Last year Valve Software President Gabe Newell gave a speech at the annual DICE summit, where he explained that by cutting prices they were able to make more profit than if they kept titles at full price.
This year Paradox Interactive CEO Fredrik Wester said the same thing in an exclusive interview to Netopia (translated version here). Gamersgate saw an increase of 5500% in sales when they reduced the prices 75%.
The successful product launches, sales have been significantly strengthened by temporarily reducing the price within three months from launch, for example over a weekend, with up to 75%. Our test case has shown sales increases from 1500 to 5500%.
The basic theory is the more you sell, even with a lesser profit for each game, you’ll end up making more money. Both Steam and Gamersgate have proven this is true when applied to video games. They also noted that even after the sales were over there was an increase in game sales.
It turns out that the sale not only increases during the campaign period, but that sales of the output price increases the weeks following the campaign. It has also help to prolong the product life cycle due to the proliferation of product, which then recommended by more and which spreads to new customer groups.
In the year following Gabe Newell’s speech there has been no change in game pricing, maybe now with both Gamersgate and Steam coming out with the same results there might be movement in all game pricing. With the economy the way it is, lower pricing just makes more sense, and even more so if it means more profits. With game developers cutting employees as they are struggling, they need to take a serious look at pricing.
I’d like to announce an addition to the site at this time, as it is apt to this topic, one of the additions to this site will be a digital game sales page that will show game sales as they come out. We are in the beta stage of it now, but it should be up shortly.