http://www.mcvuk.com/features/808/OPINION-Retail-vs-Steam
I have read with interest the article ‘Retailers blow off Steam’, as the topic is one I have been focussed on for some time now. Three years ago, I requested of that the 1C management team negotiate and retain the digital rights to all our titles, even when we sell on the boxed rights to other publishing houses. They agreed and for the last two years this decision has born major dividends for 1C. The reasons behind the decision were numerous, but one of the large driving factors was the fact that in the English speaking territories – especially in the UK and USA – we saw a massive decline in the way the PC market was being supported by the bricks and mortar retailers. Shelf space was being reduced on an almost monthly basis in favour of the latest twitch kids console title and it was becoming more and more difficult to get titles listed in any depth – even when those titles were securing review scores of over 80 per cent. It’s not surprising that PC gamers turned to different methods of distribution, and Steam filled that need perfectly. Not just providing a well stocked distribution platform, but a whole social network for enthusiast gamers who were not getting supported elsewhere as their hobby went mainstream. HIGH STREET OUTRAGEWhat is more surprising is the reaction of retail now. I have read it described as the reaction of a small child who threw his toy away because he no longer wanted it, but started screaming as soon as another child picked it up to play with. The metaphor works perfectly, especially in the light of the excuse I heard on numerous occasions. ‘There is no demand’ went the mantra. But is this really true? Not in our experience. I remember fondly the meeting in my office with a red-faced publisher who was explaining why their initial order from a major retailer for one of our new releases was just 30 units. At the time I had my browser open on the Steam product data page, which updates sales numbers every few minutes. “They have taken one unit for each of their top 30 stores” he told me. “There is just no demand from their customers”. I glanced at my screen, hit refresh and advised him: “In the time it’s taken you to tell me that there is no demand, Steam has sold 45 units”. Steam is selling decent numbers of our titles. They are really cool to work with, have a refreshing, knowledgeable developer mentality, and never bully or threaten their suppliers. And for a company such as ours, there is much more to it than that. There is the financial model, which is so often overlooked. Since 1997, when 1C’s gaming division was founded, the company worked on a model whereby a title developed and sold by 1C in Russia was then sub-licensed to our great publishing partners. As a generalisation, retail would pay these guys a maximum of 40 per cent of what they made. So on a £29.99 game the publisher would receive about £12 (and on a sub-licensed deal, we would then only get about £4.25 of that) – minus return, write down and consignment costs. When would we get that money? Well, payment would be by the end of the quarter. So, let’s say £10 per unit sale goes to the publisher, £3 to the developer/sub-licensor, and it’s in your bank five months after the customer has paid out £30. Compare that to the digital model. On a £29.99 sale, the digital partner will pay the publisher – or in many cases direct to the developer – between 60 and 70 per cent, by the end of the month following the sale. Wow. To recap: on a sale over the counter today, we can have our £3 by the end of March, or on a digital sale, we can have £20 by Christmas. Remind me why we should choose to go with retail and decline to let Steam sell the game? DIGITAL DIVERSITYWhilst the specific MCV story referred to Steam, there are a large number of other digital partners. 1C deals with 26 of them, who report and pay monthly sales varying between hundred and tens of thousands. Steam may be very dominant, but I do believe there is room for innovative and creative partners like GamersGate, Impulse/Stardock, Direct2Drive, GreenMan Gaming and GetGamesGo/Eurogamer to find a customer base who prefer their particular offerings. Unlike at retail, the dominant players in the digital market do not get, nor do they ever ask for, better terms than the other players. So what else, apart from better support, better sales, no inventory, no returns and much better payment terms, have the Romans ever done for us? Another advantage is the ability to boost sales with promotional prices – and you’ll often see an additional sales upturn after returning to the full price. For example, if you run a game of the week promotion, you can sell maybe 20,000 units of your title in that period. You now have 20,000 new users enthusing about your game, which even when the title returns to full price, causes a very obvious knock on effect that can happily double your sales. This creative working of pricing, promotions and catalogue is something I am convinced retail can learn and benefit from. It frustrates me greatly that once a game is six weeks old, it is written off and consigned to the bargain bins, never to rise again. We have a 10-year-old simulator title that still sells regularly on digital platforms. This brings me to a quick recommendation. The Long Tail by Chris Anderson is an essential read for anyone who wants to understand the differentials and opportunities offered by the digital platform. In the book, Anderson talks about one outlet that turn 90 per cent of their titles only once a month – but as they stock two million titles that once a month equates to 1.8m sales. Retail has just delivered $360m sales on first day for Black Ops. Those are impressive numbers. Will they really not stock Black Ops 2 next Christmas if it has Steam features included on the PC SKU? Add those numbers to the sales, longevity and depth that digital can offer, and surely we have a decent market model that can work alongside each other without the need for threat and recrimination? Steam is here to stay. Retailers needs to communicate and work with publishers, rather than dictate and pontificate to ensure the same can be said for them.
