Iwata Is Wrong When He Claims Digital Games Aren’t Cheaper Because of Value

Vortex Effect: GameSpot posted an article today where Nintendo President Satoru Iwata talked about why digital titles on the eShop are not cheaper than their boxed retail counterparts. And as with most things Mr. Iwata says these days, it’s nonsensical. His comments come from an investor’s Q&A session.

“Although the mainstream idea regarding the digital business in the industry before we actually started selling software in both digital and packaged formats last year was that the digital version should or must be priced lower than its packaged counterpart, we decided that, since the contents are the same, the company would offer the software at the same price, be it the packaged version or the digital version.”

This is probably the same reasoning Sony and Microsoft would use for reasons digital titles on the PlayStation Network or the Xbox Live Marketplace aren’t cheaper than the boxed versions either.

[MattS]

I'm sure the author of this piece has extensive experience in upper management of global corporations and understands the economics behind product pricing.

Or not. Games journalists and all that. Calling a CEO "nonsensical" makes me question whether the author is even old enough to have started tertiary education, let alone understand business.

[StingerVE]

Ah, the old "can't write about it because you don't run a company" line.

Can you explain how charging $60 for year old titles is creating "value" when a consumer can get that title far cheaper elsewhere?

And actually, my degree is for business management/accounting , and I do have a pretty firm grasp of Austrian economics.

I suspect you didn't even read the opinion piece, and instead glanced at the description provided before commenting. I can't help you if you think paying $60 for something others are charging $20 for is somehow good business.

[MattS]

Oh, well then. Since you have a degree in business management, I'm even more surprised that you would write this piece, and I would have thought you would have a basic understanding of the dangers of commoditisation in luxury goods categories.

[BattleAxe]

I have a degree in Steam-O-Nomics, which puts me in the unique position to suggest that buying a game like GTA4 on sale for $4.99, gives me the best value.

I hope that once Iwata is removed from his post, Nintendo will embrace the digital world, and will look to increase sales by releasing their games on Steam, Google App Store and the Apple App Store. With the WiiU doing so poorly in worldwide sales, they should abandon the home console hardware market, and release their games in the Playstation Store and Xbox Live.

[wheresmymonkey]

Its creating value because the end product, or the game itself is identical. The only difference as far as nintendo are concerned, is the delivery method.

Which is no different to any other console or pc game. steam games, when first released cost the same as they do at retail.

When nintendo speak of value they also talk about the net worth of their ip. They value it far higher than their hardware so they'll not do anything to make it lose its value over time.

The trade in market reflects this marvelously you'll be able to trade in a nintendo game for more cash for a much longer period than a game from any other publisher. In fact sometimes they actually increase in value.

Likewise their limited eds really are limited. so if you buy one chances are if you ever deicded to sell it in the future you would make money on it.

If you hadn't noticed all of their digital only offerings have by and large, been much cheaper or priced in unique ways. that create value to the customer.

Then there's the current promotions they've been running japan - that basically undercut retail on every new release by 10% if bought didgitally, the recent pikmin/wonderful101 deal in the uk which made the games if bought together cheaper than disc.

then there's the premium owners deal that rebates you £5 for every 40 spent on the eshop.

Sure the bog standard price of retial games on the shop is the rrp, but there's sales on every week on pretty much every digital distribution network.

In fact your example of zombiU is laughable because not only did Ubisoft set the rpice of that gam, not nintendo, who by the way have some of the cheapest titles on the eshop, but its currently on sale for £11.99 down from its original £60 and it was recently given a perminent reduction, in the uk at least, to £25.

Also your comments about not downloading anything because you've only got 32gb of space and you'd have to buy a hard drive are utter tosh. outside of full retail games the average sive of a game on the eshop is a couple gb tops.

If you'd actually bothered to look into what nintendo is actually doing and taken them into context with the reality of whats happening on he eshop as apposed to taking comments to investors in which he's going to try and tell them how they're going to continue to make lots of money, because well thats what they want to hear.

and mixing it with the tired digital games should be cheaper than boxed argument, which is lets be honest, bupkiss given the fact that most digital only games already are because they don't have to recoup costs from the physical side of the business.

in short your argument is flawed due to a serious lack of research.

