GOG.com

[thatgui]

but I wonder wether having such drastic prices drops is really beneficial for the "classic" pc games

 There's no reason to pay games so expensive in the age of digitial distribution. That cut down so much of the "inventory + distribution + intermediates" costs that existed before in the age of 40-50 dollars games, now virtually all new games should be sold at less than 15 dollars or less than 10 dollars even and devs and publishers would make just as much money as before.

So what you are saying is that a few years back, when digital distribution wasn't really a thing, but the pc gaming market was basically as big as it is now, the prices actually not came from high development and marketing costs, but distribution costs and "publisher greed" ?

 

[ekianjo]

but distribution costs and "publisher greed" ?

There were a lot of fixed costs in non-digital distribution.

And I'm not talking about "greed' - that's called margins.  

Now with digital distribution the fixed costs are mostly gone, leaving a large space for margins. There's no tangible reason to pay more than 20 dollars for any game out there unless you want to donate your cash to publishers/devs in a large fashion. 

Plus, PC gaming is expanding, not shrinking or stagnating, which means everyone gets a bigger piece of the cake these days compared to 10 years ago. There's no reason to keep prices up when you can recoup it on volume instead.

 

[thatgui]

but distribution costs and "publisher greed" ?

 
There were a lot of fixed costs in non-digital distribution.


And I'm not talking about "greed' - that's called margins.

these margins look like a too big heap to me. Up to 75% of the retail price, depending on the end user price you are willing to pay, which is fluctuating in your posts between 10 and 20

Plus, PC gaming is expanding, not shrinking or stagnating, which means everyone gets a bigger piece of the cake these days compared to 10 years ago. There's no reason to keep prices up when you can recoup it on volume instead.

Do you have numbers to prove that?Tthe last numbers I saw (but from 2013) showed stagnation in the pc gaming market (and don't forget that games did not have the budget 10 years ago that they now have).

 

[_jr_]

There is a detailed 2014Q3 financial report on cdprojekt.com. I don't see any significant margin for lowering prices there.

 

[ekianjo]

There is a detailed 2014Q3 financial report on cdprojekt.com. I don't see any significant margin for lowering prices there.

Link please?

 

[rohezal]

There's no reason to pay games so expensive in the age of digitial distribution. That cut down so much of the "inventory + distribution + intermediates" costs that existed before in the age of 40-50 dollars games, now virtually all new games should be sold at less than 15 dollars or less than 10 dollars even and devs and publishers would make just as much money as before.

A bachelor degree programmer works for 36K € per year, a master degree programmer works for 48K € a year (without retirement fund, health insurrance etc). Lets say 60K € per year for a master programmer with social security costs (in Germany).  Pay 5 master programmers for 2 years and you have costs of 600K. Without artists, rent for the building, music composers etc. If the Programmers can do the level design too, you can save money on this part. Lets say all in all the development costs 800K. You have to pay 19% vat per game sold.

So if you want to sell your game over your own website game for 10€, you have to sell 100K copies to just get the production costs back. This is quite hard for non AAA titles. If you want to sell it over gog you have to add their costs to the price (lets say 10% of the price per game).

 

[thatgui]

There is a detailed 2014Q3 financial report on cdprojekt.com. I don't see any significant margin for lowering prices there.

Link please?

maybe this ?

 

[WizardStan]

Maybe gogs offers aren't too expensive, but Steams are too cheap ?

That's the answer. How many games on Steam have you paid $2 for because it was part of a sale and never played? Probably never will play? Steam sells millions of these cheap games to impulse buyers. Yeah, a lot of them are getting a game they wanted for cheap, but a lot more are getting a game they wouldn't have otherwise purchased: I don't have any actual numbers but Gaben has made it quite clear on several occasions that they don't do things that lose them money; if it didn't balance out to a net profit they wouldn't keep doing it.And that's the real benefit of digital distribution, you can push volume. You don't have to produce a bunch of physical copies and hope they sell, or depend on presales to gauge interest, you just start marketing and start selling. If you only sell 10 then blagh, you go back and review your market; if you sell 100K the only additional cost is network which scales with sales.

So you can sell 100K copies at $10 to people that have done their homework and know what they want, or you can try and sell 500K copies at $2 in a big marketing blitz to people that ordinarily wouldn't have bought your game and only are because it's cheap.

Valve can do this, Steam is so ubiquitous and the sales are so well advertised that publishers can easily rack in tens if not hundreds of thousands of new sales that they otherwise wouldn't have gotten. Even the little games get huge boosts, like some AAA game goes on sale and someone says "I was just going to buy game AAA but this other one on sale beside it looks cute and it's only $1.50 so why not?"