I have read with interest the article ‘Retailers blow off Steam’, as the topic is one I have been focussed on for some time now.
Three years ago, I requested of that the 1C management team negotiate and retain the digital rights to all our titles, even when we sell on the boxed rights to other publishing houses. They agreed and for the last two years this decision has born major dividends for 1C.
The reasons behind the decision were numerous, but one of the large driving factors was the fact that in the English speaking territories – especially in the UK and USA – we saw a massive decline in the way the PC market was being supported by the bricks and mortar retailers.
Shelf space was being reduced on an almost monthly basis in favour of the latest twitch kids console title and it was becoming more and more difficult to get titles listed in any depth – even when those titles were securing review scores of over 80 per cent.
It’s not surprising that PC gamers turned to different methods of distribution, and Steam filled that need perfectly. Not just providing a well stocked distribution platform, but a whole social network for enthusiast gamers who were not getting supported elsewhere as their hobby went mainstream.
HIGH STREET OUTRAGEWhat is more surprising is the reaction of retail now. I have read it described as the reaction of a small child who threw his toy away because he no longer wanted it, but started screaming as soon as another child picked it up to play with. The metaphor works perfectly, especially in the light of the excuse I heard on numerous occasions.
‘There is no demand’ went the mantra. But is this really true? Not in our experience.
I remember fondly the meeting in my office with a red-faced publisher who was explaining why their initial order from a major retailer for one of our new releases was just 30 units. At the time I had my browser open on the Steam product data page, which updates sales numbers every few minutes.
“They have taken one unit for each of their top 30 stores” he told me. “There is just no demand from their customers”.
I glanced at my screen, hit refresh and advised him: “In the time it’s taken you to tell me that there is no demand, Steam has sold 45 units”.
Steam is selling decent numbers of our titles. They are really cool to work with, have a refreshing, knowledgeable developer mentality, and never bully or threaten their suppliers.
And for a company such as ours, there is much more to it than that. There is the financial model, which is so often overlooked.
Since 1997, when 1C’s gaming division was founded, the company worked on a model whereby a title developed and sold by 1C in Russia was then sub-licensed to our great publishing partners.
As a generalisation, retail would pay these guys a maximum of 40 per cent of what they made. So on a £29.99 game the publisher would receive about £12 (and on a sub-licensed deal, we would then only get about £4.25 of that) – minus return, write down and consignment costs.
When would we get that money? Well, payment would be by the end of the quarter.
So, let’s say £10 per unit sale goes to the publisher, £3 to the developer/sub-licensor, and it’s in your bank five months after the customer has paid out £30.
Compare that to the digital model. On a £29.99 sale, the digital partner will pay the publisher – or in many cases direct to the developer – between 60 and 70 per cent, by the end of the month following the sale.
Wow. To recap: on a sale over the counter today, we can have our £3 by the end of March, or on a digital sale, we can have £20 by Christmas.
Remind me why we should choose to go with retail and decline to let Steam sell the game?
DIGITAL DIVERSITYWhilst the specific MCV story referred to Steam, there are a large number of other digital partners. 1C deals with 26 of them, who report and pay monthly sales varying between hundred and tens of thousands. Steam may be very dominant, but I do believe there is room for innovative and creative partners like GamersGate, Impulse/Stardock, Direct2Drive, GreenMan Gaming and GetGamesGo/Eurogamer to find a customer base who prefer their particular offerings.
Unlike at retail, the dominant players in the digital market do not get, nor do they ever ask for, better terms than the other players.
So what else, apart from better support, better sales, no inventory, no returns and much better payment terms, have the Romans ever done for us?
Another advantage is the ability to boost sales with promotional prices – and you’ll often see an additional sales upturn after returning to the full price.
For example, if you run a game of the week promotion, you can sell maybe 20,000 units of your title in that period.
You now have 20,000 new users enthusing about your game, which even when the title returns to full price, causes a very obvious knock on effect that can happily double your sales.
This creative working of pricing, promotions and catalogue is something I am convinced retail can learn and benefit from. It frustrates me greatly that once a game is six weeks old, it is written off and consigned to the bargain bins, never to rise again. We have a 10-year-old simulator title that still sells regularly on digital platforms.
This brings me to a quick recommendation. The Long Tail by Chris Anderson is an essential read for anyone who wants to understand the differentials and opportunities offered by the digital platform.
