Today I want to take some time to look at a service that has revolutionized the way PC gamers purchase video games. Steam.
Steam is an online video game store created by Valve, the developers of the Half-Life and Portal series. Valve released Steam in 2003 as a way to sell PC games directly to consumers. It allows the user to purchase a game and then download it on any computers they own.
Initially PC gamers approached Steam with a huge dose of skepticism. They saw it as a form of DRM that provided very little benefit. The only reason a lot of them signed up for it was that it was required to play Half-Life 2, one of the most anticipated games ever.
So how was Valve able to revolutionize PC gaming? Two words: Steam Sale.
Valve is a privately owned company. Because of that, they are able to experiment without having to appease shareholders. One of the things they started experimenting with is pricing. This led to an important discovery.
We do a 75 percent price reduction, our Counter-Strike experience tells us that our gross revenue would remain constant. Instead what we saw was our gross revenue increased by a factor of 40. Not 40 percent, but a factor of 40.
Basically, he’s say that reducing the price 75% did not result in a sales increase of 4x normal but 40x. That is a huge difference!
So Valve started doing big time sales. They have at least 2 (Summer and Christmas) and sometimes as many as 4 (Spring and Fall as well) every year. These sales run for a week and a half to 2 weeks. Almost all the games on the service have some kind of deductions (10%-33% at least with some being reduced as much as 90%) throughout the whole sale. Then there is a slate of games each day that receive bigger discounts for a short period.
These sales led to 2 major changes in the way I purchase video games.
- If it is a game I am only mildly interested in or that did not score real high, I will wait for it to go on sale. Chances are extremely high that I will be able to get it at a much reduced price if I am willing to wait. I still pay full price if I am really excited for a game. However, it takes a special game to overcome my desire for a deal. Of course, that leads to the second thing…
- I own a lot more games that I found mildly interesting than I would otherwise. PC gamers call this the Steam backlog. Right now, mine is sitting at 342 games, less than half of which I have actually installed and played. It is hard to resist a game I heard good thing about when it is on sale for $2.50.