech lol not new or old.
Retail and digital games are the same... the difference you can install faster than download the game if you choose retail.
Most people don't want a digital only console... it is a dumb idea to be fair... give us choices and not limitations.

Retail will be always a good choice over digital only.

I call a bullshit way how they do on PC... a DVD only with the Steam installation to download the game... nobody wants this shit.

#TeamFullGameOnPCDiscs

 

[ethomaz]

Dude it's passed 15m shipped by now. Should also be past 15m sold through by now.

It is a possible scenario but nobody knows.
It can be far way 15m sold yet like 13m or even less.

 

[outunderthestars]

Another way of phrasing this is to say: If consumers are dumb (read: passive) enough to keep buying something, keep selling it. It's business. Publishers don't owe consumers anything whether we like to create that illusion or not. 'Fairness' is a word you likely won't find in many consumer electronics business models.

It will always feel icky though. The only way it would ever have changed is if consumers (read: general consumers) were informed enough to realise they were paying over the odds. Too late now though



Of course it is. But we are in the informed minority.The vast, vast majority of consumers aren't armed with that level of knowledge though.

Jesus, could be more condescending towards people who buy games digitally? I'm really sick of the "people who support digital downloads are stupid" bullshit that people spout in every single thread about digital sales.

I make enough money that I simply don't give a shit about reselling a game. I buy most things digitally because I don't have to deal with physical media cluttering up my home, having to change discs when I sit down to play a game, and better potential for future compatibility. I am not "dumb" or uninformed. I simply find value in what digital downloads provide.

 

[Miles X]

seems about right with XB1 at 13, wouldn't that mean 10 million more for the rest of the year?
which mostly would come from PS4.

XB1 was around 13m earlier in the year, it's probably closer to 15m now, but it's all guesswork anyway. XB1 should be around 20m end of the year and PS4 36m, so they're way out.

 

[Aceofspades]

The way my brain works: "Margins over 2x physical? So you're saying digital games should be less than $30."

Nope, physical should be $120 XD

 

[ethomaz]

XB1 was around 13m earlier in the year, it's probably closer to 15m now, but it's all guesswork anyway. XB1 should be around 20m end of the year and PS4 36m, so they're way out.

Source? There is no evidence Xbone was at 13m early this year.
The last hint was near 10m in late November last year... I really doubt it sold 3m in December alone lol

It is possible it didn't even crossed 13m yet.

 

[Miles X]

Source? There is no evidence Xbone was at 13m early this year.
The last hint was near 10m in late November last year... I really doubt it sold 3m in December alone lol

Guesswork, and plenty of people earlier this year worked out estimates based on shipments.