In the book, Anderson talks about one outlet that turn 90 per cent of their titles only once a month – but as they stock two million titles that once a month equates to 1.8m sales.
Retail has just delivered $360m sales on first day for Black Ops. Those are impressive numbers. Will they really not stock Black Ops 2 next Christmas if it has Steam features included on the PC SKU?
Add those numbers to the sales, longevity and depth that digital can offer, and surely we have a decent market model that can work alongside each other without the need for threat and recrimination?
Steam is here to stay. Retailers needs to communicate and work with publishers, rather than dictate and pontificate to ensure the same can be said for them.
Yeah, of course digital distribution is great for the publisher/distributor. It is the customer however that gets screwed. I always had horrible problems while buying directly from manufacturer - the truth is, you are a friggin' nobody for the Big Corporate. However with retail: you are important for your local store owner, the local store owner is important to the regional office, the regional office is important to the distributor, well the corporate will pay way more attention to the distributor with a problem, than to a Joe Schmoe Nobody.
You as a customer have no negotiating power directly with the MFG. It does not matter that 30% of all customers have the problem. The Big Corporate will blow you off because they have your money, they can find a way to deny you the return and unles you create some kind of association or go for a Class Action Lawsuit - you can go screw yourself.
And this is why big producers like to deal directly with customers: you don't matter. Once they convince you to give them your money you can crawl under a rock and die.
Stardock is an exception, but most likely because it is a small company run by a private owner, rather than a public corporation run by a mercenary CEO.
Which is a big part of the reason I've come along for the ride with Elemental - after being very unhappy initially. Stardock is certainly a one-of-a-kind company.
Best regards,Steven.
I don't know if anyone understands the problem with the Australian market outside of the publishers. I could guess it's import duties and other problems we've heard of in other markets, but wheres the fun in that?
Perhaps the biggest sign that the tipping point on direct download has been reached is that the newest WOW expansion is available for DD (and of course only from Blizzard). This is something that many retail stores were up in arms about because it will severely hurt their sales and at least a few threatened to boycott sales of their game (a tactic that has stopped titles in the past from being available for DD).
Regarding the price of games, I'm pretty sure DD sites can't charge anything less then retailers for a new game.
I suspect if retail stores cut out gaming, they can all pretty much say goodbye to HDTV sales, monitor sales, computer sales, vidcards, whatever in the technology aisle. People will just shop online like they do for their games.
This is undoubtedly the real reason they're offended.
OR: I just know it's a very good service. Which in fact I do.
Impulse Reactor so far it's just a fairy tale. It isn't a viable option to developers cause it simply isn't available to anyone outside Stardock. And if I must choose between Steamworks or GFWL I'll pick the first one any day untill the end of days.
Sorry if this hurts you.
I've got nothing against downloading, rather than buying the item in a store. Most of my life, I've been hunting for hard to find items in stores that rarely carried them. If you are not the type who prefers whatever is popular at the moment, stores generally never carry what you are looking for. Some specialty stores might, but they are very few and usually only in a large metropolitan area. Before, I had to mail order direct. Now with the web, this is a whole lot easier to do. And it's a great way to bypass the middlemen, who just increase the cost of things, increases way out of proportion to any role they may play in the distribution. With the web, it's getting to the point where these middlemen are no longer useful at all, to anybody but themselves, and no longer needed, either.
That brings me to steam and their monopoly workings. They are one of these useless middlemen who created a niche for themselves so they can continue interjecting themselves between makers and buyers of products. They are not particularly nice to deal with now, just read a few of the horror stories by people ripped off by this outfit. This is a sign of things to come. You think they are controlling now, you aint seen nothing yet. As they get more control of the market share, they will get worse. Much, much worse.
Digital downloading is a great tool the customer can use to increase their choices of products. Handing over your digital future to some monopoly seeking corporation is just like returning to the same problems you had with chain stores. No personal control over what you buy and how you buy it. The total antithesis of the customer freedom the web is an ideal tool to encourage. Monopolies help nobody but the monopolists.
So you think that it would be better to buy directly from each developer / publisher? Not only I hate idea of creating 150 accounts on all those websites, I also trust many of those companies much much less compared to Steam and Impulse (just look at how "reliable" is Ubisofts own digital distribution.....)
I dont care if by buying from from my favourite comapny I help in creating its monopoly - developers and publishers selling in that store still have to compete against each other for my money, so I dont see any danger to future prices, just because one shop might hold 70+% marketshare..
Usually you are such a fanatic about your views that I can barely relate, but in this I agree partially. I do not want a freaking account for each publisher, for each developer, for each game. It's already annoying enough to manage these things. We still need competition, but a digi store and an invasive client program from each one is not an answer.
