By Nicholas Haberling
There has been a trend over the past fifteen years across the electronics industry: digital downloads. Like everyone else I was initially excited about the possibilities of digital downloads. We live in a world where thousands of songs can be held on a single device along with dozens of movies and video games. It’s almost like a dream come true until you begin to consider the monetary consequences. I first began to realize the obsession with digital downloads for video game consoles could lead to unnecessary costs a couple months ago. My friend had recently purchased an Xbox One and we wanted to play Halo 5’s campaign online. While I already owned Halo 5, my friend didn’t so he was planning to download the game from the Xbox store for $39.99. Thinking that was a little expensive I decided to check if Amazon had cheaper digital options. While Amazon also had the price of $39.99 for a Halo 5 digital download, interestingly enough, the disc version was in the range of $20. While for the sake of expediency my friend decided to go ahead and purchase Halo 5 for the digital price, I felt this development warranted a further look.
These were the first twenty games to appear on Amazon when I typed in “xbox one videogames.” I've reordered them based on their release date. In this sample I tried to use the standard edition for each game. However, for a few games the standard edition was unavailable in both the disc and downloadable version so the edition that was available in both domains was used for the sake of consistency. Regardless, you will immediately notice that besides a few exceptions there is a significant disconnect between the disc version of a video game and its digital download price. How large is this difference? On average a digital download costs 52.7% more than the disc version. The median difference is 52.4%.
Why this is Important
Generally speaking this is not a game-changing societal issue. However, we shouldn’t ignore that the digital revolution has reduced the power of the consumer in the free market. For instance let’s look at music. I love *NSYNC, but I don’t think their albums should cost $9.99 like they do on iTunes. The price of an *NSYNC disc on Amazon(1), approximately $5, is a far more accurate assessment. Why is that? Because retailers that sell physical items have an inventory cost for holding that item and must adjust the price of their inventory to meet the demand of the consumer. Historically this has been an important element of our free market system since it gives consumers some relative influence on the price of goods.
We can clearly see this in the snapshot of the video game price spreadsheet. Retailers that sell the physical discs of a video game must set their prices at a level that attracts consumers. While those who reap the rewards from digital downloads are either slow to match these trends or ignore them all together. As a capitalist and believer in the free markets I am generally okay with businesses increasing revenues from buyers who are too lazy to drive to a store to purchase a game or wait for snail-mail. But I feel that at the very least I must make a note of protest when the purchasing habits of these individuals could eventually lead to me paying more for video games (potentially other media as well). As recently as this console generation(2) gamers were faced with the possibility of only downloading games digitally. Luckily there was enough uproar to prevent this from happening, but the trend towards downloading video games is only growing stronger with time. Already 72%(3) of console and PC gamers download rather than buy a disc. While this is likely heavily skewed by PC gamers(4) there is no question that executives are paying attention to this trend and will be prepared to pounce in future console generations. This could lead to the very real possibility that a game could cost the same as it did on its launch day nearly a year later. I love video games and appreciate the hard work the development teams put in. There are many franchises that I want to succeed and they can only do that through strong revenues and profits. I'm sure digital downloads that hold a higher price over time contribute to this by increasing the monetary longevity of a game. But at the end of the day the market should determine the price of a game which is in turn a reflection of its quality. And the fact is that digital downloads reduce the ability of consumers to impact that price
Note: Obviously on launch day and in the following weeks the price difference between discs and digital downloads is generally zero. However the information above shows that even after a couple months there is a significant difference in price.