Before Christmas I signed, sealed, and delivered an extensive list of presents I wanted for the big day, in order of preference. As you can probably guess, my selection of video games were at the top of the list. Then, after all the gifts were unwrapped, I tallied up my game boxes, but counted only one. I searched behind chairs and under tables, but found only dust bunnies. So there it lay, Super Mario 3D World, the one video game I had received this Christmas. A great game, don't get me wrong, but I was hoping for a little more variety to pass the rest of the holiday season. Anybody feel the same way? You give your family a mile long list of games, and instead get socks and underwear. As seems to be more common nowadays, I also received a healthy stack of various gift cards. So after things were cleaned up and I finally sat down at the computer with my two Steam gift cards, I popped on and was brought to tears. The Winter Sale was in full swing, and everywhere I looked titles were fifty, sixty, even eighty percent off. Suddenly my hopes of a lucrative gaming holiday were rekindled. A two-week deal bonanza, with about a dozen new games marked down daily, and flash sales that lasted only a few hours but offered rock-bottom prices on digital titles. Every day until the end of the sale I ritualistically checked Steam to see what the new deals were. When it finally finished I checked my Library, which had increased dramatically, and nodded my head in approval. Then I remembered my small splurge during last year's Summer Sale.
Let's put it in perspective. Back in July I purchased Fallout 3: Game of the Year Edition, the enhanced editions of both The Witcher and The Witcher 2: Assassins of Kings, and Torchlight 2, altogether costing me less than twenty bucks. Then with my forty dollars in Christmas gift cards, I picked up Anno 2070, Hammerwatch, Might & Magic: Heroes VI, Terraria, Wizardy 6, 7, and 8, Ys I & II Chronicles+, and Far Cry 3. So, for the price of one console retail title at launch, I got everything I just mentioned. Now riding high, I took my Nintendo eShop and PlayStation Store gift cards to their respective consoles, hoping for the same success. That's where my purchasing power fizzled. Now, the PlayStation Store did have a formal holiday promotion, with the menu screens all decked out with festive colors, but it only masked the small selection they offered. There were a couple notable titles, but my twenty dollar gift card would only net me one good game or a couple cheaper thrills, and that's only because I'm a PlayStation Plus member. Not a member? You'll barely break the twenty percent off mark. Nintendo's eShop was even worse. No holiday sale, just the usual weekly deals on games I already had or didn't much care for. Now, perhaps I shouldn't complain when any mark down is better than full price, but it got me wondering, how can a third-party digital distribution program offer us games for pocket change, and companies like Sony and Nintendo give us only fractional discounts, even on their first-party titles?
Well, after a little research, the answer was quite plain. Steam can sell games cheap because they have a lot of people buying them, way more than Nintendo and even Sony. It actually took Steam a few years to build a consumer base and build a profit. For first-party developers, the cost of producing retail copies and the shipping involved is high, not to mention the marketing. That's why grabbing a new title off the GameStop shelf costs sixty smackers. Steam instead, using digital rights management, has partnered directly with game publishers. Steam only takes about 30%-40% of the profit, but still, selling a hundred thousand copies of Terraria at five dollars a pop with little more than a download is easy money. To help revenues, Steam sells games from parent company Valve and keeps all the profits. Of course, it helps that there are more people in the world who own a computer with an internet connection than those who own a gaming console. And despite the continuing argument over console gaming vs. computer gaming, most PlayStation, Xbox, and Nintendo purists still have Steam accounts they keep under wraps to avoid being called a hypocrite. The big console makers are approaching a tough spot financially by still relying on physical software for profits. This medium will soon be extinct, and digital formats will be the only option. We're seeing it with books, music, and movies as well. If they don't start competing in price with the discounts Steam can offer, then all they'll have left is their first-party properties, and that's not enough to keep any of them afloat.