Newell talks Steam sales, pricing experiments

GeekWire has published an interesting interview with Valve co-founder Gabe Newell. The discussion centers on Steam, and specifically, the experiments Valve has conducted to explore how pricing affects the games that it sells through the service.

When Valve altered the price of one of its games without announcing the discount, it discovered pricing was perfectly elastic—lowering the price did increase sales, but given the lower cost, Valve’s gross revenue was unaffected. However, Valve has seen very different results when sales are promoted heavily. When Counter-Strike was discounted by 75% in a widely publicized sale, Valve enjoyed a 40-fold increase in revenue from the game.

CS is pretty unique in the gaming world, but Newell says Valve observed similar behavior from at least one third-party title. He also claims that discounts as low as 25% reliably generate increased revenue. Interestingly, Newell claims discounting games on Steam hasn’t necessarily cannibalized future sales at higher prices. Games tend to sell better after a sale than they did before it, he says, and Valve has observed an uptick in retail sales while a Steam discount has been in effect.

Newell also has some interesting things to say about the free-to-play gaming market. Team Fortress 2 went free to play this summer, and Newell reports about 20-30% of free players have bought something in the game. He doesn’t put a dollar value on those purchases, but the conversion rate is purportedly much higher than the 2-3% that’s typical in the free-to-play world.

I’m a big fan of Steam and what’s it’s done for the PC gaming market, but I have to take issue with one of Newell’s comments on piracy. Before boasting about Valve’s success in Russia, a market with a reputation for rampant piracy, he states: "The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates." Fair point. However, Steam has plenty of anti-piracy technology built in. You’ve gotta be connected to install a game, and games don’t always behave reliably in offline mode—Valve’s own Portal 2 requires periodic reconnection for things like save games to remain valid. We have to dial back the date on our storage test systems manually just to get Portal 2 to work properly in offline mode.

Comments closed
    • Chrispy_
    • 8 years ago

    Has anyone ever asked Gabe what happens if/when steam stops supporting a game, or will I still be able to download Half-Life 2 in 30 years when they finally release Episode 3?

      • khands
      • 8 years ago

      There’s been rumor that they would release a patch or whatever that gets rid of the DRM.

    • MadManOriginal
    • 8 years ago

    In after the rants 🙁

    • Antias
    • 8 years ago

    I would use steam if i could use my games in fully offline mode.
    Upcoming Diablo 3 is a good example – having to be connected to even play a solo game is just plain silly and wasteful…
    Can anyone confirm if Skyrim will require online connection or will that be fully offline (except for the down,loading and registration bit of course – i’m not THAT silly)

    • tviceman
    • 8 years ago

    Steam has created a market of people who buy games they will never play. I have about 15-20 games in my steam library I’ve yet to start up and I know I’m not alone…

      • HisDivineOrder
      • 8 years ago

      So true. The day they enable selling used games to someone else is the day chaos ensues. So many games I bought because they “were such a great deal” without ever playing them, so many sales to be.

      Nah, they won’t ever do that. Not just because the publishers won’t want it; they don’t either.

    • Corrado
    • 8 years ago

    Steam won’t get another dollar from me unless they implement REAL customer support. When the ONLY way I can get any sort of response out of them is to do charge back, thats not good for them or for me. Especially because they’ll lock your entire account out, regardless of if you had $10,000 in games paid for and played acceptably. I dunno about you, but I don’t like the fact that at their will they can cut off my access to stuff that is not in question.

      • ew
      • 8 years ago

      Their support is truly horrible. Don’t even think about getting a refund if a game doesn’t work because of a bug. It’s a buyer beware platform for sure.

        • mcnabney
        • 8 years ago

        What planet do you live on? Pretty sure Best Buy, Gamestop or ANY retailer will tell you NO REFUNDS on software purchases.

          • Corrado
          • 8 years ago

          But if its defective I can usually at least talk to someone, exchange it, etc. You can usually talk someone at Best Buy into store credit if you had a massive problem with software (IE, it doesn’t work). There is literally NO ONE to talk to at steam. There is no phone number, you can open a trouble ticket and wait, or you can email their support and hope they respond. Both times I had issues with something, I had WEEKS of no response. I did a charge back, they INSTANTLY locked my entire account. Best Buy doesn’t come and confiscate everything I’ve ever bought from them if I do a charge back.

