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Forums - Gaming Discussion - Ubisoft reveals profit margins for physical versus digital sales on console

Darwinianevolution on 12 February 2018
flashfire926 said:
Darwinianevolution said:

With physical games gone, there would be no real incentive to lower the prices. Why should they? Either you buy them from us, or you walk away. And even if dedicated videogame stores are becoming smaller and smaller, the big retailers around the world still sell them. In fact, because they are massive markets, they can afford to buy in bulk way more copies of games per store than the smaller videogame retailers, decreasing the price (not to mention online stores for such products).

curious question: Do you think the console makers will raise their cut, once digital is majority?

No, but by the same token, they won0t feel the need to decrease it. And with less options to get games, they will become more expensive overall.



You know it deserves the GOTY.

Come join The 2018 Obscure Game Monthly Review Thread.

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Teeqoz on 12 February 2018
RolStoppable said:
shikamaru317 said:

I kind of feel bad for buying physical games at $20 now. If I'm reading that right, the publisher only gets $3 on a $20 physical sale, versus $13 on a $20 digital sale. No wonder the publishers are pushing digital so hard. 

That's exactly what industry figures want you to believe. They want you to pity the publishers they are working for. Similar things happened with used games that were supposedly bad for the video game industry while every other industry is fine with its second hand market.

The second hand market for other media is dissappearing even faster than for games. For music and movies, you don't even own the media at all. You subscribe to a service that provides them.

So I'd say it's a bit misleading, every other industry was fine with its second hand market, but that second hand market doesn't exist any more for other entertainment mediums.



Teeqoz on 12 February 2018
RolStoppable said:
Teeqoz said:

The second hand market for other media is dissappearing even faster than for games. For music and movies, you don't even own the media at all. You subscribe to a service that provides them.

So I'd say it's a bit misleading, every other industry was fine with its second hand market, but that second hand market doesn't exist any more for other entertainment mediums.

I was speaking in broader terms than mere entertainment, but okay. You are right that other entertainment media have seen their used markets crumble, but that's the result of falling prices. Nowadays you pay around €1 for a new song whereas previously you paid €6 for a CD. Similarly, what was previously charged for a DVD or Blu-ray buys you a month or two of subscription to a big selection of TV shows and movies. There's also the difference to video games that music artists and TV shows/movies have other sources of income, like concerts, ad-supported broadcasts and cinemas.

Both cinemas and ad-supported broadcasts are faltering in competition with streaming (notice the trend - digital distribution outcompetes traditional channels). Concerts are doing well due to an increased focus in experiences from millennials and teens.

As you say, the second hand market has crumbled as a result of digital distribution channels (that don't allow resales) marginalizing physical media by having much lower prices. Yet your argument is that digital distribution for games won't benefit consumers? The trend for digital distribution from other entertainment mediums suggests the opposite - physical distribution can't even come close to compete. Same thing will happen for games. Xbox Game Pass and Steam sales are just the start.

Yes, the second hand market for stuff like cars is still alive and strong, but why on earth would you look at trends from cars... instead of more similar things (in terms of how you consume them) like music, movies and books?



Alkibiádēs on 12 February 2018
Teeqoz said:
RolStoppable said:

That's exactly what industry figures want you to believe. They want you to pity the publishers they are working for. Similar things happened with used games that were supposedly bad for the video game industry while every other industry is fine with its second hand market.

The second hand market for other media is dissappearing even faster than for games. For music and movies, you don't even own the media at all. You subscribe to a service that provides them.

So I'd say it's a bit misleading, every other industry was fine with its second hand market, but that second hand market doesn't exist any more for other entertainment mediums.

I work for a large reseller company (software licenses, hardware, solutions and IT services) and there's a decently sized market for second hand software licenses. It's much cheaper and there's nothing Microsoft can do about it (and they've definitely tried to stop it). Of course the companies buying those second hand licenses don't get any support from Microsoft, so they do take a rather big risk. 

So even with an all-digital future, a second hand market can still exist. 



