Some incredible numbers came out of the mouth of Valve co-founder Gabe Newell last night regarding those lovely Steam weekend sales that I spend way too much money on. What he shared could mean a lot for how we buy games in the future. In other words, how digital distribution will make gamer makers rich and gamers richer.
His key example was last weekend’s 50% discount on Left 4 Dead. I was apparently not the only human who bought the game at that price point—Newell revealed that sales of the game rose 3000 percent, bringing in more dollars for the game through the service than at any point in the game’s history—including launch. And it didn’t cannibalize retail, either.
Another unnamed game that was recently offered in a Steam sale saw its sales numbers jump 36000%. That’s a lot of percent! Has Valve stumbled on some kind of magical spell where everyone makes more money by charging less?
Well, sort of. These numbers have made me realize that the Steam sale is actually a brilliant new mutation to the digital distribution model, and one that can’t be imitated by brick-and-mortar retailers. Let’s create a hypothetical situation where Steam is offering Team Fortress 2 for five dollars in a weekend sale. If a store like Best Buy tried this, the only thing that would happen would be what is referred to as The FatWallet Effect—resellers would swoop in like vultures, buy everything, and post the games on Ebay at list price.
On Steam, it probably went more like this:
1. Revenues shot up as people who didn’t even know what TF2 was spent money they would never have otherwise spent on TF2, because it was cheap enough just to see what it was. People are pleased with Steam because Steam gave them a deal. Everyone makes more money.
2. More people know what TF2 is. Likely they understand its charms, so they love it and tell their friends how great it is. As a result yet more people know what TF2 is, and maybe some of them even buy more TF2. The community around the game grows, making the game itself more enjoyable. Everyone makes more money.
3. Team Fortress 3 comes out. Now lots of people know what Team Fortress is, and more people than ever love it. Sales of TF3 are higher than they would have been without that one TF2 weekend that happened, oh, four or five years ago (again, hypothetical situation). Everyone makes more money.
It’s a seemingly endless knock-on effect where everyone wins, and the fact that not everyone is doing something similar tells you just how young digital distribution is: nobody understands its unique advantages yet. But Valve’s pricing experiments are working out great, and signs point to them becoming increasingly aggressive. Which means we’ll all have more money to spend on more games.
Related Links:
Why Do Gamers Care So Much about Sales Charts?
Video Games: Bigger, But Still Not Bigger Than Movies
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