The weird economics behind Steam prices around the world

01/03/2016 15:40

Steam regional pricing map

Article by Bo Moore

PC gamers love Steam for its convenience and its mod communities and its vast catalog. But above all, we love it for one thing: prices. Sales. Digital games don't carry the manufacturing and distribution overhead that plague physical discs, bringing prices down in the first place, and Steam Sales slash those prices even further. But there's one area of Steam's purview that's puzzling at best and downright frustrating at worst: how widely, and seemingly unfairly, game prices vary across the globe.

Western Europe just barely trails North America in representation of Steam's 100 million active users, representing 40% and 41% of Steam's global sales, respectively. But prices between these regions can vary with seemingly little consistency, even after accounting for exchange rates between the US Dollar, British Pound Sterling, and Euro. According to, there’s a wide swath of games available for significantly cheaper prices in Western Europe. The chief offender on the "top rip-offs" chart: Burnout Paradise: The Ultimate Box, which retails for $19.99 in the US, £4.99 in the UK(~$8.08), and €5.99 in Europe(~$7.54). That's a -60% price discrepancy.

On the other hand, many games are afforded no such price cut in non-US regions. The Sims 3, for example, currently retails at $19.99, £24.99, and €39.99—the UK and Euro prices are $40.59 (+103.05%!) and $51.63 (+158.28%!) when converted to USD, respectively. Similarly, though not nearly as extreme, indie games almost across the board retail slightly more expensively in the UK and EU than their US counterparts.

Indie publisher prices are more consistent than AAA

Steam regional prices - Indie Prices

So why the discrepancy? With digital games, isn't it reasonable to think that prices should be equivalent in different regions? Why does Europe sometimes get games on the cheap, but other times get stuck with a higher price point? And why is everything so fucking cheap in Russia and Brazil?

We tracked prices of both triple-A and indie games across a number of regions, then asked a number of indie publishers about their regional pricing methodology. (We asked some triple-A folks, too, but they weren't as talkative.) Here's what we discovered.

The power of Valve's suggested regional prices

Before the indie explosion of the last five or so years, game prices were determined by mighty publishers wielding extensive market research. We as gamers collectively accepted $60 as the price point for a AAA console game, and the PC equivalent usually followed suit. But as indies have grown in popularity, we now have a much broader array of price points at which games can be sold, and along with them a collective understanding and acceptance of how much content a $5, $10, $15, $20, (and so on) game will contain.

It is through these relatively arbitrary (but not random) personal feelings that most indie games are priced. Representatives from both Devolver Digital (the publisher behind games such as Hotline Miami and LUFTRAUSERS) and Tripwire Interactive (Killing Floor and Red Orchestra) reported that game prices are determined through an open and honest conversation with the developer, discussing what price point they "feel" is right for a game, usually leaning towards a higher price. (You can always lower a price later, but jacking it up after the fact would cause an uproar.)

The next step is determining the price for other regions. When you submit a game to Steam, Valve automatically suggests prices for local currencies in other regions. You have the option to change these numbers at will, but a suggestion is made. It's unclear how exactly these suggested prices are determined—likely a combination of current exchange rates, regional sales trends, and other factors. (Valve did not respond to our request for comment.)

"Valve has sold an awful lot of games," Tripwire Interactive Vice President Alan Wilson told PC Gamer. "Counter-Strike has done huge business across the globe, in every available marketplace, so they must have a metric shit-ton of empirical data. And if I know Valve, they will have experimented with the pricing. They like experimenting, they're willing to take the risk of experimenting to find out what works and what doesn't. So in those markets that we really don't know, I'm perfectly happy to take their suggestion."

Having said that, Wilson says his company does sometimes adjust the suggestions a bit—usually just for the Pound and the Euro. In those cases, they look at the current exchange rate and then ask 'does this feel right?'

Steam regional prices - GBP Historical Exchange Rate w.arrows

Exchange rate fluctuations can affect our view of how "fair" a game's price conversion is.

Assuming this logic is followed, you would assume that prices in the UK and Europe are roughly equivalent to their US counterpart. So then why are indie games—Tripwire, Double Fine, and Devolver Digital all reported this method for regional pricing—consistently more expensive than you would expect?

