Maths with THQ

Red Faction Guerilla is this week's weekend special on Steam. This game normally costs £34.99/€49.99/$39.99 on steam, but the weekend special has brought the price of Red Faction Guerilla down by 25%. It is now £26.24/€37.49/$29.99. The UK and EU price of the game is still higher when it is on weekend special than the standard USA price.

To add insult to injury, Saints Row 2, a game by not only the same publisher, but the same developer, is priced much more sensibly at £14.99/€19.99/$29.99.

This table shows the prices for the two THQ/Volition games on Steam in the three regions and three currencies:

The astronomical inconsistency in international pricing between these two games is certainly frustrating. You have to assume that THQ have chosen this pricing strategy simply because it will make them more money. It is essentially price discrimination, the equivalent of looking at customers walk into a shop, and gauging how much to charge them based on how rich they appear.

I don't know exactly what we should be doing here. How steam used to work, where everyone paid in dollars exchanged into their currency at the exchange rate when the transaction occurs seems like it might be better for most people outside of the USA, although as SR2 proves this is not always the case.

How steam currently works is that the publisher sets a specific price for each region. These prices are generally roughly comparable to each other based on exchange rates at the time, however, if the publisher wants to charge more in one region, they are completely allowed to do so.

Were it up to me, I would still allow this practise, however, I would also regulate it a bit more. I would say some kind of rule where no game was allowed to be sold for (say) 10% +/- the price of the same game in another region, and could be reviewed monthly with regard to currency fluctuations. This would give publishers a margin for error, but prevent them gouging different regions just because they can.

Perhaps the whole thing is academic anyway, since RFG is far cheaper to get at retail:
Red Faction: Guerilla, PC - £17.99 delivered


Gnoupi said...

Publishers don't set their price according to the currency values, they set it according to the market value of a game. Blockbuster for PC, 50 euros, or 50 dollars. This has nothing to do with the currency rates, it's only the common price for a game in retail stores.

Publishers are only putting the prices they put in the retail stores (most of the time, ok).

Steam can't be asked to regulate it, it's not their place, and they would have no interest in the matter.

Keep in mind that prices in dollars are actually bigger, because a year ago, you had to add the VAT on their prices, which was increasing price by roughly 1.2 . In this case, we enjoyed buying on Steam during the low values of dollar, when it reached the 1.6 dollar = 1 euro peak, typically, because we were gaining money on it.

Change is still in our favor, but what if it wasn't ? If we had a change like 1 dollar = 1.3 euros, then we would actually be glad to have such things from the publishers.

Now, I'm not saying it's a great thing to have this 1euro=1dollar, don't get me wrong. That's mostly why I prefer publishers like Stardock, who respect such difference (not saying Impulse does, Impulse now has the region pricing available for publishers, but their own games, yes).
But then you find yourself with weird things, like Demigod for 30 euros on their site, and 40 in retail.

More than regional pricing, I would be more against regional restriction. The whole "let's check your ip to see if your can buy". It's incredibly frustrating to be limited like this. Though I understand that this is again a process linked to retail.

Publishers don't consider online distribution as a worldwide service. Most of them use it on the same way they use retail stores, they divide in regions, and have a different management for each. Is it necessary, profitable for them, I don't know, it's their job, they probably know it more than me.

But for sure, if we enjoyed taking advantage of the currency system, they enjoy it too. They have no reason to sell a product for a "worldwide price", if some regions are used to buy at a higher price.

This kind of thing finally revolts us, because we feel like buying worldwide, because we "see" the dollar price. But in a retail store, you only see the regular price for a game, you don't see a worldwide price, you see a market price. The price that customers are supposedly ready to pay. And this is the base of selling, don't sell something for cheaper you can actually sell it, it's obviously more profitable.

Joe said...

Is it not the case the publishers have different offices in different countries, and that if games were sold at a world-wide price the offices from some of those regions would get less than they arguable should?

Ansob. said...

I suppose this is a better place for my musings than the comment section on RPS where there's about two of us in total who give a damn about regional pricing. Warning: wall of text incoming. May crit for 2*10d20 damage.

