An all-digital future with Sony and Microsoft would mean death to fair prices

This past weekend, as we returned home from a close friend’s wedding, my wife and I had a discussion about the future of console gaming. We focused on why the used-games market exists and the inevitability of an all-digital gaming world.

I have some reservations about an all-digital gaming world for consoles. At present, we can only purchase digital games through Xbox Live, the Playstation Network, and Nintendo’s eShop (and GameStop to a very limited degree). If publishers and developers seek to establish an economy where purchases are made exclusively online, I fear that Nintendo, Microsoft, and Sony will run the risk of creating self-contained quasi-monopolies. I’m no attorney, so take my use of the word “monopoly” to be more a representation of the future than a literal description of it.

Consider the sentiment, though. If I only own a Playstation 4 and PSN is the only means I have to purchase games, what’s to stop PSN from jacking up the prices? Or more practically, what’s to stop them and/or publishers from poorly pricing games over time? One could argue that Microsoft’s online-gaming ecosystem would provide significant competition to keep Sony from setting poor price points (and vice versa), but that scenario still seems much less advantageous for consumers than our current hybrid system. This hybrid system mixes digital sales with sales from brick-and-mortar retailers like GameStop, Walmart, Target, Best Buy, and other independent shops (eStarland, for example). This market allows for significant competition — competition I believe will die when we go all-digital.

So let’s examine a possible instance. This past weekend, I wanted to purchase Sega Superstars Tennis for my son. Conveniently, Xbox Live had it on sale for $9.99. GameStop was selling it for $2.88, and its copy included several Xbox Live Arcade games bundled in for free. Which one do you think I purchased? In an all-digital world, what incentive would Xbox Live or Sega have to sell me that game any lower than their current $9.99 rate? Even in this current hybrid system that we have, they don’t see fit to price their games competitively. What happens when you remove the limited competition that GameStop and other retailers introduce?

Now, let’s chat about this notion of used games. Cliff Bleszinski comes out and says that keeping used games in the market is untenable for developers and publishers. I reached out to him on Twitter to discuss his comments, but I’m a nobody in this world, so I didn’t expect any type of response. But let’s discuss why I think used games exist at all. I’ve been buying them since before GameStop made it a standard in this market.

As a kid, I used to ride my bike up to my friend Matt’s Music & Games neighborhood store. I often purchased used games and music from him. I did not buy used games from Matt solely because I wanted to get my games cheap. I bought them from Matt because doing so allowed me to pay the price I felt the game was really worth. I still apply this approach today. The simple fact of the matter is that Risen 2 was not worth $60 to me. Instead of buying it at launch, I waited until I was able to buy it for $16 at GameStop. Had I perceived the game to be worth the $60 price point, I never would have waited to buy it used. I will comfortably assume that many gamers take this same approach. We are not cheap; we just refuse to pay for something we believe is not worth the price of entry. This is why I believe the used-games market is as prolific as it is today. So to Cliffy B., I say, “If you want to do away with used games, either stop making whack-ass games that are not worth the price you charge or lower the price of your clearly inferior games. Be smarter about how you price your products before you bring them to market.”

We’ve nailed down what I think is a major hurdle we need to address before we can go all-digital. Now let’s talk plausible solutions. What I would love to see on all-digital consoles is a free market approach similar to what exists in the PC gaming world now. With Steam, GOG, Battle.net, Origin, GameStop Online, and others, you have an ecosystem that supports competition in the market. What if we could somehow cajole Microsoft and Sony into opening their doors to other digital game-distribution platforms? We can already assume GameStop is working on this as rumors and announcements related to the PlayStation 4 and Xbox One have threatened its livelihood over the past year. But what if we had Xbox Live, PSN, Steam, GameStop, GOG, eStarland.com, and others all selling digtal games on our consoles? Then there would be true incentive to compete in terms of pricing and providing consumer benefits.

I honestly believe the companies who have suffered this generation have done so mostly because they did not properly price their products to sell. You can blame used games and piracy and tout the eventual all-digital market all you want. But in the end, consumers won’t pay what they consider an unfair price. Had publishers priced their games better from the start, they could have had many more early adopters willing to take the plunge. That would have resulted in cash in their pockets that ended up in GameStop’s instead.

This happened because GameStop figured out something vital about the gaming market long ago. It realized that most of the games that publishers make are not as awesome as they think they are.

Sidenote:  You’ll notice I’ve left Nintendo out of much of this discussion. Based on its history, I feel safe in assuming that it is not about to let anyone else into its house to make money.