          STALKER: Clear Skies had Steam DRM + other activation with a limited number. It seemed to be a random amount. I built a new rig to play the game, and had a bad piece of RAM. I ended up reinstalling my OS twice before figuring it out. After the 3rd activation of the game, it stopped working. So…. I had a game that < 1 day after purchasing I could no longer install. I contacted Steam, opened a trouble ticket, emailed and posted in their support forums. After 15 days of non action, other people on the internet completely not affiliated with Steam suggested I contact GSC (the game’s developer/publisher). I got no response from that for 8 MORE days and still no contact from Steam. I had paid $40 for something that simply didn’t work. So I had no choice but to do a charge back. Within 3 hours of the charge back, my entire steam account was locked out along with about $500 in games that had been paid for for months/years. It took 3 months to get them to unlock it. Since then I have not spent a dime with them.

          If you want to play with the big boys, you need customer service, plain and simple. I need to be able to talk to someone in real time, especially when you’re dealing with nerds on the internet.

            • sjl
            • 8 years ago

            Regarding locking out the account: my reaction to that would be to take them to small claims. (I don’t have that much by way of games on my steam account … maybe $100 worth, and most of that is Deus Ex 3, but if I had $500+, I’d definitely do the small claims thing.) It’s not a question of trying to get money back on games that I’ve played – it’s a question, as you say, of having access to what you should rightfully have.

            Guaranteed, if enough people did this, they’d be forced to be more customer focused – small claims (usually) ignores the boilerplate legal text, and focuses more on the moral feel.

      • FranzVonPapen
      • 8 years ago

      Steam has the worst customer support I’ve ever experienced [i<]in my life[/i<]. As part of my IT job and from personal experience, I've called, written, emailed, and chatted with hundreds of companies to get support... Valve makes great games, Steam works great when it works (which is most of the time), but when it doesn't, you'll get better relief praying to your god than contacting Steam support.

    • OneArmedScissor
    • 8 years ago

    The problem is that every time they talk this up, they are just dancing around explaining why the heck a game would cost $60+.

    Yes, sales volume goes up as prices go down. We have heard of economics. However, the “sale” can be faked with artificially inflated prices.

    They are throwing every number at us except what would happen with lower starting prices, as is standard for CDs and DVDs.

      • BobbinThreadbare
      • 8 years ago

      When’s the last time a Valve created game cost $60?

        • OneArmedScissor
        • 8 years ago

        When was the last time Steam only had Valve games? 2005.

        Maybe Steam games generally aren’t $60, but we’ve had it forever now and it’s not doing anything to deter ever inflating prices.

          • rxc6
          • 8 years ago

          Steam has NO influence on the MSRP that the publishers determine. Do you blame Amazon, BestBuy, etc. for selling games at those prices?

          • bcronce
          • 8 years ago

          OMG, you figured it out. Valve has no control over other companies and can’t tell them how to price their goods. Thanks for enlightening us.

      • travbrad
      • 8 years ago

      [quote<]They are throwing every number at us except what would happen with lower starting prices, as is standard for CDs and DVDs.[/quote<] While I'm not willing to pay $60 for most games, I do value them significantly higher than a DVD movie. Most movies are about 2 hours, whereas a good RPG/RTS/multiplayer game can provide hundreds of hours of entertainment. People think DVDs are overpriced too btw, otherwise rental/streaming services wouldn't be doing so well.

        • Corrado
        • 8 years ago

        I don’t play multiplayer, so games have a SIGNIFICANT decrease in re-playability for me. I rarely touch a game after I beat it. This is generally why I won’t buy a new release game anymore. If you wait just 4 weeks, a $60 game is on Amazon for ~ $40 usually unless its Halo or CoD or the like. Even still, you can get used copies. That fine with me as, again, I won’t be playing online.

        • OneArmedScissor
        • 8 years ago

        I didn’t say they have to cost $7. I’m saying they need to try doing [i<]exactly[/i<] what they have been doing, but also when the game first comes out. What they've done is teach people to wait for sales. But what happens when people wait, while a squillion other games are coming out? They lose interest. There are probably well over a hundred games I've thought looked interesting enough to buy, but only at a lower price, which they'll inevitably hit someday. So I wait. And it drops. But when it gets there, I forget altogether. Or it's no longer worth any price, for several reasons. Many games have a finite hype train to ride, as they will quickly be replaced by a sequel or just another flavor of the month multiplayer game. There's an average sale price over the life of the game in there somewhere, and they'd be doing no harm to use it as the initial price and bag the people leaning on the fence.