GoG doesn't have that kind of marketing. They have a sale and I usually don't hear about it until it's almost over. The Steam sales start getting hyped weeks in advance.

 

[klapse]

A bachelor degree programmer works for 36K € per year, a master degree programmer works for 48K € a year (without retirement fund, health insurrance etc). Lets say 60K € per year for a master programmer with social security costs (in Germany).  Pay 5 master programmers for 2 years and you have costs of 600K. Without artists, rent for the building, music composers etc. If the Programmers can do the level design too, you can save money on this part.

Last sentence is wrong.

A level designer costs about half as much as a master-level programmer. In addition they are specialized at that job so they are more productive at level-design than a programmer. You cannot save money by having the more expensive employee doing tasks that a less expensive employee can do.

The economic principle underlying this is called the "Division of Labor".

 

[ekianjo]

these margins look like a too big heap to me. Up to 75% of the retail price, depending on the end user price you are willing to pay, which is fluctuating in your posts between 10 and 20

WHat are you talking about ? I'm talking about physical distribution in that paragraph. Nobody could ever make 75% in retail.  

 

[PowerGod]

Steam is starting to sell even the MODS... I hope that GOG will not follow them, as it did with DLCs...

 

[WizardStan]

Steam is starting to sell even the MODS

If you're referring to Skyrim then they apologized, admitted they didn't know what they were doing, reversed the decision, and refunded everyone.

 

[PowerGod]

Steam is starting to sell even the MODS

If you're referring to Skyrim then they apologized, admitted they didn't know what they were doing, reversed the decision, and refunded everyone.

Cool !! During my internet blackout I missed that

 

[ekianjo]

Steam is starting to sell even the MODS

If you're referring to Skyrim then they apologized, admitted they didn't know what they were doing, reversed the decision, and refunded everyone.

They will probably come back on that idea later on, though. 

 

[thatgui]

these margins look like a too big heap to me. Up to 75% of the retail price, depending on the end user price you are willing to pay, which is fluctuating in your posts between 10 and 20

 WHat are you talking about ? I'm talking about physical distribution in that paragraph. Nobody could ever make 75% in retail.

Hmm, maybe I misunderstood your previous posts or my last one wasn't phrased right ? Train of thoughts:

• according to you a game costs 40-50 dollards
• you deem a retail price of 10-20 dollars more fair
• if I did undertand you correctly the difference comes from "inventory + distribution + intermediates" and "margins"

as you are a tad vague about numbers I just tried to take the middle ground and took 40 dollars as the "current price" and 10 dollars as the "what it should be price".Which means your price is 75% of the current price, which implicates that these 30 dollars are according to your posts spend on inventory n' stuff and margins - seems too much for me (thats why I extrapolated greed in, as there is something missing for me).

But while we are at it: while digital distribution looses a lot of weight in comparison to physical distribution, it isn't cheap either: You get lost of rents, wages, cost for physical media and logistic, etc.. But there are some "downsides" to this, that may even be harder to calculate in, as while you just have to serve digital copies, you cannot actually now how long you want/have to do that. Unless your just there for a quick cash grab, you may need to provide server space and bandwidth for 10, 20, x years and especially if you are all DRM n stuff and with customers internet access getting "speedier" constantly you may have to calculate in, that your customers will download the game more often then before.

Of course, this applies only if you are both producer and distributor like Valve, EA, Ubisoft.(which probably already covers 50% of the market). But if not, you will have distribution costs again, as the distributor wants is fair share of the price too.

Also don't forget about another thing that is practically obligatory these dasy: multiplayer either via the distributor or by yourself, again you have to invest a huge amount of money to provide a fast and stable online multiplayer experience.

And there is still the whole "collectors Edition" stuff that seems to do well (I guess, as it would not be an interesting sales model anymore) so physical distribution isn't totally a thing of the past.

But don't get me wrong, I don't think that these companies are "angels" that would rather die of starvation then giving "us" (jitter) games for a too high price, I just think that reality is more complicated then "they usually don't distribute physically, so it must be cheap as hell".

They will probably come back on that idea later on, though.

I guess so, too.

 

[ekianjo]

which implicates that these 30 dollars are according to your posts spend on inventory n' stuff and margins - seems too much for me (thats why I extrapolated greed in, as there is something missing for me).

It's not too much. There are many sources on the web for the cost split of  a physical game. 

Out of 50 dollars, something betwen 10-15 is coming back to publishers. That's what I am saying. The rest goes into distribution (the point of sale, whether it's Amazon or BestBuy or wherever you shop at), transportation, inventory cost, warehousing, production of CDs, printing stuff, boxes, etc... You are probably underevaluating the amount of work and resources needed to distribute physical things (and I know that very well myself since I am working on physical stuff in my day job).  

it isn't cheap either: You get lost of rents, wages, cost for physical media and logistic, etc..

