Can Steam Sales Hurt Developers?

The recent talk on the Bombcast of Super Meat Boy selling more in the first week on Steam then on Xbox Live got me thinking about whether or not Steam Sales actually help or hurt developers. Now, I love Steam Sales as much as the next guy, and on one hand, the sales allow the game to gather more exposure then selling at its regular price. The game is also purchased by more players then it potentially would have been without a sale.

On the Other hand, the consumer may wait for a sale resulting in a lower overall number of sales upon a game’s release, which the publisher looks at when making decisions on the business end. For example, I have yet to purchase Rayman: Origins, despite hearing how great of a game it is from many journalists, because I have been waiting for the price to drop from $30 to about $10 - $15. Luckily, the game sold well enough that Ubisoft gave a green light to a sequel. The potential for a Steam Sale could have hurt the developer if others had been as frugal as I am and the game didn’t sell well due to consumers waiting for a good sale.

What are your thoughts on this?

No i don't think it does hurt the developers. Don't they make a deal with Steam? or maybe not. Either way instead of making a profit. instead of getting a profit of 100x 30 they'llget a profit of 200x 15. which are both 3000. The 100 and 200 being customers and the the 15 and 30 being the price of the game.

The consensus seems to be that the notion of Steam sales hurting devs is bullshit. PC Gamer recently had a pretty good interview with Valve's business director on the subject. Here's my favorite quote:

EA, however, don’t love Steam sales. Just a few weeks ago their senior vice president made his opinion clear, claiming that they “cheapen” intellectual property. A few days ago the Origin Summer Sale kicked off anyway.

I think the people who wait for sales are the people who would wait and buy it much later after launch. You will always have people who are willing to buy a game day 1, full price given that it's a game that deserves that.

Developers are only getting the people who would normally buy a game used or too frugal to buy it otherwise and getting a nice resurgence of interest in an aged title. Win-win.

No, as long as there is good publicity and the game itself is good then it doesn't matter.

I've not enough money to buy so many things, thanks to sales and discounts I've discovered and become fan of amazing games such as Mount and Blade Warband and The Witcher, games I would otherwise probably never touch because the price is too high and the value I'm getting unknown.
 
More demos are needed in my opinion, if the press can play all those builds, they should allow the consumers as well, I mean, we're the ones you have to convince, not the press!

@TaliciaDragonsong: I feel that when you follow the opinion of press that you trust, for example the Giant Bomb guys, their word that a game is good or bad is enough to convince me to purchase it. Sometimes demos can't articulate the best parts of a game as well as press can.

I think alot of people would not even consider buying the game if it was not on sale.

So all in all Steam sales are great for everyone! Eff EA.

the publishers/devs usually have a say in whether they want their games to have a discount. It's not like steam randomly picks a game and says here's a discount.

i'll also add this quote from the VP from Xseed games on how he feels about steam promotions.

"Rather than looking at it as a 'lost sale' when people wait for these Steam discounts, I think it needs to be viewed as reaching out to a new customer that never would have purchased your game otherwise."

First of all developers have to agree to the sale, its not like they are being forced to. And games usually go on sale because either sales have dried up or the game flopped, so its a way to get as much money as possible for what is usually a somewhat older game. Money that can be used to fund a new game.

And that EA quote is from one dude - EA discounts their games when sales slow down just like everyone (see BF3, SWTOR, etc).

@ManotheBard said:

The recent talk on the Bombcast of Super Meat Boy selling more in the first week on Steam then on Xbox Live got me thinking about whether or not Steam Sales actually help or hurt developers. Now, I love Steam Sales as much as the next guy, and on one hand, the sales allow the game to gather more exposure then selling at its regular price. The game is also purchased by more players then it potentially would have been without a sale.

On the Other hand, the consumer may wait for a sale resulting in a lower overall number of sales upon a game’s release, which the publisher looks at when making decisions on the business end. For example, I have yet to purchase Rayman: Origins, despite hearing how great of a game it is from many journalists, because I have been waiting for the price to drop from $30 to about $10 - $15. Luckily, the game sold well enough that Ubisoft gave a green light to a sequel. The potential for a Steam Sale could have hurt the developer if others had been as frugal as I am and the game didn’t sell well due to consumers waiting for a good sale.

What are your thoughts on this?

No more than coupons hurt grocery stores.

I think dropping the price so soon may eventually hurt initial full price sales. Lately, I find myself waiting a few weeks for a huge discount sale price on games I would normally buy as soon as they come out at full price. I paid full price for Max Payne 3 (PC) and then barely a month later it's 50% off? That kind of a kick the balls. If it was 3-5 months later, I would have been fine with that. On the other hand there are a bunch of games I bought cheap that I would have never bought otherwise.