    • TurtlePerson2
    • 8 years ago

    The only thing that I dislike about Steam DRM is the inability to resell used games. I personally didn’t sell my games (though I did lend them to friends from time to time), but I liked to buy used. The Steam sales have sort of weakened this criticism though.

      • BobbinThreadbare
      • 8 years ago

      Buying used means the developer doesn’t get any money. I much prefer Valve’s sales to this. I still games cheap and they get money for creating something I want.

        • Sunburn74
        • 8 years ago

        They can always take a small proportion of the resale price.

          • BobbinThreadbare
          • 8 years ago

          That’s a good point.

          • eofpi
          • 8 years ago

          Actually, they can’t. The first sale doctrine means they have no legal right to any subsequent sales.

            • Anonymous Coward
            • 8 years ago

            Maybe they could charge for the service of transferring the game.

            • khands
            • 8 years ago

            Except they never actually sell you anything, it’s all licensed, look at the fine print.

            • Arkwald
            • 8 years ago

            That is all you have EVER had.

          • bcronce
          • 8 years ago

          How? Please explain.

          • Chrispy_
          • 8 years ago

          Uh, how?
          What channels exist in the used games market for this, and unless it is regulated by law, why would you expect resellers to willingly give away a portion of their profit?

            • khands
            • 8 years ago

            It would stay on steam and only be to other steam users most likely.

        • Anomymous Gerbil
        • 8 years ago

        Huh? So what? Do car companies get any money when I sell my car? Etc.

          • The Dark One
          • 8 years ago

          They usually get you with the warranty, though, don’t they?

            • Anonymous Coward
            • 8 years ago

            Last I checked a car’s warranty is transferable.

          • BobbinThreadbare
          • 8 years ago

          That’s a flawed analogy and I’m pretty sure you know it.

          When a car company makes one car, they sell one at a price to make a profit. When a game company makes one game they are not expecting to sell a single copy.

            • Anonymous Coward
            • 8 years ago

            Are you suggesting that a car company would design a car expecting to sell one copy of it?

            • Corrado
            • 8 years ago

            Then why not, say, books? Writer writes book, gets paid by publisher. Car designer designs car, gets paid by manufacturer. Then other people take raw materials (steel, aluminum and rubber in the case of a car, or paper, glue, ink in the case of a book) and they then get sent to retailers. Someone buys said book or car. They decide to resell it. The retailer, the manufacturer and the designer get no money from subsequent sales.

            Now, developers create a game, publishers publish the game, and retailers sell it. Tell me again, why is this different than a book, a CD, a car, or a TV?

            • BobbinThreadbare
            • 8 years ago

            Books and CDs are very similar to games, as primarily what they are selling is an idea. Cars and TVs are different as they are primarily selling a physical object.

            I’m done responding to this trolling now.

            • Anonymous Coward
            • 8 years ago

            Your arguments where ridiculous.

          • xtalentx
          • 8 years ago

          A video game is not a car.

            • Corrado
            • 8 years ago

            Why is it different? Instead of making a statement, back up your point. Why is the sale of X not the same as sale of Y. I know the difference is you’re LICENSING the game, not purchasing it, but that’s still ridiculous. You license music too, but I can resell CDs and what not.

          • no51
          • 8 years ago

          They do, through replacement part sales. Which is using your car analogue would be DLC.

          • BobbinThreadbare
          • 8 years ago

          Also, if I had the money I would only buy new cars. Who wouldn’t if they could afford it?

    • JohnC
    • 8 years ago

    “giving those people a service that’s better than what they’re receiving from the pirates” – that is a little bit ambiguous sentence… Are they willing to host enough servers for each of their multiplayer-enabled game with 24/7 live admin presence on each server? Also, I dunno where they got their statistical data on Russia but last time I visited it I couldn’t find any person with a non-cracked Steam installation on their PC’s.

      • Noigel
      • 8 years ago

      “Are they willing to host enough servers for each of their multiplayer-enabled game with 24/7 live admin presence on each server?”

      Do pirate networks host multiplayer servers now? That’s pretty crazy…

      What I got from Newell was “providing a better distribution/downloading service” than pirates.

