E.g. I just bought a game 85% off on Steam (for a discounted series and I own all the previous titles). Assuming the publisher makes no profit from this sale, how do they make future revenue from me?
In: Economics
A product has 3 costs
Development cost: The cost it takes to develop the product
Production cost: The cost it takes to produce the product.
Distribution costs: The cost of getting the product from the producer to the customer.
For a digital game almost the entire cost is development. And that’s a fixed cost regardless of how many copies the game sells. Production costs are near zero (whatever computing power it takes) and distribution costs are very low (whatever manpower, computing and storage it takes to get the customer to buy).
What this means is that you have infinite supply (since you have no production cost) and then you have a demand curve. That curve is related to how many people are willing to buy the game at a given price point (the higher the price, the fewer the customers). So you need to set the price at a point where Game Price x Customers = Maximum revenue. Reviews and word of mouth can influence where this point is, but that’s basically it.
So. Imagine this graphically. [Like this demand curve](https://www.thebalancemoney.com/thmb/yBdcJeJq3O8WrXGp1yjVB7QUxaY=/750×0/filters:no_upscale():max_bytes(150000):strip_icc():format(webp)/demand_curve-56a9a6613df78cf772a9395b.GIF). Game Price x Customers forms a rectangle (p0 x q0 if you look at the linked image). And that’s your original revenue. However. As long as you don’t cut into your original customers, if you later set the game at a lower price (p1)…you’re going to have a new rectangle of revenue (new customers being q0->q1 willing to buy at p1 price). As long as you don’t lose too many customers (“I’m going to wait for a sale, there will always be a sale”) that’s a new square of revenue that you’d never get otherwise.
In short, you’ve made more money than you would have otherwise made at basically no extra cost.
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