There are four problems with regional pricing; two that work in favour of it, and two that work against it.

Problem the first: regional pricing makes a certain degree of sense. The minimum wage in France is about 8.50€ per hour. The national minimum wage in Canada is about $8.50 an hour. Obviously, taking the minimum wage into account isn't an exhaustive way of comparing relative wealth levels, but it does highlight that in terms of spending power, 1€ and $1 are fairly close in their relative markets. Since we're being paid the same number (not amount[*]) with a different sign in front of/behind it, it seems defensible that we ought to pay the same number (not amount) of money units in currencies X, Y and Z; in other words, that a game that is worth $50 in North America should be worth 50€ in France.

Problem the second: we live in the age of globalisation. Companies can ship their stock from one end of the world to the other at next to no charge, relative to the market value of that stock. Shipping costs can be even further cut down by owning a printing plant in the target region, since sending data digitally is free. There are virtually no tariffs on import/export today, thanks to the IMF insisting on ruining the developing nations' economies. There are very few barriers to exchanging physical currency for currency of another type, and even less barriers to exchanging virtual currency for currency of another type. Manufacturing costs are negligible thanks to the plentiful availability of cheap workforces and the automation of basic factory tasks like CD printing. Server costs related to digital distribution are a fraction of the costs incurred in providing physical copies of games.

All of this cuts down on the cost of getting video games to the customer. Admittedly, it's hard to compare the price of video games now to the price of video games fifty years ago since, well, gaming is a very recent invention; but judging by some developers' fancy sports cars and publishers' corporate megatowers, there's certainly enough wealth being made in games development that at least some of it could be given back to the consumer like, you know, what was supposed to happen as a result of globalisation. As it stands, publishers have free reign to sell whatever they want, wherever they want (we'll leave censorship out of this, since it has little bearing on prices) – one of the major benefits of globalisation. What's the customer supposed to be getting out of this in exchange? The ability to purchase from the cheapest seller on the worldwide market rather than the local/regional market. Do we have that? Blatantly not – because the publishers are deliberately preventing us from buying from the cheapest supplier, in direct contravention of the wonderful principles of economic globalisation that are allowing them to line their pockets. And yet, in a world where protecting a burgeoning local industry in order to not end up terminally poor and uncompetitive is internationally sanctioned, no one has any problems with customers being fleeced by suppliers.

[*] “the same amount” as 30 USD in EUR would be 20 EUR. “The same number” (as in, of monetary units) is 30 EUR. Yeah, I know it isn't real jargon, but my days of studying economics are several years behind me.

Ansob. said...

Problem the third: regional pricing is really what allows the developers and publishers to survive. If we truly had the ability to purchase games at the lowest selling point, we'd all be buying them at Nigerian or Hong Kong prices – significantly less than European prices or even North American prices, resulting in the demise of all but the biggest companies that are able to have most of their costs in cheap foreign countries; then again, the market law that capitalism so adores dictates that they'd sell more if the price were lower.

The alternative to developer/publisher bankruptcy as a result of global pricing is raising the prices in poorer regions, depriving gamers in China or Africa or even Eastern Europe of games. It is only because the developers make money on the Western markets that they can then afford to sell games at affordable prices in the poorer markets.

Problem the fourth: it's not about being able to sell to Nigerians and Serbians, it's about lining their pockets. Fortunately, this is a tendency that has steadily declined for PC games over the last decade courtesy of the AAA-isation of studio productions and digital distribution (meaning that games often get a “worldwide release” much like big-budget films get), but unfortunately, it's still very common for console games (especially portable consoles): a game comes out in US priced at $50, with a European release date six months later; the game is discounted to $30 within three months of release, and further discounted to $20 by the time it hits European markets; in Europe, the game is sold for 60€/$90 at release – twice the US release price and eight times the price Americans would be paying for the game if they bought it in the US on the same date that it was released in Europe; the massive profits from the European sales are passed on to American customers; European customers get the shaft; European customers get the shaft again because the game stays at the 60€ price point for a minimum of a year (often as much as a year and a half) before finally being discounted to 30€ when the publisher deems it has fleeced us for enough money.

