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Valve's Newell: One-Price-For-Everyone Business Model 'Broken' 374

Fysx writes with recent comments from Valve co-founder Gabe Newell about how he thinks the traditional video game business model is flawed: "The industry has this broken model, which is one price for everyone. That’s actually a bug, and it’s something that we want to solve through our philosophy of how we create entertainment products. What you really want to do is create the optimal pricing service for each customer and see what’s best for them. We need to give customers, all of them, a robust set of options regarding how they pay for their content. An example is – and this is something as an industry we should be doing better – is charging customers based on how much fun they are to play with. Some people, when they join a server, a ton of people will run with them. Other people, when they join a server, will cause others to leave. We should have a way of capturing that. We should have a way of rewarding the people who are good for our community."
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Valve's Newell: One-Price-For-Everyone Business Model 'Broken'

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  • Steam is usually the gaming conglomerate that's most often mentioned on /. . (I only bother to play the free games in the Ubuntu repository.)

  • Guess karma has a price.

  • Tell people how low your price can possibly go, but have a plan to charge many times that amount. Good players can receive countless discounts, trolls and griefers would be well advised to take their bile elsewhere if they want to continue qualifying for said discounts.

    I think insurance companies suck, by the way.
  • oh no (Score:5, Insightful)

    by phantomfive ( 622387 ) on Tuesday May 17, 2011 @12:30AM (#36149230) Journal

    Some people, when they join a server, a ton of people will run with them. Other people, when they join a server, will cause others to leave.

    In other words, now, instead of having a bunch of friends harass you because they want to build a bigger farm, your friends will actually get monetary recompense for harassing you. Looks like I'll have to unfriend even more 'friends'

  • by MusedFable ( 1640361 ) on Tuesday May 17, 2011 @12:32AM (#36149250)
    Trying to make money from something that isn't scarce is silly. Charge for the scarce goods not the stuff you can easily copy. The very first copy is scarce. Support is scarce. Commissioning people with talent is scarce.
    • They are TRYING to charge you for their time and talent, which is not scarce. As a bonus, you get a game. The way they do this, is by attatching an arbitrary value to what they CAN GIVE YOU - a game - but you are actually paying for the time and talent it took to create that game, not the copy of the game. Same with music, same with books, etc., etc.. If you can come up with a business model that lets people give out something that is infinitely reproduceable - AFTER it is produced, and get paid for the non-scarce talent/time investment... well, I'd like to hear it. I'm not convinced the current model is overly broken, merely that the the value of the public domain is undervalued in the current regulatory regime, and that many people don't look beyond the thing they can acquire to see if something pre-final product was actually scarce.
      • If you can come up with a business model that lets people give out something that is infinitely reproduceable - AFTER it is produced, and get paid for the non-scarce talent/time investment... well, I'd like to hear it.

        Well, I don't currently have a business model like this that I can show you, but if you pay me a bit of money, I'll design one for you -- We can share the plan with everyone once I'm done.

      • by Aceticon ( 140883 ) on Tuesday May 17, 2011 @07:18AM (#36151496)

        Three points:

        1) Why limit yourself to models that pay for something AFTER it has been produced?

        We have centuries of experience with paying BEFORE for people to produce something and that seems to have worked out ok (Michelangelo didn't exactly paint the ceiling of the Sistine Chapel for free and sold tickets AFTER)

        2) There are in fact successful comercial models that include free distribution of the copyrighted product. For example, Redhat makes is money from support. Similarly, some game makers distribute the game for free and make their money solely from paid subscription to access a managed online environment for that game.

        3) In computer systems DRM is more than just a means of protecting copyright. It is essentially an automated digital Agent for the seller which is present in the sold product and imposes arbitrary after-sale limitations on the use of it. With online authorization and updating, the seller can even easilly and at no cost change the allowed use of the product AFTER the buyer has paid for it and the only recourse for the buyer is (costly) legal action to recover access to those features they already paid for.