Not really. It's not like they're giving games away dirt cheap during the launch window - I imagine sales have pretty much dried up by the time you see them being given away for next to nothing. They're going for the impulse purchase from people that don't particularly want the game, but they'll buy it if it's only a couple bucks because whatever. It's a second injection of cash they wouldn't otherwise get.  

You could argue that it's training people who would otherwise pay more for games to just wait for sales, but I don't really buy that. I don't think enough people actually make good on that to offset what is gained later from the impulse purchase crowd. 
 
Take Rayman for example: I think once that gets cheap enough (a few bucks) it will be the sort of thing that everybody will pick up, but most of those people wouldn't consider it at $15-$20 no matter how long it stays at that price. Not saying the game deserves that, I just think that's how it is. Some games have a very broad appeal, but not a particularly intense appeal, if you know what I mean.

The amount of games I have bought in the sale and either regretted buying or would never have bought anyway is a number far greater than it should be. Steam sales do not hurt the developers.

Also keep in mind that a lot of the 'x% off!' shit on Steam is just marketing spin. I've seen plenty of cases where 50% off the Steam price more or less just brings their price in line with the regular price at other places.

@Jimbo said:

Also keep in mind that a lot of the 'x% off!' shit on Steam is just marketing spin. I've seen plenty of cases where 50% off the Steam price more or less just brings their price in line with the regular price at other places.

Or when a publisher pack is '85%' off, when really it's 85% off the price they just doubled the pack to.

I can't count how many games I've bought off Steam that I wouldn't have if not for the sale, so if getting my money that way hurts the developer then it's probably less painful than not getting paid at all.

@ManotheBard: I think they actually help the devs more than they hurt them - sure they won't get as much as they would if they just left the prices at regular full price, but the sales give them the publicity/incentive for customers to dive in! I'm sure many of us have said to ourselves at one point or another, "If only this were a few 10-20 bucks or so less... I'd give it a shot"

It's not like they have to pay extra to actually manufacture disks and such to sell them - bandwidth and licensing maybe, but that's stuff that's manageable these days.

There will always be people who buy on the first day. You dont have to worry. The numbers might drop, but im sure Ubisoft isnt looking at only first month sale numbers.

Every sale is good publicity. The more people buy the game, the more people will buy the game in the future. If a group of my friends bought a game while it was on-sale and were all talking about it, I'd probably pony up the cash to buy it at full price.

Also, I'm pretty sure that developers have to approve the sale price: I've never seen any games put out by the stauncher publishers (Square-Enix, EA, etc.) with a discount of more than 30% or so.

after the initial release the amount of people going out to buy a game at full price drops a lot as those that may still want to get it usually wait till it gets cheaper. the steam sale and with how cheap some thing get not only gets those people that wait, but those that have never had any intentions on buying the game in the first place. i know i've bought stuff during the sale that i had no intention on whether it was because of a pack deal or just because it was cheap enough to give it a shot. that's money that the developer would have never received, and even though it's not as much as before it can't hurt.

It can't hurt. Mainly because sales are a downward slopping graph from its initial release. So usually, when a game goes on sale for 1/10 the price (which is pretty rare), they might actually get X100 or X1000 what their normal sales would be. So, in the end it actually works out that they make more money.

When people are saying that they don't think something like Arkham City is worth 10 dollars nine months after it came out, I'd say there's a problem.

I spend more money on games since the advent of steam sales, so it's really a win win. Sure I spend less per unit, but overall they're getting much more from me, in addition to getting money from me for games I would otherwise NEVER buy.

@ManotheBard said:

What are your thoughts on this?

I wish I could remember the economic term for it, but Steam is just following some basic economic philosophy. You let the product sell at the initial asking price for as long as you can until sales slow enough to justify dropping the price, then you reduce the asking price thus opening up the product to a new group of consumers who were unwilling to invest at the previous price. The results that you attain from this can vary pretty widely depending on the elasticity of demand from the target demographic, which is further complicated when you are dealing with multiple demographics. The idea behind elasticity of demand is that an "inelastic demand" stems from a good being essential to living, so people are willing to pay whatever for it because they need it. An "elastic demand" is usually present with things like our good old video games that are non-essential to living (although I know some of you may choose to argue otherwise) so it leaves the consumer with more power to be discerning as to what price they pay for the good. This excerpt does a pretty good job of illustrating how lowering prices like Steam does can increase revenue.

Elasticity of demand and total revenue for a producer
The relationship between price elasticity of demand and a firm’s total revenue is a very important one. The diagrams below show demand curves with different price elasticity and the effect of a change in the market price.

