Two Perspectives on Fairness in Game Pricing

Game pricing does not make a lot of sense. Most of us should be paying more for games, and at least some of them should get more expensive over time. The fact this doesn’t happen may be strange, but the causes are not mysterious. Steam runs frequent sales events, and the practice of heavy discounting is grounded in the observation that the combination of an event and a discount can produce sales that exceed the traditional peak of launch day at full price. Gamers are also a particularly vocal set of consumers with a tendency to dig in on whatever they perceive as unjust. Most of us will only ever have to consider games pricing as a consumer, but it is still possible to gain some perspective on how strange the current pricing regime is.

The costliest version of a game a customer can buy is often the worst iteration of the game publicly available. Updates have become a regular feature for most releases and discounts tend to increase over time, making the version with the greatest number of additional features and bug fixes the least costly. This fact is well known, but there is not a consensus on what can be done about it. Rimworld has stayed firm by not offering a discount below 10% and has signaled they do not intend to go lower. The Castle Doctrine tried a similar strategy and saw its player base dry up before finally lowering the price. DLC attaches a price to some of the updates, but this is offset by discounts in the base game, and early adopters still pay full price while latecomers enjoy discounts on the game and its DLC.

Discounts might be thought of as a kind of price discrimination. A more familiar example might be to consider something like a student discount, where membership in a particular group grants a different price. When I lived in British Columbia, I experienced something closer to complete price discrimination due to how its auto insurance system works. Auto insurance is mandatory and is sold by a single Crown corporation called ICBC. Insurance is all about pricing risk, and so a 17-year old with a sports car in Vancouver is going to pay more than a 40-year-old with a station wagon and a history of not getting into accidents. ICBC’s special status as a Crown corporation means it is not likely focusing on willingness to pay, but it does serve as an example of a pricing system that goes beyond our more common experience of one price for everyone.

Gaming is an environment in which complete price discrimination could work. There are relatively few storefronts, and even these are usually focused on a single platform (Sony and Microsoft dominating their respective consoles, Valve holding a significant share of the PC market, etc.). Each of these storefronts has information about its participants and their purchasing behaviour. It is conceivable that a storefront could do a good job of estimating its customers’ willingness to pay and adjust its discounts accordingly. Customers who can and would be willing to pay something closer to full price would see fewer discounts much further form the release date, while players who do not have the means or interest in buying something might see deeper and more frequent discounts.

Any time a pricing system like this has been attempted in other markets the result has been universal outrage. Even if the policy were to be implemented in a revenue neutral (or even decreasing) way, every available communication channel would be flooded with variations on “so greedy! Don’t they make enough money!?” It is easy to see why. Even if this change were intended to more evenly distribute gains between the consumer and the developer, the new system represents a loss for the consumer without anything in return. In fact, the most likely outcome would not just be a marginal loss. Under complete price discrimination the consumer surplus vanishes and it would be distributed between the developer and the platform. In theory it could be set at a more equitable level, but this is like saying that in theory consumers will recognize the need to support the things they love and not seek to buy every game at a fraction of the price.

Even though complete price discrimination is very different from the current pricing regime, both can be thought of as fair in their own way. While the consumer surplus may be lost under price discrimination, the consumer still has the option of buying something else or nothing at all. The only difference is that they are no longer buying games for any amount less than their willingness to pay (the ‘true value’). Given the phenomena of large libraries of unplayed games bought during Steam Sales (i.e. not part of bundles), it seems that discounting has gotten low enough that they are reaching the value at which the consumer prices the option to play a given game, and so it seems fair to say that the current system is much more tilted towards large consumer surpluses. But this has its own sense of fairness since developers ultimately set their prices and are under no obligation to discount.

Are there reasons consumers might shift away from a system that is currently tilted in their favour? There are plenty of cases of consumers taking on inconveniences to support things they value (tipping, not crossing picket lines, etc.). One catalyst can be making hidden costs explicit. There are certainly costs to the current system.

There are more high-quality games than there are successful games. Yes, there is a lot of nonsense, and that number will likely grow, but even the fussiest consumer could limit their attention to releases in one genre in the current year and still have their choice among multiple high-quality and affordable titles. Some of the developers of the high-quality but unsuccessful titles will find success with later releases, but some fraction will throw in the towel and find work in a larger firm or leave the industry entirely. These exits represent a loss through the games we might have enjoyed in the future if we had allowed this talent to flourish.

To be clear, scoping and pricing projects in such a way that more money comes in than goes out is part of the job of operating independently, and consumers should not be harangued into paying full price because a developer wrote a sad blog or may be leaving behind a lifelong dream. This would be a bit like restructuring the global economy to accommodate the number of children who want to become ballerinas. But there remains a role for the consumer to play in choosing what succeeds. The $2.50 we save by waiting a year on an indie we wishlisted doesn’t really enable us to do anything we can’t do already, but in aggregate this can add up to real money for the developer. Most consumers are not likely motivated by the savings in itself so much as the feeling of getting a good deal. A small savings or the feeling of getting a good deal is still a benefit when viewed in isolation. When viewed as a trade off between limiting the experiences available to us tomorrow (through the loss of otherwise talented developers), it doesn’t seem like such a good deal any more.

It may be that the current system is the best we can do right now. It is fair by one set of standards, the same way the seemingly outrageous case of complete price discrimination is fair by another. We have certainly done well under it. There are more and better games than ever available at the lowest prices both in nominal and real terms. More people are able to make games now than before and make a living doing it. In some ways the problems we are faced with now are a product of the industry’s success. But part of that success has come from the arrival of new voices into the space and the ability for the most promising ones to find it worthwhile to continue practicing their craft. I would certainly prefer their ingenuity to go towards experiences that delight me rather than ways to extract an extra dollar, and a small readjustment of the distribution of the surplus seems a fair way to go about it. As always, we continue to render a verdict on what we want to see in the future through what we choose to support today. We can, however, sometimes sway the jury with a raised eyebrow when someone skimps on the tip.

I am a member of the Humble Affiliate Program and will tend to use an affiliate link when referencing a game. I receive a portion of the revenue generated from traffic driven to the site from the affiliate link. I encourage you to do your own price comparison and buy on your preferred platform.

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