Analyst: Valve Is Pushing Steam Games To Be Mostly Free

Last week Valve decided to start allowing developers to set their own Steam sales. Industry author Nicholas Lovell believes that this has signaled the start whistle for PC games price race to the bottom.

According to economist Joseph Bertrand's theory, when isolated from outside factors, competition should drive consumer prices to their marginal costs. Steam makes distributing games digitally practically free, just like Google's Play Store and Apple's iStore, so it makes sense that Steam games can go down in price to those platforms' levels. In turn, this should give Steam Box a competitive edge over consoles in the living room.

"There is an issue with Bertrand Competition," acknowledged Lovell . "It excludes the impact of marketing; it assumes that one pair of shoes is as good as another pair of shoes; it doesn't factor in the cost of comparison, or the cost of switching, all of which are real. But what it does say is that the thing that drives the cost of products down, particularly in the case of digital products with low marginal costs, is competition, not piracy. And by removing itself from the pricing process on Steam, Valve has just made its platform hyper-competitive."

Lovell believes that Steam Box competes directly with traditional game consoles. While traditional consoles are sold at a loss that is made up for later through game sales, Steam Box is sold at a profit from day zero.

"[W]hat if Steam's [unique selling proposition] was thousands or tens of thousands of games for free," Lovell mused. "What if it competed with consoles by taking the Steve Jobs approach of an open platform with the price set by developers (and hence likely to tend to free, according to Bertrand Competition)? What if Steam wants the PC market to go to free because it will be a powerful competitive weapon as it battles the console manufacturers? Then I would expect [Valve] to open Steam to many more developers (Greenlight), to make games available fast (Early Access) and to give the market control over pricing (developers set their own sales)."

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Sounds good.

Now just get on with HL-3, make it exclusive to PC, then do the same thing with Portal 3 before this generation of gamers die from old age waiting & you're set..

jeez valve is genius. i like

jeez valve is genius. i like the comarpison To Walmart above. its all about the service.... one stop shop. cheap cheap cheap. Thing is.... the products on steam are the same they are everywhere. the beauty of computers and game copies :-)

I would like to see the

I would like to see the numbers of users on steam from 2010 to 2013. I'm sure the "bundle mania" is bringing tons of gamers to Steam and I'm sure lots of people got sites like epicbundle or cheapshark on their bookmark now to get so many games dirt cheap. I got Fallout Vegas for 2.50$, Darksouls for 6$, Napoleon Total War for 3$. PCs are a more expensive sure, like twice the price of a console, but the games are so much cheaper while on sale then it is actually much cheaper to game on PC than any console, plus you get all the benefits of modding, free online multiplayer and always compatible hardware instead of having to re-buy peripherals each time new consoles comes out. This is sure some sort of "walmart" tactic from Valve to sell so cheap they make the console games feel too expensive and in middle to long term this approach might work pretty good.

I'm just not poor. If you

I'm just not poor. If you choose to pirate a game you can get for a few bucks you probably are. Paid versions tends to be hassle free and updated if you stay away from certain publishers you shouldn't be buying games from anyway.

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