        A good real-life example of how DRM is used by the seller to change after-sale features of a product is the "Removal of Linux access on the PS3" situation.

        To use a car analogy, it's like buying a car and discovering that you have a representative of the brand on board always with you when you drive. He can stop you doing certain things (say, turning the radio on, opening the windows or having passengers on the back-seats) and will, once in a while, phone home office and get a new list of limitations he will impose. He works for free and if he suddenly adds a new limit on your use of the car you bought (say, by only allowing the aircon to be off or full-blast on) you have to go to court with it and show that the contract you signed when you bought the car actually included the right to use that function of the car which you've just been denied the use of (i.e. that the contract actually stated you could regulate the level of the aircon).

        With Physical Property like a car, the law is in your side in that you can just kick the seller's agent out of your car.

        However, with Intellectual Property laws in places like the US you actually have no easy way to do that since:
        - AFTER the sale you have to accept the EULA to use the product you just bought, which in some States as per-law means you just signed a contract that pretty much gives the Seller any arbitrary rights they want.
        - Laws like DCMA restrict your access to tools that would allow removing of seller's digital Agent(s) from a product you bought.

        Current Intellectual Property laws de facto support the right of the seller to arbitrarilly enforce and change at will limitations on a product that the buyer has already bought, something which, with products which are purelly physical, is not allowed.

        This is why Intellectual Property when it comes to products which can contain digital Agents is flawed.

        • Yeah, everyone and his brother wants to "segment the market", to charge widely different prices for the same thing based on the variable amount of utility (Econ 101 jargon for "yeah, what's it worth to you, Bud") for the different customers.

          The phone company had that time-of-day pricing (good that is gone -- Hi Mom, sorry it is 2 AM by you but it is 11 PM for me here in college, and um, I need some money). GM would slap a Buick badge on a Chevy, Ford a Lincoln badge on a Ford and charge money for the sta

    • by syousef ( 465911 ) on Tuesday May 17, 2011 @03:14AM (#36150284) Journal

      Trying to make money from something that isn't scarce is silly. Charge for the scarce goods not the stuff you can easily copy. The very first copy is scarce. Support is scarce. Commissioning people with talent is scarce.

      I thought bottled water in places where clean water is plentiful for almost nothing would never take off. I was wrong. People aren't rational.

  • What started as the Team Fortress 2 nonsense store which allowed the purchasing of hats in a first person shooter(!), has progressed to a total overhaul of how Valve sell their products. Portal 2 is now fast becoming the flagship example, with, wiat for it, hats available for purchase, along with little flags and such. DLC (I feel a bit sick every time I say or type that) is the devil that you cant' avoid. If Activision put a human shit in a box and sold it as Call of Duty (or Modern Warfare, whichever they

    • voltron.. each lion sold separately... He-Man, green tiger sold separately... (insert toy here) "collect them all" ... it isn't new at all.
    • I feel like we are still in the infancy of all of this and many companies are going to make the mistake that some of their previous successes in DLC are "how business is done" and it just becomes another checkbox on the game development list that becomes exploited in a more miserly fashion with each new iteration. Thankfully there have been huge blunders (horse armor) that pointed companies in better directions. So I'm not too worried on that one.

      The one thing that does bug me is that DLC seems to be drivin

  • by definate ( 876684 ) on Tuesday May 17, 2011 @01:12AM (#36149510)

    I initially wrote this off as "oh he's sort of trying to implement perfect price discrimination", which is great in theory, impossible in practice.

    But if you ignore his "one price for everyone is a bug" idea, which is fucking stupid. Then supplant it with a, you get micro payments over time, to your account, for playing a lot and being a good player. Then it's just "incentivise people to play nice". That would mean some sort of mechanism of ranking players (based on fun), and giving them targeted discounts based on new games.

    This seems fine and dandy... in theory. Once again, how would such a mechanism be implemented? Admin's would suddenly have a lot of power, or other players would, where they could actually do monetary damage to someone. You'd need a dispute resolution system, which is going to cost you overhead. Suddenly you've invented an elaborate system, which might make less profit, and the inventive structure might deter people from getting into these games because "well if I'm not good at it, I might end up paying more for other games I'm more interested in/better at".