When demand is inelastic – a rise in price leads to a rise in total revenue – for example a 20% rise in price might cause demand to contract by only 5% (Ped = -0.25)
When demand is elastic – a fall in price leads to a rise in total revenue - for example a 10% fall in price might cause demand to expand by only 25% (Ped = +2.5)
The table below gives a simple example of the relationships between market prices; quantity demanded and total revenue for a supplier. As price falls, the total revenue initially increases, in our example the maximum revenue occurs at a price of £12 per unit when 520 units are sold giving total revenue of £6240.

Price	Quantity	Total Revenue	Marginal Revenue
£ per unit	Units	£s	£s
20	200	4000
18	280	5040	13
16	360	5760	9
14	440	6160	5
12	520	6240	1
10	600	6000	-3
8	680	5440	-7
6	760	4560	-11

Consider the price elasticity of demand of a price change from £20 per unit to £18 per unit. The % change in demand is 40% following a 10% change in price – giving an elasticity of demand of -4 (i.e. highly elastic). In this situation when demand is price elastic, a fall in price leads to higher total consumer spending / producer revenue

There are too many unknowns before we can know for sure, the biggest one being the developer/publisher cut of Steam revenues.

EA has a valid argument in that the perceived value of something can be greatly affected if you do deep and consistent discounting. On the other hand, Steam exists completely in the PC ecosphere, and we will never see something like Steam's game service on a traditional console where the majority of gaming revenue still comes.

I bought Orcs Must Die for $2.49 on Steam the other day. If it were full price I would not have bothered. Doing the math, two and a half bucks is better than nothing so, no, Steam is not hurting developers.

If I don't think a game is worth x amount of money, I won't ever buy it at that price.

If a game I don't think is worth x amount of money comes closer to a price I can swallow during a Steam sale, I'll buy it.

When I buy it, if I like it, I just might buy the next game full price. If I don't like it, then I've saved myself the money I would have spent getting it full price and they still get some of my money.

Getting the game out there into more hands is probably infinitely more important than the money they might be losing.

I'm pretty sure it does hurts developers in the long run. It's fantastic for consumers now, but long run? We'll see if it ends up reducing quality and choice. As another poster alluded it depends on elastic game demand really is.

1- It devalues the perceived value of their products

2- It trains consumers to wait for sales.

3- There is no physical product to get rid of for the publisher, so they don't really have pressure to try to recoup their printing costs and may actually hurt their chances of moving already printed physical copies of other versions of the titles.

The pluses of course is that it allows consumers to buy more games than they otherwise would (and perhaps actually end up spending more on games), which allow smaller companies more of a chance to get word of mouth out on their titles. Which means this is more of a problem for EA than say Zeboyd. It's entirely possible for the super small companies to really benefit from them.

The assumption the devs make is that they are getting enough new customers who will purchase something else and thus make up what they are losing by heavy discounting. I don't know if that's true.

To me if buy Saints Row 2 for say twenty bucks and I like it ok, am I now going to go out and buy Saints Row the Third for $60? I doubt it unless I really really like it. I'm more likely to wait until Saints Row the Third is that cheap. Exposure is only beneficial to devs if it leads to profitable sales.

For the game company they pretty much only cash in if they turn me from a sale customer into a new release buyer. If I don't then they probably never make money off me. And I would wager that's what usually happens with Steam Sale customers.

So at a time when production costs keep rising, consumers are now more price conscious and price anchored than ever. Bad mix for developers. Great for Steam, great for consumers though. So I don't complain.

There's some research out there that the Steam posted about the analytics of reduced pricing.

I think they said something like "We have seen time and time again that doping the price of a game by 75% increases sales by nearly %700+).

The main reason it works so well is that it's all digital. You couldn't drop the price as well retail due to the supply chain still costing you the same.

I buy a tonne of games I'm not that interested in or would never have bought otherwise. I think you would have heard stories by now if devs didn't like Steam sales, instead of constant praise from the indie scene.

Also, don't confuse publishers with developers. Publishers will never be happy as long as Steam is king of what their trying to achieve.

Like others already said, I also buy a ton more games on sales, including games that wouldn't even be close to my radar. When the asking price is rational for the product they're selling, so also does it warrant you buying it. My thoughts are that if developers want more sales and want to make more money they should lower the asking price substantially to begin with. Some prices are just ridiculus - I mean this might be a bad example because of the "pull" this title has and because it's EA, but look at something like Sims 3. Released 3 years ago, selling for $55? That's what, $5 from full price and it doesn't even contain one single bit of DLC out of the billions of things they've released for that game post launch? I mean come on now, it's not like you're sending the games off to factories or have to pay-by-bulk to have them printed, you're on a digital platform.

