Finally, Gamasutra published an article on a topic that I’ve been interested in for a long time: the economics of Steam sales. Valve’s infamous sales often drop games as much as 75% to 80% off their regular price, which has lead many to wonder whether selling their product for a few dollars hurts developers in the long run. EA has claimed it devalues IPs and makes consumers unwilling to pay anything except bottom dollar for games, while Valve has maintained otherwise. As a consumer, I am deeply appreciative of Steam sales, but as a supporter of the hard work developers put into their games, I always wondered how they could profit by selling their games at incomprehensibly low prices.
During the Humble Indie Bundle V AMA on Reddit, Tim Schafer answered a question about how viable deep discounts are for small studios. His answer was characteristically bizarre, but still revealing: sales are “magic,” and the more you give away, the more you take in. It makes sense, in a way; sure, you’ve lost some money from fans who would be willing to buy Psychonauts for $10, but you’ve gained tons of money from people who would never have bought the game or even thought about it if it wasn’t $5 off. I guess the balance swings in favour of profitability pretty much all the time.
Sure enough, the Gamasutra article seems to confirm this. Runic Games have claimed that, thanks to periodic Steam sales, Torchlight has enjoyed more or less evergreen sales since its launch, while Edmund McMillen has claimed that at 75% off the regular $4.99 price (making it $1.24), The Binding of Isaac‘s sales suddenly multiply by a factor of sixty.
Speaking of Edmund McMillen and Team Meat, I remember Tommy Refenes mentioning in Indie Game: The Movie that launch day is typically the best day for game sales, and things only go down from there. But with these deep discounts, games can far eclipse their launch day sales and generate record profits on days when they’ve marked down. Hell, Bastion‘s launch day was only its fifth best day of sales on Steam, thanks to all these sales (I picked it up for $5.00, but I’ve seen it go for as cheap as $3.74).
So far, it seems like Steam sales are a win-win-win situation for customers, developers, and Valve itself. There seem to be no drawbacks whatsoever; Valve’s statistics show no negative impact on sales after a promotion finishes, with a reversion to normal, pre-promotion sales figures being the worst that typically happens (in Torchlight‘s case, a doubling of purchases at the full $15 price for nearly two weeks after the sale is a best-case scenario). That being said, I’d like to read even one horror story about a developer being totally ruined by a Steam sale, just to see if things like that can actually happen, as EA intimates they might. The Gamasutra article makes that scenario seem impossible, but given how little I understand regarding the economics of digital distribution, they could be easily pulling the wool over my eyes.