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Start scratching your heads now because the following statements from David DeMartini (Senior VP of Global Ecommerce at EA), don't make a damn bit of sense. In talking with GI.biz, DeMartini made a huge number of comparisons between Origin from EA and Valve's Steam service. Let's just get on with this to see what he had to say.
And yet, when games are first released they're consistently on the top sellers for Steam. Or when they're worth picking up, they're worth picking up without a sale as Arma 2 has proven thanks to the Day Z mod. But alas, sales simply cheapen the IP of a company, you heard it from DeMartini, folks.
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Q: One of the things that Steam does is this random deep-discounting of software, and it works well for them. Do you see that as something you want to do?
David DeMartini: We won't be doing that. Obviously they think it's the right thing to do after a certain amount of time. I just think it cheapens your intellectual property. I know both sides of it, I understand it. If you want to sell a whole bunch of units, that is certainly a way to do that, to sell a whole bunch of stuff at a low price. The gamemakers work incredibly hard to make this intellectual property, and we're not trying to be Target. We're trying to be Nordstrom. When I say that, I mean good value - we're trying to give you a fair price point, and occasionally there will be things that are on sale you could look for a discount, just don't look for 75 percent off going-out-of-business sales.
Q: Isn't that in some sense an old-school way of looking at it based on cost of goods? When your cost of goods is basically your transaction costs and your server costs. Even when they discount a game by 75 percent, they're still making money on it. It's not the margin that's important, but the total amount of revenue that's coming in. If by discounting it that much on a weekend they then kill the sales going forward, or they kill the sales in retail stores for the packaged versions, that could be a concern. But Gabe has said that as far as they can tell when they've done that it hasn't affected sales in other channels.
David DeMartini: Actually, Gabe will usually say it improves sales in other channels because if the game is good there are some water-cooler moments and it has a spring-up effect. Without revealing too much, what I'll say is one way to deal with aging inventory is you do deep discounts like that. There are other ways, which I can't really talk about, of dealing with product as it ages over a period of time, where you present a value to the customer and you engage them in your service on a going-forward basis. We don't believe in the drop-it-down, spring-it-up, 75 percent off approach, but we've got something else that we do believe in that we'll be rolling out.
But I absolutely understand your point, and I'm not not-hearing what you're saying. We don't have the old-school approach that you're describing; we're all about building as big a universe as we can, and there are multiple ways to build the universe. One way is to discount the price, the other is to form a longer-term relationship with them and draw them in that way.
David DeMartini: We won't be doing that. Obviously they think it's the right thing to do after a certain amount of time. I just think it cheapens your intellectual property. I know both sides of it, I understand it. If you want to sell a whole bunch of units, that is certainly a way to do that, to sell a whole bunch of stuff at a low price. The gamemakers work incredibly hard to make this intellectual property, and we're not trying to be Target. We're trying to be Nordstrom. When I say that, I mean good value - we're trying to give you a fair price point, and occasionally there will be things that are on sale you could look for a discount, just don't look for 75 percent off going-out-of-business sales.
Q: Isn't that in some sense an old-school way of looking at it based on cost of goods? When your cost of goods is basically your transaction costs and your server costs. Even when they discount a game by 75 percent, they're still making money on it. It's not the margin that's important, but the total amount of revenue that's coming in. If by discounting it that much on a weekend they then kill the sales going forward, or they kill the sales in retail stores for the packaged versions, that could be a concern. But Gabe has said that as far as they can tell when they've done that it hasn't affected sales in other channels.
David DeMartini: Actually, Gabe will usually say it improves sales in other channels because if the game is good there are some water-cooler moments and it has a spring-up effect. Without revealing too much, what I'll say is one way to deal with aging inventory is you do deep discounts like that. There are other ways, which I can't really talk about, of dealing with product as it ages over a period of time, where you present a value to the customer and you engage them in your service on a going-forward basis. We don't believe in the drop-it-down, spring-it-up, 75 percent off approach, but we've got something else that we do believe in that we'll be rolling out.
But I absolutely understand your point, and I'm not not-hearing what you're saying. We don't have the old-school approach that you're describing; we're all about building as big a universe as we can, and there are multiple ways to build the universe. One way is to discount the price, the other is to form a longer-term relationship with them and draw them in that way.
And yet, when games are first released they're consistently on the top sellers for Steam. Or when they're worth picking up, they're worth picking up without a sale as Arma 2 has proven thanks to the Day Z mod. But alas, sales simply cheapen the IP of a company, you heard it from DeMartini, folks.
(via)
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