I don't think it hurts developers too much, because if people really wanted the game in the first place then they would gladly pay full price for it. If it was something they're mildly interested in but won't want to pay full price, then they potentially lost a customer (like with me and the DS Pokemon games). By having a cheap price, they will attract those who were mildly interested, those who want a cheap bargain and people who probably never heard of the game.

When a developer complains about a Steam Sale then I'll start to wonder. But sales make money and get a lot of developers a wad of cash that they wouldn't have gotten otherwise because people are in a spending mood.

I can't really imagine that Steam sales hurt developers. Developers want to get exposure for their games so that you will become a repeat customer. Sure, it's better for developers when people pay full price on Day 1 because it takes pressure off them when they are trying to meet whatever financial goals have been set by a publisher to determine whether the developer will get to make another game for them or whether the shop will be shut down. On the other hand, a lot of the people who pick games up during the sale might not have bought it had it not been deeply discounted. If the game impresses them, maybe they will become a Day 1 purchaser for the next game.

The only way I see a developer being hurt by the Steam sales is if the developer's game is released right around the time of a sale. If a game is released in the month before the sale, the people who aren't the types to run and get it day 1 may wait it out to see how far the price may drop during the sale. If a game is released during the sale, it may get lost in the shuffle because everyone is too busy buying looking for deals so a full price game isn't going to get the same initial sales rush it would get if released at any other point during the year. Lastly, a game released right after the Steam sale may suffer because many potential buyers ended up spending more than they intended during the sale so the budget is tight to non-existent for a period of time after the sale.

The gamer waiting on the sale may have had no intent on buying it otherwise. This is the case with most of the sale items I buy. It's not that I'm not interested, I just don't have the money or time. At a certain dollar amount, my inhibitions show a little give. I'm "sale drunk."

I say, take what you can get. I don't care how much a game costs to develop VS how it sells. All I know is that games are too expensive to buy even a fraction of the number of titles released.

@Slag: If it was so bad for developers, you'd see them complain about Steam Sales. Not only they don't, but generally they are also eager to participate in them. So, yeah, if you go by EA's interests, sure: Steam sales are hurtful. But for the whole rest of the industry, they are great.

@Slag: I would contest that. As I posited before in this thread, the Steam sales are basically playing the same role as coupons would in retail outlet. Price discrimination is employed in numerous industries to some extent or another. The only difference is that people are having to wait for an unknown period of time for the product to go on sale for an unknown discount. Let those who are able and willing to pay for the game at full price do so and get it immediately, and those who don't have that level of interest or simply don't have that much cash on hand pay with time instead.

In addition, the notion that this change would be industry wide is impractical as far as theories go. You need to handle these things on a game by game basis. Highly anticipated games are going to be received differently from less publicized or anticipated games. For instance, it is likely that everyone who was ever going to buy Portal 2 at full price did so either before or immediately after the game's release. As a result, after a week or so Valve could be confident that there was likely very few people out there who would be still willing to buy the game at full price, as almost everyone who would had already done so. So—and correct me if I am misremembering this—they put it on sale for something in the ballpark of a 75% off only a month or two after release, and suddenly got the purchases of an entirely different segment of the population that (for whatever reason) didn't see the game as worth a buying at full price.

Is it possible that there is some element of the first group of customers that were "trained" by past sales to wait until the game was discounted for that price? Probably. But what should then be concluded is that these customers should never have been classified as part of the first group anyway. Obviously, they're more comfortable paying less for their games and making up the difference in waiting, and that's totally fine. It just means that they were a square peg in a round hole all along, and Steam gives them the ability to purchase games at a pace more comfortable for them. Imagining that the entire audience for videogames is going to undergo this shift is preposterous; there's always going to be those individuals who want your game as soon as its available, Call of Duty and other multiplayer-centric games thrive off of such fanbases, and AAA games by their nature are always going to have have sizable full-price-purchase audience so long as they continue to be popular.

Furthermore, you can't discount that there's going to be those customers who didn't initially value your game at full price but, having played it, then value your next game at full price. I bought Torchlight for $5, and I've already preordered Torchlight 2 at full price; I didn't play Bastion until I was actually given it, but you may be confident I'll be preordering Supergiant Games' next effort at the earliest opportunity. This is why Steam sales can be good for independent developers: while the giant companies are concerned it may be eroding their first-day purchase audience, it's actually helping indies get exposure and build up such an audience.