      If you think of a pirate group as a distributor then you’ve got to get your hands on their distro… probably through a torrent, news group, ftp, or hell… secret society. Then manually install the game and execute their rogue code to crack it. Then as updates come out you either live with old content (breaks, errors, and such) or you look for a way to get the update and crack the game again. A lot of times this is hit or miss… and mostly miss.

      It’s less than ideal… especially when Steam and other distributing services offer a route out of this frustrating madness with bargain bin deals.

      I honestly believe some pirate-game-users* spend more time (which equates to money) on keeping a game cracked than if they just outright bought it.

      *Calling pirate-game-users… Pirates… is like calling the poor in Sherwood Forest… Robin Hoods.

    • MaxTheLimit
    • 8 years ago

    “…I have to take issue with one of Newell’s comments on piracy. Before boasting about Valve’s success in Russia, a market with a reputation for rampant piracy, he states: “The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates.” Fair point. However, Steam has plenty of anti-piracy technology built in….”

    Is this a situation of ‘ Do as I say, not as I do.’ or is it more ‘ Practise what you preach. ‘ Haha

    To be fair the DRM inherent in Steam is far less restrictive than things like SecuROM which will shut you off from playing for no reason at all. The WORST though is when DRM is added on top of the Steam DRM. Steam + SecuROM = NO!

      • ImSpartacus
      • 8 years ago

      I think Valve has mastered DRM.

      I actually [i<]like[/i<] Steam. It provides more good than bad. If I get a new computer or reformat, I can just log in and start downloading my games. There's no finding disks and marathon installation sessions. It "just works". Of course, the downside is the required internet connection, but in a world where we have internet-only [i<]operating systems[/i<], I think we survive an internet connected game distro platform. However, I agree that 3rd party DRM added to Steam is unacceptable. Thankfully, I do not play such games.

        • kamikaziechameleon
        • 8 years ago

        YEAH, steam gives you so much in the way of services in exchange for a few compromises. I’m happy to trade in a few consumer privileges to gain a few ya know. I’m happier for what I gain than I am for what I loose.

      • HisDivineOrder
      • 8 years ago

      Steam + SecuROM + Games for Windows Live = DRM Hell.

      • Anonymous Coward
      • 8 years ago

      [quote<]Is this a situation of ' Do as I say, not as I do.' or is it more ' Practise what you preach. ' Haha[/quote<] I think this is an example of "carrot and stick".

    • kamikaziechameleon
    • 8 years ago

    I agree with what gabe said, “he easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates.”

    If you consider games a services industry in addition to a product driven one then his approach makes perfect sense. Sony seems to see the same value, as does nintendo to some extent while microsoft has no clue.

      • BobbinThreadbare
      • 8 years ago

      Sony has awful customer relations, and I speak a moderately happy PS3 owner (it plays BluRays and has the best exclusive games imo, so I like the device).

      I haven’t seen any other company resort to changing the EULA to prevent customers from joining a class action lawsuit.

        • kamikaziechameleon
        • 8 years ago

        Well I will agree they have some ridiculous moves, like how they pulled the plug on the linux functionality then tried to sue geohot for cracking the system and unlocking that feature. They should know not to piss off hackers. I’m just talking to how open their online is generally speaking(how they have steam functionality on it!)

    • PrincipalSkinner
    • 8 years ago

    Someone should inform Mr. Newell about dollar to euro exchange rates. They are not 1:1 anymore!

    • cheddarlump
    • 8 years ago

    Just waiting on the portal pack to go on sale again.. 🙂 My son needs a copy so we can play coop.

      • l33t-g4m3r
      • 8 years ago

      In the old days you bought one copy and that was enough to play coop over your home network, you just couldn’t play over the internet. Now, you have to buy an individual copy for each personal computer you own. Such a lovely system we have now.

        • BobbinThreadbare
        • 8 years ago

        Depends how old you mean. I remember having to keep the CD in the tray.

        Also, what you’re telling him to do was always against EULAs.

          • l33t-g4m3r
          • 8 years ago

          Not it wasn’t. There were plenty of games that explicitly allowed you to do this, and some even came with a special lan only installation option.

            • Anonymous Coward
            • 8 years ago

            Yeah the big companies are pretty much run by greedy bastards. Go indie games!

            • Chrispy_
            • 8 years ago

            Not sure why you’ve been ranked down for that comment.
            Multiplayer spawn installations were [i<]the norm[/i<] before internet gaming caught on and we all had to use LANs.

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