Wednesday, December 23, 2009

Fire Sales In Digital Distribution

Right now there's a huge sale going on at Steam, with many games (including AI War) being on large discount. In a recent comment thread over at Rock, Paper Shotgun, some people were wondering how these sorts of sales affect the profits made by indie developers. I commented there, but thought I'd also turn this into a blog post.

Like Jonathan Blow, I can also confirm that the percentage cut is the same with these sorts of deals, with Steam and elsewhere. Digital distributors take a percentage of net profits, so discounts are taken off before that. So, in the case of Steam, that would meant that then the developer/publisher would make less on discounted sales, but so does Steam. However, the loss on any individual sale is generally greatly offset by the huge influx of sales in general that these sort of discounts bring.

With any digital distributor, having a sale on a given game is going to increase its sales volume 10x or more in my experience with AI War. Sometimes as much as 50x, depending on the day. For AI War, one of these sales can make us several month's worth of income from a distributor in a single week. That's why you see this sort of thing so commonly, and why it is becoming even more commonplace. I think that these sorts of sales tend to incite people to buy who might otherwise not, so it's not even really seeming to cut into longer-term sales at all. On the contrary, on the wake of any given sale, I tend to see a ripple effect of higher sales volume even for a week or so after the game returns to full price.

I assume that's people trying the demo while it's on sale, then not buying it in time, then deciding they like it well enough to buy it at full price. Or something along those lines, anyway -- those discounts are essentially marketing costs, is one way you could look at it, given the increase in visibility these sorts of sales bring.

Anyway, in my opinion there's no reason you should feel guilty at all for partaking of buying a game on discount, you're still helping the developer/publisher. If you really want the max money to go to them, you can always wait and buy it at full price, I guess, but I'm always happy to see new customers no matter when they buy it; if I wasn't cool with the discounted price, I wouldn't sell it at that discount, you know?


Anonymous said...

"...on the wake of any given sale, I tend to see a ripple effect of higher sales volume even for a week or so..."

My guess would be the Steam effect - You buy the game on sale, play it loads because it rocks, and your buddies get a notification every time you load it. They ask you how good it is and if they should buy it.

After I got AI war on steam during a sale, 3 of my friends paid full price for the game. I see this happen all the time.

Christopher M. Park said...

The "Steam effect" is, I'm sure, quite a factor. But, even on other platforms without a social component, the same long tail is generally seen after a sale. I've always found that odd, but perhaps that's partly just the "co-op effect" which is identical to the Steam effect when people enjoy a game that they might want to play with friends. Either way, I'm just happy to see the effect!