Why do games cost more to direct download on a console than to buy a disc? Surely direct download saves the manufacturer costs on transport, shipping, actual materials for disks and packaging, setting up deals with retailers etc…
In: Technology
So that businesses who stock their console will promote that fact and hence sell more consoles without the manufacturer spending excess on advertising
ELI5 – making a disc and getting it to the store has costs from manufacture to shipping called “overhead”. None of that goes back to the company. The profit gets eaten up by all the costs to get that disc to a store shelf. Add to that, some retail outfits will haggle a bulk discount – if they order more than X amount of units then the cost is lower. While this puts the game out there, again that eats into profits if the game has trouble selling.
You download a digital copy and pay the same amount (e.g. $65.00 US) for the game that money is all profit. The only cost would be promo codes – if anything they can give more promos because there is no overhead with digital distribution.
At this point you are paying to get the game right away, no fuss no muss.
The system designed to make the most money is not designed for less wastage etc.
It’s why we have supply chains going from Brazil to Thailand and then to USA. Not coz it’s cheaper to do so but because that’s how you make the most money.
There’s the fact that game companies are locked in to giving retailers a specific slice of their pricing. Distributors like Walmart or Steam automatically take about 30% of price. So a $60 game is gonna give up $18 to steam. Xbox takes 33% from developers. Epic takes 20%. Basically you’re still paying for the middle man to distribute the game.
20 year game industry vet here. It’s mostly because publishers and retail stores have mutual agreements with each other not to undercut.
Publishers need retail stores to sell their product. Retail stores need publishers to give them product to sell. Both of them share a cut of the profits, but both can’t afford to piss the other one off, or screw each other out of their profit per unit in pursuit of more customers.
So publishers agree not to undercut retail stores on their digital price. In exchange, retail stores agree not to undercut retail prices below a certain level. And this arrangement is why AAA game prices have stayed static at $50-70 for 30+ years even after inflation.
This is actually a huge problem for the industry. For comparison, in today’s money, Super Mario Bros would cost $153 retail. The post-inflation sale price of games has decreased by 60-70% at the same time the cost of making them has increased 100x.
It’s to keep physical disc sales competitive. We’re digital sales to reflect the lack of cost needed to print a disc and the accompanying materials, digital would vastly outsell physical.
I thought it was an agreement for shops to sell and market the products. If downloads were cheaper, shops would not stock them, and a large part of their marketing apparatus would disappear.
Seems to me you have that backwards if you’re talking about new, physical games. Digital is almost always the same price or cheaper than physical unless the store is clearing them out to make room for new titles.
This should be flaired as economics. Pricing, of anything really, is not necessarily determined by the costs, although the costs give us a minimum possible long-term price. Price is mostly determined by supply and demand. In this case the reason is “people are willing to pay that price”, and then the next step is to try to determine *why* people are willing to pay the higher price for direct download.
Because it’s much more convenient to buy and download digitally. So they know they can charge more.
I am part of the problem here for sure. If I want a game I just buy it from the playstation or nintendo online store. No chance I’d go to a store or fiddle with physical mediums.
Latest Answers