[Nevers0ft]

I agree that the massive discrepancies in eShop prices compared to retail prices are pretty dumb, but you have to remember that even in the eShop the only prices that Nintendo set are their own - the rest are set by the publishers. Now, how many 1st party Nintendo games do you see heavily discounted at retail? Ubisoft have reacted to this on the eShop recently by discounting many of their titles such as ACIII and ZombiU

[StingerVE]

Dangers?

The guy said digital games aren't cheaper than packaged products because the contents are the same and so they offer them at the same price. Doing so apparently raises the "value" of the title to consumers.

For new release titles, that makes sense. But if that is going to be the company stance, why not lower the digital prices when the packaged version drops in price (and I don't mean simply going on sale for a limited time)? They're basically asking folks to buy a new or used physical copy, for a lot less, instead of buying it digitally because there really is no incentive to do so.

I wouldn't imagine Nintendo is selling a lot of digital copies of Scribblenauts Unlimited for $60 right now. The retail copy is a lot cheaper than that, as is the PC version.

People might be enticed to buy that year-old title though if Nintendo didn't have it priced at $60 on the eShop.

Everyone else lowers prices. Steam is doing fantastic. PSN and XBLM do well too. They all lower prices at some point. Nintendo seems content to just keep their digital titles at $60, outside of a few exceptions, regardless of the price the games are selling at elsewhere.

I don't think you need to run a global corporation to see that keeping prices artificially high because "we want consumers to value software as highly as possible" is nonsense. In no way does that make good business sense. For new games, sure, but for the older titles that I talked about in the article, not a chance.

Digital titles simply aren't as valuable as physical copies. In part because you don't actually own the digital version, and because you can't sell it, trade it, or give/lend it to a friend.

I'm not saying price new games a lot cheaper digital. All I'm saying is that it's nonsense to claim your digital prices are what they are because you want the consumer to value the software.

There's no danger in Nintendo lowering the prices on older digital titles to actually compete with their competitors like most every other company does.

This is a gaming market we're talking about. One in which retail prices often drop, or at least go on sale, by $20 within a month.

Would you pay $60 for a digital version of a year old title that is tied to your console when you could buy a physical copy for less than $20? I wouldn't, and none of the gamers that I know would.

[MattS]

My suggestion to you is to do some research into commoditisation and discounting, and the economic criticisms of both.

It'll help balance your next opinion piece.

[Dasteru]

@MattS:

So much for common sense.

Nobody gives a rat about commoditisation, it is illogical. If a product is $40 more expensive for a restrictive digital version with less content vs the physical copy, that is not value, it is bad business plain and simple, you can try to justify it all you want but it is still idiotic and non sensical.

[StingerVE]

Thanks for the suggestion, but I'll pass on it. Don't really think old overpriced digital games on the Nintendo's eShop has anything to do with commoditisation. We're talking about digital video games here, many of which are on other platforms at considerably cheaper prices, and the statements of the Nintendo president who tried to explain digital pricing in a completely bogus way by claiming it makes consumers value the product more highly.

But by all means, feel free me to school me on how Nintendo would be hurt by lowering prices on old eShop titles that retailers and their competitors have already reduced the price of by half.

[wheresmymonkey]

haven't you actually considered that by making the digital version the game the same price as the physical one they're actually increasing the value proposition of the physical copy.

If digital games were always cheaper, people wouldn't by physical copies anymore. Nintendo/sony/MS don't want you to buy digital as it just means they take a bigger hit on the physical discs and more importantly it would piss off retail outlets. which the big three need to sell their consoles.

look at the pspgo. digital only, since they couldn't make any cash off of it most retailers refused to stock it. so it bombed.

Also nintendo have been decreasing the price of old eshop titles. you'd know that if you ever went on there. also as i said in a previous comment nintendo have no say in the pricing of games they don't publish on the eshop only the companies that do, do.

So zombiu and batman still being $60 is ubisofts/warners doing. Not nintendos.

With this article you've just shown your complete lack of understanding for a very complex issue. bacially reducing your argument than to the usual rabblerousuing F*** nintendo retoric for hits.