    At which point, you realize BOTH of these ideas, and likely everything this man has ever said, everything his grandparents ever said, and that his spawn will ever say, is wrong!

    • Micropayments would work well for this, a flat monthly charge would too slow to keep up with the dynamics. If you focus on incentivising good behaviour, not so much punishing bad behaviour, people will work it out for themselves. Mind you someone who plays a lot is actually costing the company more, so bulk discounts are kind of self defeating. So yeah I can't see much use for this idea.

      • Who gets to determine what's "good" and what's "bad" behaviour? The other players? Any chance I could be a spectator for the train wreck?

        Could you imagine how many people would consider someone a true friend and wonderful buddy who is too stupid to play a game and lets them pad their kills?

    • by Sky Cry ( 872584 )

      But if you ignore his "one price for everyone is a bug" idea, which is fucking stupid.

      Micropayments have already proven to be a good way to get price discrimination. For example, check out what happened to Dungeons&Dragons Online after it went free-to-play with ability to buy extra content or eye candy. By giving customers a lot of payment strategies to choose from they managed to get a huge revenue increase. Here's a first link I googled out for you: Going Free Boosts Turbine's DDO Revenues 500 Percen [gamasutra.com]

      • by definate ( 876684 ) on Tuesday May 17, 2011 @04:58AM (#36150746)

        Sorry. I made the fatal mistake of RTFA, and just Re-RTFA just in case I missed it, and I still don't see it. Nowhere is he talking about micro-payments for extra content or eye candy. Also, this isn't "a lot of payment strategies" your examples are "different products". There is a HUGE difference.

        I have no problem with these different products, such as paying for eye candy (like more hats in TF2!), or paying for DLC. No problem there, and this isn't what he's talking about. Also, this isn't price discrimination. You could loosely apply third degree price discrimination [wikipedia.org], but this would be more like "You bought a more expensive variant of the game and it comes with a golden hat, which can't be purchased later".

        What he's talking about, is proper price discrimination, and he offers these two examples:

        "charging customers based on how much fun they are to play with"

        " how much people want to pay for items. Some people are happy paying a dollar. They’ll pay a dollar over and over and over again, others want to be different, others want to run servers and create mods. Each one of these people should represent a different monetisation scheme for the community as a whole."

        While the latter is a possibility and they're already doing this (such as "free to play this weekend", "DLC", "WoW pricing model", etc), the former, is what everyone is discussing.

        Okay, so your per game rating means they can't apply discounts beforehand, additionally it's open to the biggest weakness of "how do we rate 'fun'". Do you know an easy way to calculate this? A way which isn't open to gaming? A way where you don't give the trolls a very nice weapon? A way where the administration overhead doesn't increase disproportionately? A way which allows you to trust servers that you don't run?

        Quite frankly, you're saying I have an "inability to see it implemented", where as you've got what I like to call entrepreneurs myopia, it's like marketing myopia [wikipedia.org] but it's where you don't think through the entire solution, systematically, and instead jump to simplistic solutions which don't necessarily reflect reality. We all get it, especially entrepreneurial types (Read: ADD/Bipolar types).

        Also, this sort of analysis is what I do. Implementing different revenue models, is extremely difficult, and requires looking at each stakeholder (particularly the ones which are customers or associated in that way), then considering how they make their buying decision, considering what all the incentives produced are, what sort of proportions these would be produced in, and what the sum of these two would be. You're bound to get a lot of this wrong, because incentives aren't obvious, until a lot later. The dotcom boom was a perfect example of this, many different revenue models which on the surface seemed good, but underneath was a house of cards. Though hopefully we likely wouldn't make the valuation feedback mistake again (Well, at least as obviously).

        "Brainstorming" I've found to be useless, you just get a pile of ideas (which are never in shortage), instead of rigorous analysis. Which is what's actually required!