"The strong do what they can and the weak suffer what they must" - Thoukydides

Teeqoz on 12 February 2018
RolStoppable said:
Teeqoz said:

Both cinemas and ad-supported broadcasts are faltering in competition with streaming (notice the trend - digital distribution outcompetes traditional channels). Concerts are doing well due to an increased focus in experiences from millennials and teens.

As you say, the second hand market has crumbled as a result of digital distribution channels (that don't allow resales) marginalizing physical media by having much lower prices. Yet your argument is that digital distribution for games won't benefit consumers? The trend for digital distribution from other entertainment mediums suggests the opposite - physical distribution can't even come close to compete. Same thing will happen for games. Xbox Game Pass and Steam sales are just the start.

Yes, the second hand market for stuff like cars is still alive and strong, but why on earth would you look at trends from cars... instead of more similar things (in terms of how you consume them) like music, movies and books?

That's a good question. My argument is that industry figures want consumers to believe that third party publishers are barely surviving, and by making consumers feel guilty, they hope to increase their revenues and profits. I mentioned the widespread portrayal of the used video game market as an evil thing as a similar instance of making gamers feel guilty.

You sidetracked that with your initial response to me and I gave you an answer. We could continue, but it has hardly anything to do with my original point anymore.

I did sidetrack, as I sort of assumed from the tone of your response that you were of the opinion that digital distribution is detrimental to consumers. But really, I've never seen any example of the "publishers portraying used games as evil" that you mention, though maybe it happened before my time.

Some publishers do very well, but some don't do as well. Overall, it's a trend of consolidation into bigger publishers with more marketshare. Smaller publishers go bankrupt or get gobbled up. Some survive and ascend, perhaps thanks to other revenue streams (an example would be CDPR, the developer of The Witcher 3, which has GoG to fall back on.) 



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ironmanDX on 12 February 2018
Darwinianevolution said:
shikamaru317 said:

I kind of feel bad for buying physical games at $20 now. If I'm reading that right, the publisher only gets $3 on a $20 physical sale, versus $13 on a $20 digital sale. No wonder the publishers are pushing digital so hard. 

Then why not make the games significantly cheaper in digital? They are going to earn more from digital regardless.

" If digital games start being sold for cheaper than their physical counterparts when they’re new, that upsets retail partners greatly and they may refuse to carry certain games that do this, and so on."

https://www.forbes.com/sites/insertcoin/2015/07/10/ubisoft-explains-all-the-terrible-reasons-why-digital-games-are-so-expensive/#6379f4a49e87

 

Old article, still relevant though.



VGPolyglot on 12 February 2018

It's interesting noting the differences between the gaming and music industries, the former is trying to push digital hard while the latter tried to resist it for as long as they could.



Intrinsic on 12 February 2018
Ka-pi96 said:
shikamaru317 said:

I kind of feel bad for buying physical games at $20 now. If I'm reading that right, the publisher only gets $3 on a $20 physical sale, versus $13 on a $20 digital sale. No wonder the publishers are pushing digital so hard. 

By charging significantly more for digital? That's hardly what I'd call "pushing" it, if anything they're pushing people towards physical with their digital pricing policies!

And yet digital sales keep rising each year. 



SecondWar on 12 February 2018
shikamaru317 said:

I kind of feel bad for buying physical games at $20 now. If I'm reading that right, the publisher only gets $3 on a $20 physical sale, versus $13 on a $20 digital sale. No wonder the publishers are pushing digital so hard. 

You threw me on this when you said 20% licensing fee on the cost of goods sold, regardless of the sales price. Although to me this doesn't make sense, this means a unit would be loss making at anything lower the $20 and they would still sell a fair few even when they get down to 15/10.

Last edited by SecondWar - on 25 February 2018

Cobretti2 on 12 February 2018
John2290 said:
Well more of my money goes to the publisher and back into the gaming industry, good to know. I was starting to feel bad taking money away from gaming stores here which are looking in dire straights.

You mean more goes into shareholders pockets? and teens loose out on jobs in game stores.