@Ravenlight said:

The consensus seems to be that the notion of Steam sales hurting devs is bullshit. PC Gamer recently had a pretty good interview with Valve's business director on the subject. Here's my favorite quote:

EA, however, don’t love Steam sales. Just a few weeks ago their senior vice president made his opinion clear, claiming that they “cheapen” intellectual property. A few days ago the Origin Summer Sale kicked off anyway.

Saw the topic headline, and instantly thought of that article, so thanks for posting it.

I always wanted to try that Day Z mod for Arma 2 but would never have bought the game at full price. During the sale a friend of mine came on and said "Hey, that game that plays the Day Z mod is on sale. Let try it!" So we both bought a copy of the game because it was on sale. That's two sales the developer of a year or two old game would never have made if it was not for that sale and for modding. I'm sure there were millions of other people with similar stores for many other games that all happen due to these sales.

Sadly we live in a world where publishers only care about the first few weeks of a games sales and not the long run. If they did look at the long run of a game then more games would support modding as a game developing a strong mod community that supports the game past release is best way to keep it relevant. Every time someone makes some big huge total conversion mod for a game and it goes on sale they will see a spike in sales. Here's hoping they stop being so short sighted.

 Can Steam sales hurt developers? No, and it would be very silly to think so when there are articles such as this out there:
 
http://www.rockpapershotgun.com/2010/08/23/how-a-steam-promotion-saved-introversion/

Steam is not the only company who has digital distribution sales.

GOG. GMG. Amazon. Origin.

@bemusedchunk said:

Steam is not the only company who has digital distribution sales.

GOG. GMG. Amazon. Origin.

I don't think the scale and scope of the sales carried out by those stores are comparable to Steam's, though.

The only time when people have not been able to wait and get a deal on a game is when:

1. That game was only produced in a limited run of physical goods, meaning it would also be incapable of making a large return due to the limited nature of the production and linked promotion spend (something digital distribution has fixed, there are infinite unsold copies that cost nothing to make available to consumers at all times).
2. There is a large body of narrative or gameplay critical DLC to complete the purchase that is never reduced in price or offered in a 'GotY' complete box, making any 'deal' only a partial sale (depending on the core nature of the paid DLC).

So Steam sales mean we don't have the first issue (which only applies to games on a limited budget and prevents a massive hit from emerging rapidly from consumer interest) and the sales definitely seem to be moving in the direction where DLC is also attracting discounts to tempt customers who can not get a GotY box (maybe there wasn't enough DLC to make the publisher interested in making a bundle and trying their luck increasing the price with the small spend on getting some promotional material to advertise that new bundling, maybe the customer already owned the base game) or only want a partial DLC selection to consider it a value transaction. The spat with EA (you must offer a customer a way of buying DLC through Steam for a new game sold on Steam, this is not an exclusive requirement so you can sell your DLc in any other way but you must put it on the Steam store too) indicates Valve see DLC are a more core concern moving forward and I'm happy to say that a sale on some DLC with mixed reviews or which I may not yet have completed the base game will definitely get me to throw some extra cash at the developers.

This behaviour of buying on future value rather than on immediate need / an expectation of prices that slowly drop over time in a smooth fashion (so the later you buy something the better, only shop when you immediately need to 'use' the purchase) can certainly be seen to match the sales data Valve originally failed to explain but has become the core of their promotion of sales to their publishers. While it isn't a commission for construction (a Kickstarter patron), this purchase before use on hitting a value proposition is a lot closer to patronage than the classic physical model designed on manufactured scarceness (the 'game' unit purchased was never genuinely scare, being a license to a specific series of 0s and 1s which is protected by copyright). The desire to play a game as soon as possible is not changed, which is where a lot of revenue is generated at high prices. I'd much rather see 6 million people own a game (even if only 3 million ever get round to playing it in the first few years of release) and only pay $10 rather than 1 million own it for $60 each. The revenue for the publisher is barely different but the second scenario means there are three times as many people who might be interested in a sequel (and to generate word of mouth sales into the future) and the same again in people who might come to the game later as a classic and get something out of the experience (while having paid the publisher for their risk in investment when it was still relevant to the dev/publisher relationship - the risk of abandonware or even old games sales is that relationship is dead by the time the sale is made so future cooperation between the companies isn't influences by your potential cash injection).

@JoeyRavn: Amazon's July sale was crazy. They had Spec Ops: The Line for $25 less than a week after it was released for $60.

I think it's possible Steam sales can devalue individual games, but I don't think that harms developers in the long run. It strengthens their intellectual property and franchises, as well as their profile as developers. If one game is known for going on sale a lot like Borderlands, then yeah people probably will just wait until the sales. But they're most likely rearing to buy Borderlands 2 at launch for full price.