It boils down to two main factors. One: the price is 'locked in,' so to speak, at the current exchange rate when a game is submitted. In the past five years, the exchange rate between USD and GBP has fluctuated from one US Dollar being worth as much as £0.69 and as little as £0.58. Depending on how the market has changed since the game in question was submitted, its expected price may have changed a fair bit as well, while the price listed on Steam remains unchanged.

(It should be noted that prices can be updated at any time, in any region, but to manually update the price with every little exchange rate fluctuation would be both needlessly tedious and create an awkward situation where players might start trying to game the system waiting for exchange rates to change.)

Steam regional prices - GWBW PricesBut even so, games released just a few months ago carry higher-than-expected prices in other regions. Take Devolver Digital's recent release Gods Will Be Watching: US $9.99, UK £6.99, EU €8.99, which convert to $11.33 and $11.64, respectively. Now, this is only a dollar and change difference, but for a game released in 2014, you might expect something more like UK £5.99, EU €7.99, which would convert to $9.70 and $10.30 based on current exchange rates.

The answer lies in the second factor: VAT, or Value-Added Tax. European storefront prices—in this case, a price listed on Steam—include VAT, the European equivalent of sales tax. So while Americans (those not in Washington, at least—it's the only state that taxes digital goods on Steam) can pick up Gods Will Be Watching for a buck thirty or so cheaper, they can hardly fault Valve or Devolver for the UK/European Union wanting their cut.

The mysteries of AAA pricing

When it comes to pricing triple-A games across regions, there's very little rhyme or reason to explain why one region will be cheaper than the other. The biggest two factors I was able to find were that many Steam prices tend to follow their store-shelf retail counterpart, and that companies will tend to price for a single region first and then convert from there.

Most companies focus on the US market first and foremost,then deal with other regions secondarily, sometimes without much scrutiny. "We're heavily influenced by you goddam Americans," said Graeme Struthers of Devolver Digital, which has offices in both Texas and London, and publishes games from indie developers around the world. "For us it always filters back from the US dollar. That's always the starting and finishing point of that conversation."

In the past, this led to horrible methodology such as pricing a game "consistently" across regions—that is, pricing a $60, at £60 and €60, which ends up being terribly overpriced for the UK and EU. Things have mostly improved on that front, and it seems that most triple-A publishers—while they don't really have any consistency with OTHER publishers—are at least somewhat consistent within their own catalog.

The BioShock family from 2K Games, for example, are all priced at a 10/7/10 ratio between US/UK/EU (That is, BioShock and BioShock 2 are both priced at $20/£14/€20, with Infinite at $30/£20/€30, or the same ratio.)

Electronic Arts, on the other hand, mostly follows a 10/5/5 ratio, while Ubisoft is all over the board. Half the Tom Clancy series follows a 10/7/5 ratio while the other is 10/7/10, and the Assassin's Creed franchise is mostly split 10/7/7 and 10/5/5. In other words, who knows how they're doing things. (A Ubisoft representative was not available to comment.) 

Ubisoft's price conversions don't follow an obvious pattern

Steam regional prices - Ubisoft Prices

The one thing that is consistent across all publishers, developers, and price points—both triple-A and indie—is that games are cheaper in Russia. (As well as Brazil and other regions that have only recently been added to Steam.) Significantly cheaper. Like, 30% to 70% cheaper, across the board.

This is due, again, to a number of factors. The Russian ruble was only added as an accepted currency to Steam in 2011. Before that, purchases on the Russian Steam store had to be made via credit card in US dollars—credit cards are not as common in Russia, and the ones that do exist often weren't able to handle transactions in other currencies. After the Ruble was added, those with credit cards could start buying, but it wasn't until Valve added additional payment methods, such as setting up payment kiosks where funds could be added to a Steam wallet, that the service became a popular choice. What this means is that, up until the last two or three years, most Russian PC games were still purchased at brick-and-mortar stores, and historically Russian software was priced by the disc.