        Anyway, I sort of went off on a few tangents here, it's hard to stay on track when discussing such complicated ideas, in essentially an open forum (and they are complicated ideas, when you look at them in full).

  • by macraig ( 621737 ) <[moc.liamg] [ta] [giarc.a.kram]> on Tuesday May 17, 2011 @01:15AM (#36149532)

    So lemme get this straight, Mister Newell: you wanna charge socially awkward and inept people, like loners and people with Asperger's Syndrome, a premium simply because they don't benefit your Bottom Line above and beyond what they pay for the game? You want to penalize them for being "unpopular"?

    Wow, as if they didn't get enough of that mistreatment in high school, now they have to endure it in the marketplace.

    • by artor3 ( 1344997 ) on Tuesday May 17, 2011 @02:32AM (#36149994)

      Victim complex much? He wants to charge more to the trolls and hackers. The sort of people that join a server and blare Rick Astley through voice chat nonstop. That's not going after the loners, that's going after the assholes.

      • Re: (Score:2, Insightful)

        by macraig ( 621737 )

        Get out of Mom's basement much? He effectively wants to penalize anyone who doesn't positively effect the social aspect of a game (and thus indirectly benefit Valve)... in other words, socially impaired people, not just "trolls" and "hackers". Newell never used those terms, you did. You don't seem to have a very useful definition of "socially impaired". Newell used a brush about as wide as "socially impaired", not as fine as "troll" or "hacker". There are plenty of ways a person can cause people to shu

        • Also (Score:5, Interesting)

          by Sycraft-fu ( 314770 ) on Tuesday May 17, 2011 @03:34AM (#36150370)

          You find that people in online games quit for all sorts of bad reasons, including "That guy is better than me." I've seen that kind of thing in Bad Company 2, servers that get cleared out because people are good and nobody likes losing all the time.

          I play BC2 with a small group of friends, all who are pretty good at it. We are all above average. Get a couple of us together on a server, and we tend to slant things to the side we are on. This often leads to lots of people leaving on the other side. Sometimes it leads to a server dying because people leave, the server switches people from our team, they don't wan to be on the other side so they leave and so on.

          Even happens when we are facing another group who is playing together. That is most often the sort of game we get in, since that is where there are a lot of spots on one side. We'll get in and a group of people in the same clan are on the other side. We'll turn the tide of the battle and start winning, and they'll all leave because they want to beat up on people.

          So should we get ranked down and charged more because we are good at the game? Now I should add we don't talk shit, we don't harass people, we just play the game to win. People leave because they like to win and aren't having fun losing. Should we get penalized for playing the game, as intended, and being good just because others are not as good and do not care to play against us?

  • Specifically, the Hindenberg of an experiment where they coded the costs of weapons and equipment to shift based on their cross-server popularity.

    The experiment broke down immediately. Prices skewed so high on some weapons that they were literally unattainable. People coded and loaded servers full of bots to do nothing but buy weapons and further fuck with the algorithm. People figured out how to turn it off and voted with their feet.

    The funniest thing about this whole 'give bennies to 'good' players' thing

    • by artor3 ( 1344997 )

      How did wearing the halo become a "tool in the griefer arsenal"? A few servers banned people who didn't wear them, but a) that's because those people were likely cheaters and b) who cares about being banned from a couple servers when there are thousands?

  • by mustPushCart ( 1871520 ) on Tuesday May 17, 2011 @01:25AM (#36149588)

    Valve does Gods work imho so I would not dismiss this out of turn. He is naturally talking about multiplayer games because in single player games you effectively pay for the content so your entire user experience is crafted by the company using artists etc so in that case you charge what it cost you to make and think up and then some. Now in multiplayer games, the community adds a significant portion of the value to the final product so it could be argued that it makes sense that they be rewarded for adding value to a product (not unlike modders who can sell their maps on the starcraft 2 map store thingie).