To a certain degree, this is a practice that has been phased out over the last decade, but it still happens on a smaller scale and on a daily basis: games still take far longer to be discounted post-release in Europe than they do in the US (there's a 3-6 month difference, more or less) because the savings made by American customers are being passed on as costs to us Europeans.

In the end, the problem isn't so much regional pricing as pricing, full stop. 50-60€ is too expensive for a new game – I think few will argue that at least part of the numbers involved in PC piracy are from people who can't afford to buy games. In theory, regional pricing is a necessary evil, but the motivations behind it (being stinking rich rather than serving all of your customers indiscriminately and as best you can) are wrong. People would be a lot more willing to pay regional prices if there weren't such a huge difference between them: I shouldn't be paying close to $100 for a new game, and while I can't speak for everyone, I know for a fact that I'd have no problem with regional pricing if I were paying a more reasonable amount – like 30€ (or £20 when the pound's recovered) if new games were priced at $30 in the US (possibly allowing publishers to recoup their losses from increased sales and decreased piracy rates).

(And again, sorry for the massive wall of text – but there's a fair bit to be said, and I figured the sort of people who read the comments here are the sort of people who'd be interested in discussing this.

It's also, you know, an appropriate post to be publishing this as a comment on.)

frymaster said...

at least in new releases, I believe it's also because publishers are either compelled or strongly disinclined to undercut their own RRP. Even though every mail-order or bricks-and-mortar retailer in the universe undercuts it, I suspect they'd kick up merry hell if the publisher were to do so.

Let's say on an RRP £40 game that the retailer pays £30 and sells for £35, and that on an RRP £35 game they pay £25 and sell for £30 (numbers totally made up). If the publisher were to sell that RRP £40 game for £35, the retailers would insist on not paying more than £25. And would then sell for £30.

And since retail is more popular than online distribution (well, it's cheaper, so it would be - nice vicious circle, this) they have the publishers where they want them. See also retailers "accidentally" selling games before official release date - the fact that this makes more people pre-order via them is totally accidental, honest...

Carra said...

I disagree that regional pricing is a necessary evil.

Yes, if we had the option to buy our games at Chinese prices we'd all just buy our games there. But why do publishers bother with the Chinese market in the first place? Take a look at WoW. Of their 11 million players 6 million are based in China. Yet 90% of Blizzards income comes from western markets. Except to be able to say "we have 11 million players", it doesn't look like it's worthwhile to even release their games in China. Let alone the huge problems they have with getting their games trough the censorships. Releasing your games in Nigeria or other poor countries will only give you a tiny percentage of your income. You can just dump that market.

And yes, we can now *see* the difference in prices. I see that they ask €50 for the game in a retail store in Belgium. I also see that the same game is up on for €35. Or on the US steam for $50. Knowing that I haven't bought a game at retail price in any of our stores for the last five years. has been doing good business with me on the other hand.

If enough people stopped buying in retail stores they'd be forced to drop their regional prices to competitive prices with other stores. Else your shops can not compete with foreign stores who offer their games 30% cheaper.

Once most people find out they can buy their games from foreign, much cheaper shops the prices will be forced to drop.

Anonymous said...

EU countries use the same currency but their wealth varies a lot.

The typical salary can be as high as 2000 euros or as low as 600, so it's absurd to inflate those prices as if we all were (well paid) French or German citizens.

Lachlan said...

Don't think that if it was priced in dollars for everyone it'd solve the problem, Lewie. Australians are charged in US dollars for games. We're also charged $70 USD for RF:G, while people in the US are charged $40. The solution is to not allow regional pricing, or for publishers to hurry up and fucking die.


Ansob. said...

"EU countries use the same currency but their wealth varies a lot."

Steam has a separate pricing region for Eastern Europe, or so I was told, which makes that a moot point because I'm comparing the Western European, British and North American regions.