You don't need 100's of people to distribute something online. You can open a server for xx USD/month with a payment system and you are done. You don't have to take care of the logistics yourself. And the cost of digital media is falling constantly. It's cheaper than it ever was.

If anything, the cost of digital solutions is DECREASING over time vs Physical solutions.  

 

[ekianjo]

Of course, this applies only if you are both producer and distributor like Valve, EA, Ubisoft.(which probably already covers 50% of the market. But if not, you will have distribution costs again, as the distributor want is fair share of the price too.

You don't have to sell via these big shops, first, and then even if you do you nothing prevents from selling at multiple points of sales(origin, gog, play store, iOS, amazon) with close to no additional cost for the developer/publisher. In other words, your "reach" is way bigger than it could ever have been with physical distribution. It's win-win for everyone involved. 

Also don't forget about another thing that is practically obligatory these dasy: multiplayer either via the distributor or by yourself, again you have to invest a huge amount of money tp provide a fast and stable online multiplayer experience.

There's tons of games with no multiplayer elements still. I don't see them selling badly.  

And there is still the whole "collectors Edition" stuff that seems to do well (I guess, as it would not be an interesting sales model anymore) so physical distribution isn't totally a thing of the past.

Where? It does well only when you have a huge marketing push to do so (like you are Blizzard or something) and everyone else has just given up on those completely. 

But don't get me wrong, I don't think that these companies are "angels" that would rather die of starvation then giving "us" (jitter) games for too high price, I just think that reality is more complicated then "they usually don't distribute physically, so it must be cheap as hell".

The reality is tha they bumped up their profit margins from 30% to 80-90% in a matter of years by going digital.  And increased their volume at the same time. No, I don't pity them one bit. 

 

[_jr_]

There is a detailed 2014Q3 financial report on cdprojekt.com. I don't see any significant margin for lowering prices there.

Link please?

maybe this ?

Yes, the board comments contain an easy (IMO) to read breakdown. Skip to the 'Global digital videogame distribution' section. It looks like a fixed 70% of proceeds goes directly to the publisher. (This would also impliy that GOG has only limited control of pricing.)

Around half of the remaining is invested in the platform. The total amount for this seems reasonable to me, even considering the shortcomings of the platform. Digital distribution doesn't look that cheap: from the way costs go up whith sales we can guess (but could be wrong) something like 10% infrastructure costs - i.e. power, bandwidth, support, etc. - during a sales heavy period.


With the small total volume (note that these are PLN) this leaves a very small team (also working on Galaxy for which I couldn't care less; but explaining why everything takes so long and a rather modest profit that is fully sucked up by their 'Video game development' activities.


Overall GOG looks like a (smallish) medium sized business that is doing ok (and probably is well managed), but it is not reaping loads of profit. CD Projekt as a whole will also suffer considerably when Witcher 3 fails, even though development was funded without major loans (which is a considerable accomplishment).


edit: it should have been 'if' in the last sentence instead of 'when' (thanks to ekianjo for noticing)

 

[ekianjo]

considerably when Witcher 3 fails

Why would it fail ? It's one of the most awaited games of 2015. 

 

[thatgui]

You don't have to sell via these big shops, first, and then even if you do you nothing prevents from selling at multiple points of sales(origin, gog, play store, iOS, amazon) with close to no additional cost for the developer/publisher. In other words, your "reach" is way bigger than it could ever have been with physical distribution. It's win-win for everyone involved.

So what ? Just because of have multiple distributers does not mean you will get higher sales figures as these services all have overlapping user groups for the most part. And you still have a distributor which wants its share.

There's tons of games with no multiplayer elements still. I don't see them selling badly.

How big is the percentage of titles in the 40-50 dollar price range that do not offer multiplayer in some way ?

Where? It does well only when you have a huge marketing push to do so (like you are Blizzard or something) and everyone else has just given up on those completely.

So whats your point ? Of course they aren't "everywhere" never said that, I mentioned it to emphasize on the fact that physical retail isn't completely dead, Boxes of games are still sold.

The reality is tha they bumped up their profit margins from 30% to 80-90% in a matter of years by going digital.  And increased their volume at the same time. No, I don't pity them one bit.

Mind giving any evidence for this ? So far you are mixing up everything that comes your way, as long as it serves your argumentation. And I still would like to know if you really think that up to 75% of retail price are swallowed by physical distribution, or if I misinterpreted your posts