Rebel misunderstood me, but the meaning of my post wasn't that clear. I'm not against buying from a distributor who handles the products of several different game makers (or any product). Obviously, this is a lot easier than keeping track of every developer's website. What I am against is these distributors dominating and controlling the market. This is what steam is seeking to do. If the downloading sites remain essentially a service to both developers and their customers, I think that's great. Either they simply provide a central place for the products to be downloaded, without the kind of invasive, controlling garbage steam tacks on, or if they were sort of like a farmer's market style operation, a place where several developers can have their own section to offer downloads on one site.
Every company want to dominate its marketplace (StarDock, D2D etc. are no exception) - its just easier to get into such position when when your competition start later and/or dont offer as many features as you.
In 2001 Valve wanted someone else to provide them such service - nobody was willing to do it, so they created Steam - they invested lots of money and took risk and their current marketshare is their reward for pushing this risky investment (in 2003 Valve was told by MS that such large scale service wont be possible untill 2013 ).
Guess what, salesboy, you still got no steam sale here.
BTW, I forgot to mention that I recently bought something from Impulse...
Unfortunately there is a huge danger that you've missed - yes, developers will have to compete against each other in the monopoly's store, which should help prevent any one title being very highly priced relative to others (as well as still meaning there is a wide choice of titles). However prices generally are highly likely to rise in such a situation. The reason is that if Steam gets into such a monopoly position (which it looks set to do) then they can demand that a greater cut of the sales price goes to them. This reduces the amounts developers get, meaning that they have to increase the price they charge for their games.
Now if there were a reasonable number of digital distribution sites (with a decent user base) which could offer the game to people then if any one site demanded a greater cut then developers would start to move to the other sites, increasing their market share, and so you have an incentive for the distribution site to keep prices down. As it is the only incentive that would exist for steam to not abuse monopoly power is that it could lead to a competitor able to rise from a tiny user base and rival them (on the basis of a far smaller cut). I'm not too sure what the competition laws are like in various countries, but unless they specifically prevented it steam could reduce this likelihood dramatically be requiring developers use them exclusively, which then would limit their competition to developers 'going it alone' and selling their games via their website (and in reality only the really big developers who could count on enough people going to their website due to the high demand for their games could consider such an avenue).
I know you've already been told this before; Valve was not first. As is the case with many things in the tech industry, being first isn't necessarily a recipe for success. You're giving them too much credit by claiming "nobody was willing to do it" because others already were. Valve's version just wound up clicking with the market better than the others in a major way. I am not trying to downplay their success by any means, but they've done well in enough in other areas without you trying to give them the 1st credit they do not deserve.
"I know you've already been told this before; Valve was not first."
Ah, but they were the first to put a man on Mars. At least I think that's what I saw written in an old Rebell44 post.
Valve actually predates mankind. It rode in on Cthulhu's back when the world was still half molten.
True story.
You're both heretics. Before Valve, there was Chuck Norris.
I am not saying they had 1st digital distribution service (I know that StarDock had such service since late 90s) - but IIRC they were first who started selling 3rd party games. When Valve was looking for someone to provide them such service, nobody was willing to do it for them (lost opportunity for companies who had DD service at that time).
Nice to see that trolls still arent capable of anything even close to normal debate...... Honestly I am glad that idiots like you dont use my favourite DD service.
Although calling people who post "idiots" isn't exactly normal debate either.
Attack the argument, not the person.
Why should I bother attacking "argument" (there is none in his post anyway) when this is his standart copy/paste reply to my posts when he has nothing else to say.
It would be whole lot easier if this forum had "ignore" feature
If you call people idiots, you are not engaging in "normal debate". Say "I disagree" and leave it at that. Say you were one who didn't have a good argument. Do you think you would like someone saying "idiots like you" in your direction? Name-calling is inflammatory and part of a good argument is avoiding the personal attacks, which "idiots" definitely is. There is nothing wrong with disagreeing with someone and arguing a case if need be, but there *is* something wrong with attacking the person.
Tit for tat never helps.
Whenever I post anything on this forum he always start trolling me and reporting his posts didnt do anything and as I said, this forum doesnt have "Ignore" feature.
What part of his post do you think can be reasonably debated?
Best Regards,
Rebel44
Well, I guess if this forum doesn't have any "Ignore" feature, we have to just do it ourselves.
I'm sorry that there are people on forums who we don't get along well with. We just need to put our energies into things we can control.Best regards,Steven.
There are many great features available to you once you register, including:
Sign in or Create Account