[Kaze88]

@wheresmymonkey All the consumer in me sees that i went and bougth myself a Wii mini and tought that i could buy all those great games to just find out that the physical copies were mostly the same price or more due to that the games were rare. For example Xenoblade crhonicles was like 90$ which is CRAZY, i would never pay that much of it. I feel like i havent saved any money by buying Wii mini and that ive had more great tittles if i had bought Xbox360 instead. Keeping prices so high on old games aint making favours to anybody, they could sell a lot more tittles by lowering the price and making more copies of the classics like Mario Galaxy etc.

Isnt eshop prices adjusted by the publishers themselfs? ubi and warner bross etc games prices are their own doing? Those prices are crazy, but i have to admit that Nintendo is doing something but not enough. Lower prices -> more sales -> more money -> also better for consumer.

[Dasteru]

@wheresmymonkey:

Actually developers/publishers prefer to sell things digital as they make far more money off it, even when priced the same. There is no retail markup on digital games, they get almost all of the profits from it sans a slight fee to Sony/MS/Nintendo (Under $5). They also do not have to pay for the case, disk, manual or shipping.

Alot of people still like the collectability of retail games and are willing to pay a bit more for it. Taking $5 off the cost of digital games is unlikely to effect retail sales at all.

[Hicken]

Wow, Matt. He must have struck a nerve.

You won't agree- and it changes nothing; you wouldn't be the first wrong person to think you were right- but Stinger is dead-on here.

If anything, keeping the price of the retail copy of the game would present a higher level of "value" to the consumer. But a digital copy which requires virtually NONE of the costs of the retail copy yet is priced the same as or, at some point down the road, higher than the retail copy doesn't gain any extra value. The digital copy carries none of the ownership flexibility (lending, selling, giving away, etc) of a physical copy; there's little perceived value in "handing down" a digital copy of a game to your kids or grandkids.

But this original copy of Metal Gear Solid I have? That's worth passing down, and it has a higher "value" than the digital version ever will.

And what makes a CEO above being called "nonsensical?" The amount of money they make? Iwata's still human, is he not? Then he'll say and do things that warrant him being called that, just like the rest of us.

The ONE thing that makes sense as to why a digital product costs as much- for consoles- as its retail counterpart is that console manufacturers don't want to step on retailers' toes by competing with a far lower price. For now, at least, the Big Three still need retailers to move their hardware, so it's smart not to alienate them by undercutting them on software.

But that argument goes out the window after a while, as the retail version of a game goes down in price. Eventually- and particularly for certain gems- it becomes more sensible for the physical copy to cost more, if it's harder to find.

Tell you what: rather than going on about commoditization playing a part in the pricing practice at hand, how about explaining it? I'm sure most of us here have enough schooling to understand any explanation you give.

I'm not sure, however, that any explanation you give will be relevant. Especially since, rather than make even a cursory attempt in the three comments you've made(as of when I began writing this), you've essentially said, "You're wrong. I'm right. You're not educated enough to realize you're wrong."

Doesn't sound like the sort of argument a person who is as well-versed as you claim to be on the subject would make.

[triforce79]

He means you get the same value so that's why it's the same price....i go on eshop alot and they always have game sales so it doesn't matter.

[Dunban67]

MattS,

Your comments are wrong on so many levels. All one needs to be in order to have an astute opinion of Iwata's "nonsensical" comments is an adept consumer- People who pay more for a game on the E-shop than they could otherwise purchase elsewere either 1)don't care if they pay more 2) don t know any better or 3) don t have another means of purchasing the game in the time frame they desire to have it

What Iwata is actually saying is he wishes to take advantage of the people in the latter 2 categories because he can- However that thinking is "short term" and definitely not how Nintendo came to be a successful corporation for so many years.

Iwata has made many short term decisions that have hurt Nintendo and will continue to hurt Nintendo for years to come-

If you cared to notice- most people who criticize Iwata actually like Nintendo, and or have been longtime fans of Nintendo.