    In an MMORPG you ARE rewarded for being a better community member when you join groups, raids etc allowing you to unlock better gear and levelup faster. This does not result in monetary gain but most mmo's have some kind of conversion between in game benefits and real world money (not gold farmers, more like purchasable experience scrolls and the like). So in some ways being a better community player already rewards you (at least in theory, by design). Should the base game be cheaper for better community members? I dont think so. Should being a team player/community positive give you in game rewards that are otherwise purchasable with RL cash? Yea that sounds decent.

    Its vvvvvvvery interesting he mentions Dota 2 here. First because its good to hear some news about it cos I am waiting on it, and secondly because DotA (the original wc3) has a community that WILL bite your head off the instant you make a mistake in game or say something stupid in people. For some reason DotA brings out the worst in people.

  • Internet's Vectormatic: Gabe Newell's brain broken.

    I dont care about online MP these days, but if this even so much as creeps near Valve's single player titles they can fuck off, i like my games single player and without influence from random internet people thank you very much, that includes the price

  • Large man seen on water ski's above shark infested waters.

  • Happiness is mandatory, friend citizen.

  • So now, on top of accusation of hacking, people will suspect each other in trying to get freebies from game company by pretending to drag in more customers.

    And I thought, atmosphere in some... communities could not get any more poisonous.

  • you will reward those that game the game and punish those that play it.

    Because what do you think will happen? Trolls don't play games but they toy with it. Handing them yet another toy to abuse and screw with isn't going to make it better.

  • Basically. Gabe invented what bar owners have known for centuries.
  • Gabe, Gabe, Gabe. You love talking about this hypothetical shit, but you somehow can't bring yourself to answer even the smallest questions people ask about Episode 3 (or Half Life 3 if you believe the rumors).

    Shut the fuck up and get your developers coding already. You can't end Episode 2 like that and not have a resolution.

    Yes I'm pissed off. Maybe irrationally, but this guy's been spouting a lot of crap recently (how games need to be more social, connected to Facebook and so on) that I'm wishing for some

  • I totally agree with Gabe on game pricing, when the pricing we are talking about is how much the gamer pays, with the price varying based on the market they reside in. For example, a gamer in China or a developing nation should be able to pay less for a game than someone from EU or the USA. The average salary in emerging markets does not allow for paying the same price as we do in the EU or USA (or Korea, Japan, etc.). I believe this is a major driving factor behind game and software piracy in these countri

  • Yes, the fact that you are on a flight from O'Hare to SFO and paid $234 while the person ahead of you paid $428 and the person beside you paid $173...yeah, people will loooove that model brought to Steam.

    SteamAir, coming in 2013....

  • Valve/Steam is already implementing a "one price per region and currency" approach : the number is the same for people paying in Euros and Dollars, just the currency changes, which means quite a difference in the actual price you pay, eg. Portal2, 49.99$ vs 49.99 euros (~70 US$ according to xe). I guess we europeans are not fun enough to play with.
  • This is where I have a real problem with the 21st century version of capitalism.

    Through peer pressure & succumbing to advertising, too many consumers have lost their minds & backbones these days - I actually think it is quite a "sick" society we have when people are prepared to queue overnight for a new gadget or game, especially when in other parts of the world people queue for food in order to avoid starvation.

    I don't have a problem with wealth, I don't do so badly myself, but it's clear that in t

  • I am willing to pay but only if you dont harass me with complicated schemes on signing up/getting rebates etc. If you want that people advertise for you, then hire them. If you want that people spread the word about your game on Facebook or at other places, then make a good game.

    Stop trying to pay susceptible people off for the possibility to influence their reviews.

  • by MikShapi ( 681808 ) on Tuesday May 17, 2011 @05:48AM (#36150958) Journal

    Something you may be aware of is the increase in popularity in gaming over the past several decades.
    That translates into more households with more than one gamer, and more households with more than one gaming generation.
    I game, my kids game, I have many friends whose partner games.

    As an individual steam user, I find your prices generally reasonable, your service adds enough value (ignoring ethics and judging strictly from a convenience perspective) to justify paying you and using it over the hassles of both piracy and retail. Good job to you and your team on getting (me) there.