"A one disc game was $4. Two discs: $8, and the market simply wouldn't stand much more than that," Wilson said, joking how Tripwire's game Red Orchestra sold very well in the Russian territories since it's one of the few games where Russians get to shoot Germans. "We were aware that the Russian market was simply not willing to bear the prices we pay, so if we were going to sell successfully online, we had to compete with the existing retail market on store shelves. If the market has Red Orchestra at $8 on the shelf, you can't price it at $20 online."

Always cheaper in Russia

Steam regional prices - Russian Prices

This explanation applies to other recently-added regions and developing countries—the market simply cannot support the prices we pay for video games. Rather than lose sales to piracy, the logical move is to adjust prices to a level more affected by the market demand and sustainability than the direct exchange rate.

Russia also has a notorious reputation for software piracy—Russia pirated 63% of its software in 2011, as compared to 19% in the US and 26% in the UK, according to a global study—a figure which is echoed in other countries with developing economies. However, this may not have as much bearing on the country's low prices as you might think. According to Valve boss Gabe Newell, piracy is an issue of service, not pricing.

"The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates," Newell said in a 2011 interview with GeekWire, noting at the time that, outside of Germany, Russia is Valve's largest continental European Market. "The people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russia."

Interestingly, the opposite effect seems to have happened in Japan. Steam prices are again affected by the brick-and-mortar shelf prices, but games on Steam—the few that even make it there in the first place—tend to be priced higher. PC gaming is extremely niche in Japan, but within that niche is a market of buyers willing to pay upwards of the Yen equivalent of $70 or $80 for a game. Many companies don't want their game on Steam, because they don't want to reduce the price to match the sale prices targeted at western gamers. The few games that do make it onto Steam then have their prices dictated by the store shelf prices—companies don't want their niche brick-and-mortar sales to be cut into by lower prices online.

"They want those $70, 80 dollar sales," said Esteban Salazar, a producer at Japanese developer Marvelous AQL. "It’s very, very focused, laser targeted, towards the core group of a few thousand people that would buy, rather than a huge mass market audience like the store overseas."

Steam regional prices - Borderlands AU Prices

Compare this to the Australian market, where taxes keep the price of imported games locked in higher than their overseas counterparts. It's expensive to ship games to distribute games in Australia, and publishers have claimed in the past that selling new AAA games for less than $80 AUS would not be profitable. Publishers typically keep Steam prices even with retail prices, which means Australian Steam games almost always feel unfairly expensive to Australian PC gamers. Ubisoft recently offered the explanation that “unlike Ubisoft US, Ubisoft Australia & NZ is a part of the European business group...We buy and sell product at euro-based cost of goods and royalties, as does UK, France and most of continental Europe.”

Cutting the binds of retail

After spending weeks making spreadsheets charting the prices of hundreds of games, the biggest takeaway for me is that many companies—triple-A especially—have little discernible rhyme or reason when it comes to pricing other regions. Indies, with their "feeling-based" pricing systems and trust in Valve's pricing matrix tend to be both the most consistent and the most fair to consumers across all regions. Triple-A's, on the other hand, seem to still be pressured a fair bit by brick-and-mortar pricing. But as game sales shift more and more into the digital-only realm, I wouldn't be surprised to see Steam prices approach more normalized levels.

Changing exchange rates will always throw a monkey wrench in any attempt at global pricing normalization, and actively updating prices as currencies rise and fall in value would create far more chaos than it would be worth. But that doesn't mean leaving prices untouched for years as exchange rates fluctuate is a good idea. The only real solution is to price fairly as you go, using a combination of current exchange rates and market analysis, then perhaps revisiting outdated prices at regular intervals—maybe on a yearly basis, or at milestones such as when a new series entry is released, or when a price drop is set to be enacted.

Publishers should always be free to set their prices at whatever point they like, but I don't think it would be too much to ask for more consistency, or at least transparency about why some of their regional prices vary so dramatically. If anything changes the way publishers approach Steam in the near future, it will be the ever-increasing dominance of digital sales. As retails stores become less and less relevant for games, the prices set for physical discs—and the costs associated with producing or distributing them them—will hold less sway over what it costs to publish games all over the world. Game prices could look very different in five years.

But they'll probably still be incredibly cheap in Russia.