The Wii, Wii U and 3DS are our only consoles- I bought the Wii U w the intent that it would be our only console for its generation- but Nintendo have failed on many levels, particularly attracting 3rd parties, getting its own games onto the system and alienating many of its fans-

Weather you agree w the article or not, it is very well written and well researched- You damage your own opinion by stating otherwise-

Iwata has said and done many "nonsensical" things over the last year+/- Even if he made sense to the Nintendo BOD (remains to be seen), he has not made sense to his target audience for the Wii U (proven by it s horrible sales of hardware and software) as well as Nintendo shareholders (see the stock price)

[iamnsuperman]

No you dont want users to value software (seriously that is a weak argument). You don't want to piss off the retailers (some retailers haven't been kind to Nintendo) also you get more profit per unit sale because you get the retail fee and it is one your service.

Not pointing the finger just at Nintendo. They (big three) all do it

[iplay1up2]

I buy mostly hard copies, and will more than likely continue. The way I see it, the very least that should be discounted, is the cost of materials and it's cost to make and distribute them. If you don't get a Hard Copy, manual, case, guess what DON'T charge. Iwata, give me a break, digital IS cheaper, unless you want to send us, the disk, instructions, and case. DUH????!!!!
The game may be the same, BUT what you get IS NOT!

When the hell did two and two =5???

[BadlyPackedKeebab]

Its total BS. there is way higher margin for Nintendo on the eshop than via retail too. There is less value for the customer as they cannot trade / sell if the game is duff.

[extermin8or]

Basically its publishers being greedy/not wanting pissed off retailers. Going digital cuts put all the costs of box, disc, manual and retailer cut-staff costs etc. Tbh I think the main reason is wanting retailers to push their hardware because any business would know that pricing the digital copy lower and say 5000 day 1 sales at £30 is better than say 1500 day 1 sales at £40-50 and lifetime sales at 2 million for £20-30 gets you morr money than life time sales of 1 million at £50-20.... not forgetting that final price is beforr retailer costs are removed. Just look at how many people buy some of the games on steam when they are discounted and every sale has no added cost unlike when a hardcopy is purchased...so they still make a profit.

[SAYGUH]

Yea, what is the deal with this Iwata guy? He can' t be serious!!! What is goin on at Nintendo headquarters!? I mean this guy tops off each briefing/investor meeting with ludicrous claims that are unethical or unheard of. Does this guy care about the company? It' s as if he' s a paid undercover agent with a mission to sabotage Nintendo til it' s no more

[Misaka_x_Touma]

if game drop in price so fast that right there tells you that it not a good value. A product that has great value and price will not see price deduction nor lost in value when being sold recently. Reason from Nintendo titles keeping there values and prices for a long period of time. UNLESS it highly demanded.

[SAYGUH]

I' m sorry what? Didn' t catch your comment due to bad grammer. Didn' t you read the article? Quit being a fanboy

[Misaka_x_Touma]

here go again. Another person jumping to conclusion.

I am not for or against Iwata. I am stating what games showed in the past.

If you can wrap your brain around the logics that goes around digital and retail games prices then that your fault. I was merely talking about retail side of the situation. Digital is different since the publisher controls the price.

[SuperWeeb]

Matt, you're being foolish. Nintendo's unwillingness to reduce prices of old games or reduce the price of digital (along with no unified account system across their devices) games is one of the reasons I no longer buy Nintendo products.

The issue here is that you cannot trade in digital titles. A stronger push for it allows you to greatly reduce the used game market, which would have otherwise caused a fair amount of potential revenue loss.
If I am giving up my ability to trade in the title, I as a consumer expect something to combat that, be it huge convenience (My Vita, for example, I can carry a large amount of games around without bringing any physical cards) or a price drop (PSN sales, PS+ free games, Steam/GOG/GMG/GGG/GG/GLG sales). Nintendo offer none of this.

Thanks to PC gaming and PS+, I've become a huge digital gamer, and the only reason I'd ever buy physical was if I couldn't find a digital version... Or in cases like Tales of Xillia, the store couldn't find the case and offered me a great discount for one in a blank case, however I wouldn't be able to trade it in.
Nintendo have one of, if not the worst stances to digital gaming I have ever seen.

[SpiralTear]

There are a lot of problems with your reasoning.

Firstly, Vita memory cards combat the advantage of digital sales. You're paying a lot for a proprietary format that evens out the saved money from sales and free PS+ games. The only way to truly take advantage of Instant Game Collection on Vita is to buy a lot of memory cards and that stacks up monetarily.

