Why are digitally distributed products so expensive?

Steam - Technology for the future or a ghost from the past
Steam - Technology for the future or infrastructure from the past?

Recently I complained about Canal Plus’ C Sports awfully high prices. Paying close to €20 for streaming a Premiere League game, is in my eyes way too expensive. While I am a very big fan of digital distribution I wonder why so many digitally distributed products have to be so expensive. Digitally distributed products are often sold at the same or even higher price as their retail counterparts. The most recent example is Call of Duty Modern Warfare 2. MW2 was recently made available through Steam for close to €60. Elkjøp, a Norwegian retail store, is currently selling the same game in a weekend deal for 350 NOK (about €40).

A €20 price difference is quite astonishing. Retail products come on a disk which is put into a case together with a manual. The cases are transported all over the world and sold in stores which need to pay rent and their employees. These are all costs which can be cut if the product is distributed digitally.

Setting up and maintaining a server park for digital stores is obviously not free either. However, it would surprise me if these costs are higher than the costs related to printing, distributing, and selling retail products. Moreover, digital distribution should give the developers and publishers added advantages. First, it is so far not possible to resell digitally distributed product. Hence, everyone who wants to get their hands on a product needs to buy it from the publisher rather than through second hand stores or on the private market. Second, by requiring activation of the games through the digital store, the stores may contribute to reducing piracy. Third, digital stores would make it far easier to sell add-ons, extensions, and other products using micro transactions. All in all, digital distribution seems to be a big advantage for the developers and publishers.

However, this is not the first time Steam charges the price of a kidney for their games. I guess we as consumers should look elsewhere to increase the competition in the market. I hope that stores like Impulse and Direct2Drive will increase their catalogs and contribute to forcing Steam into reducing their  prices.

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