What PlayStation’s “monopoly” lawsuits get wrong about digital game sales – Ars Technica7 min read

https://arstechnica.com/gaming/2021/05/what-playstations-monopoly-lawsuits-get-wrong-about-digital-game-sales/

The raw cost a publisher pays the console-maker for these codes can vary depending on a variety of elements, according to market sources that spoke to Ars. Some publishers might pay the complete 30 percent commission that the platform holder would otherwise charge for a direct digital sale. Others might be able to work out lower rates, particularly if they buy codes up front wholesale.
At root, however, the console-maker is controlling the market for downloads in both cases; the presence of outside sellers in the chain is a little a red herring (which features its own intrinsic limited cut). And eventually, if a merchant truly attempted to undercut the console-makers own MSRP for digital video games, that console-maker could just cut off that sellers access to additional download codes. (These type of manufacturer-imposed prices requirements prevail for physical video games and are typically legal, according to the FTC.).
Even if console-makers were forced to provide totally free, resell-able console download codes to publishers (something neither lawsuit seems to be arguing for), that is not likely to equate straight to lower costs for customers. Thats because, as weve recently talked about in some depth, the platform-level commission rate usually has very little to do with the ultimate long-lasting cost charged for a video game, which is driven instead by consumer demand.
” I think that developers and publishers see no factor to pass [reduced store fees] on to customers,” F-Squared analyst Mike Futter informed Ars. “Consumers believe that $60 (quickly $70) is the reasonable market value since [advancement] expenses increased.”. The only area where seller “competition” for digital games perhaps assists consumers is through short-lived one-off sales. Newegg, for circumstances, is presently using a digital code for Resident Evil 3 on the Xbox One for $53.99, a 10 percent discount from other retailers.
You could argue that offering more retail options for game downloads increases the possibility that any among them will be using such a discount rate at any particular time. However those results are still most likely to be transitory. “Price changes only boost volume for a brief window, then sales continue to decay,” NPD expert Mat Piscatella informed Ars. “The change has a short-term impact, whether the cost modification is permanent or momentary.”.
You might also make an Epic-versus-Apple-style argument that all console-makers exercise too much control over what should rightfully be more open, PC-style platforms. The ability for traditional merchants to sell download codes for games on those console platforms is not the key argument versus that practice.

At the same time, however, the fit points out that a number of disc-based games are readily available from retailers for rates $30 to $40 less than the same digital game through the PlayStation Store. If the “supracompetitive” price for digital video games were really an issue for a possible PS5 buyer, one has to wonder why that theoretical client neglected these less expensive discs and purchased the Digital Edition in the first location. The 2nd match also suggests that the ability to purchase games from outdoors merchants is helpful for gamers who are not able to utilize a credit card to buy games directly from the PlayStation Store. Merchants including GameStop, Amazon, Target, the Humble Store, and more all provide a digital download of the video game for the exact same price as a direct purchase from the online Microsoft Store: $59.99 (thanks to the Virtual Economy podcast for highlighting this specific example).
And eventually, if a seller actually tried to damage the console-makers own MSRP for digital video games, that console-maker might just cut off that merchants access to more download codes.

Wheres the competition?
In any case, both claims focus on Sonys 2019 decision to discontinue the sale of digital PlayStation video game codes through “standard” brick-and-mortar and online merchants.
The intent, the new match states, was to “entrench [Sonys] monopoly power over the PlayStation Digital Game Distribution market” and “eliminate competitors and enable it to charge supracompetitive prices for [PlayStation 5] computer game. There are no procompetitive justifications for its choice.”
The current suit tries to argue that less expensive physical video game rates on the PS5 are useful as “a handy benchmark for what prices would look like in a competitive market for digital games.” Digital games in a really competitive market, with multiple retailers using download codes, would be even less expensive than these physical versions, the suit argues, because of “the greater input expenses associated with packaging, circulation and manufacturing” of disc-based video games.
Enlarge/ This digital video game code for Resident Evil 3 on the Xbox One costs $60 whether you buy it from Microsoft or a retailer.In practice, though, this is not how things usually work. Take the 2020 relaunch of Resident Evil 3 on the Xbox One, as just one example. Sellers including GameStop, Amazon, Target, the Humble Store, and more all provide a digital download of the video game for the same cost as a direct purchase from the online Microsoft Store: $59.99 (thanks to the Virtual Economy podcast for highlighting this specific example).
This is precisely the sort of “competitive” retail market for console video game downloads both PlayStation claims are combating for. Its also the kind that existed in the PlayStation environment until 2019. Yet on the Xbox One, digital downloads for RE3 and numerous other games arent any less expensive through these retailers than they are when purchased through the console itself. The very same phenomenon can be seen on the Switch, where prices for download codes are likewise broadly consistent throughout retailers and Nintendos eShop.
Whos really in control?
When a retailer sells a console download code, its buying that code from the publisher of the game itself (and adding a little markup to the final rate it charges the end customer). The publisher cant simply create infinite copies of its digital console games to provide to these sellers.
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A 2nd law office has actually filed a proposed class-action suit against Sony for its alleged monopoly control of digital PlayStation video game circulation. But both claims seem to be operating on a basic misconception regarding the mechanics of how “retail” competition operates in the market for downloadable console games.
Unlike the previous suit submitted by Westerman Law Corp, this new suit filed by the Saveri Law Firm focuses practically solely on the Digital Edition (DE) of the PlayStation 5, which is sold without a disc drive. On this hardware, the match argues, “customers … are left with 2 choices: purchase video games directly from Sony using the PlayStation Store, or purchase another console for numerous dollars.”
The Digital Edition and the Standard Edition of the PS5 are not interchangeable markets, the fit argues, due to the fact that of the “big rate discount rate” of $100 for the Digital Edition hardware. The match argues that a customer faced with a legally appropriate “substantial but small and non-transitory boost in rate” in digital games on the PS5 “would not shift away from the PS5 DE to the PS5.”
At the exact same time, though, the fit points out that a variety of disc-based video games are offered from merchants for rates $30 to $40 less than the same digital game through the PlayStation Store. If the “supracompetitive” price for digital games were actually a concern for a potential PS5 purchaser, one needs to wonder why that hypothetical customer overlooked these more affordable discs and bought the Digital Edition in the very first place. And if those disc-based video games are not suitable replacements, the new match does not truly make that argument (lawyers for the Saveri Law Firm did not react to a demand for comment from Ars).
The 2nd match also suggests that the ability to purchase video games from outdoors merchants is useful for players who are unable to use a credit card to purchase games directly from the PlayStation Store. Again, one has to wonder why a player faced with such an inconvenience would buy the Digital Edition of the PS5 in the first place. Absolutely nothing is stopping those players from purchasing PlayStation Store present cards from merchants and using those cards on the console itself.
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