Secondly, Nintendo is releasing Wind Waker HD and a lot of other first-party titles digitally weeks before the retail version comes out. Think of how many people would buy a game like, say, Call of Duty if they could play it online earlier than their friends. Digital sales would skyrocket, even if you "couldn't trade it in." (though Gamestop wouldn't give you much anyway). Nintendo is setting an example here; if Microsoft or Sony did this, it would help them considerably, plain and simple. But here we are, wondering why XBL and PSN aren't doing this.

Lastly, your last statement: "Nintendo have one of, if not the worst stances to digital gaming I have ever seen." That's terribly misinformed. Xbox Live is the posterchild of this. Games on Demand, Microsoft's full game marketplace, is the most overpriced digital store you'll find in that generation. No one uses it because it's garbage. Charging a full $60 for a game a year after it's been released is just terrible. Also, many XBLA titles like Sonic 4 are STILL $15. Do you see a problem with that, especially when Steam is selling a massive bundle featuring Sonic 4 and ten other Sonic games for the SAME PRICE?

So, yeah. If digital sales are to improve, every console service needs to work on it. Nintendo has their issues, but they are not the only guilty one here.

[SAYGUH]

@Misaka_x_ Touma, again you' re not making a lick of sense. I think you' re the one who needs a clue.

You said it doesn't matter since the publisher controls the price? Get outta here!!! Even if they adopt anti consumer practices forcing them to buy games else where? I don't think so

[Misaka_x_Touma]

and i said in my original post "UNLESS it highly demanded"

[Apex13]

If there is no physical materials then it should be a lot cheaper and this is why I dont waste my time with it right now or magazines from the app store. It's robbery and a slap in the face.

Tell me your charging me for the convenience and I will be less insulted.

[RaikRhythm]

I know I said it when this news was first reported, but:

Here in Australia, Etrian Odyssey IV released a couple of months ago. It was $70 in the eShop, and $45 at EB Games for a physical copy. This is the store I refused to go to for ages because they overpriced everything; day 1 release, $25 less.

Anyone defending Iwata here will have to explain how that makes sense. I'm not going to enjoy the game any more if I'd gotten it for more; in fact, I'd probably feel better getting it from EB because I saved a bit of money. And this is not a bad game; I've racked up ~30 hours and am yet to finish, and that's without any major deviations from the main story; this game is long, it's fun, it's from Atlus and it's damn good quality. So don't give me that "The game is not good value".

It's greed, and nothing more. The content of the game is still the same; it's just not in a box. Aside from the fact that they don't drop prices of major games, they're saving on the process of making a physical copy; no packaging, printing on to the cartridge, distribution, no middleman (in this example, EO:IV was published by NISA); EB Games is able to make a profit on $45. So how much is Nintendo making on $70?

Anyway, this is a good, well thought-out article. Good to read.

[11eleven11]

I agree on most things said in the article. I do like dowloads though, and the future won,t know of the physical copies. Hard drive space is becoming a non issue. It's cheap and you don't really need TBytes. However Nintendo have to guarantee that the product once bought is safely owned and change the price policy. It's called market economy. People will pay less for the same thing if they can and your shop will sink.

[SpiralTear]

With the Wii U being compatible with external drives and the PS4 having an upgradable internal drive, it's become much easier to embrace digital.

I remember when having a 120GB hard drive with your 360 meant you were a real hotshot. My, how times have changed...

[GinkgoID]

And hence why I don't buy digital versions.

Why use my download limit, my limited HDD, my time and backup space for a digital version, when 9/10 I can find it cheaper on a disc.

Digital will not become the standard until this thinking changes.

[Double_O_Revan]

Agreed. And because of the increased profit margins due to there being no cost of production, packaging, or shipping, I don't see any reason why Digital games shouldn't be about $10, even at launch.

I would buy a few games digital, but not when it's more expensive and I can't sell it when I'm done.

[SAYGUH]

@ Misaka x_x Touma; Shut up, you still haven' t proved a valid point. No one game is gonna be worth $60 digitally forever, a collector' s edition maybe but not a virtual copy. I wasted too much time with garbage like you, don't ever in your life debate with me again