    However, I, like many geeks of my generation, have now evolved into a family of five, and am no longer an individual steam user.

    This is where the problems start, and you push me, your customer, away. Why? Because I'm a dad, and my gang all play.

    For the sake of making a point, I will ignore 'offline mode' because the games we care about are online.

    Here are the options you give me:

    Option 1. Have one steam account per person, and either buy many copies of each title
    (or, I am told, go through a cumbersome process that costs 10$ processing fee to have your support move the title between accounts, this option is too painful to be practical. ).

    Insisting I have a separate per-game license for each kid makes sense and is fair if we will be playing concurrently (and it is A-OK for you to sell us a 'borderlands 4-pack'. I'll buy it.).
    This makes no sense if I'm done playing a game, uninstall it, and my kid wants to have a go. Realistically, you're dreaming if you think you'll get me to pay twice. You'll either give me a way to let my kid use it, or I'll take my business elsewhere to GOG or direct2drive or retail, because they will.

    Option 2. Have one account for what I'll tell you is /me/, but what in reality will be the whole family. I won't tell, you won't know. Sadly, that means that two computers on my home network can't be "on steam" at the same time, and I can't play online game X while my kid plays online game Y. Plus, it'll get all my steam achievements gunked up with my kid's ones. I don't want that. Force me down this route and, again, I'll go.

    Option 3. I'll create a separate steam account for every game I purchase. This will make your product into a very inconvenient one with a flaky user experience, no achievement history etc, and I'll take my business elsewhere. Too much hassle.

    Here's the news. An entire gaming generation is now very busy having their children reach gaming age.

    You can put some weight behind those brave words you said. The solution is dead obvious.

    The recipe is:
    1. One family "billing account" (that's a BILLING account, not an application account you sign into steam with) with a single billing method. If a single billing method isn't enough to deter most of the unrelated people from pooling into a "pretend family" account and costing you potential revenue (it probably would be enough, and while you may lose a bit of immediate revenue, you will make huge gains in customer loyalty by trusting them), then put your thinking cap on and figure out how to structure a plan to include real families that count money together and exclude most of the freeloaders. You have smart people working for you.
    2. ONE family-wide game/license library.
    3. Several "gamer" steam accounts, one per real person managed by the billing contact (the guy with the credit card who vets the games, aka the parent), without needing to involve you. That's what web interfaces (or your application) are for. These steam accounts should all be able to go online concurrently, and can all have their own (SEPARATE) steam achievements, and can be use different games at the same time. If they want multiple people to be playing the same game at the same time (that thing we call co-op play is very popular in families btw) they need to purchase and own multiple licenses. Keep 2-pack, 3-pack and 4-pack deals coming.
    Yes, this will mean you may have sev

    • Re: (Score:3, Insightful)

      by Phydaux ( 1135819 )

      I agree with all your criticisms. They're the reasons why if I have a choice between a steam only game and an xbox version of that game I'll get the xbox version so my wife and I can have separated achievements, progress, saves (in some cases), friends etc.

      Your solution is a great one too. I'd love it if Valve introduced something like that.

    • You should email this to Gabe. It's unlikely anyone from Valve is reading these forums.
    • by Piata ( 927858 )

      Rather than posting this on Slashdot, why not email Gabe Newell directly? Your argument is sound. Might as well present it to the one person that this kind of information will have an impact on. He is very well known for responding to all his emails eventually.

      Give it a shot:


    • by pnuema ( 523776 )
      Gabe if you are listening - I am transferring as much business as I can from Steam to Amazon for this very reason. Their flexibility means they are offering a better product. I couldn't care less about friends lists, or achievements, or any of the rest of that crap. I want to be able to LEGALLY play my games without screwing with CDs, or logging in and out of a Steam account because my kid wants to play a game attached to my account. Until you fix this, I'm taking my business elsewhere.

"If it's not loud, it doesn't work!" -- Blank Reg, from "Max Headroom"