Recently, it's become quite noticeable that digitally-distributed video games are somewhat over-priced in the United Kingdom compared to the United States. A simple Google search currently displays Overwatch, a recently released game, in the UK PlayStation store as a whopping £54.99; after perusing the Xbox Live store, the price is again £54.99. Some delving into the exchange rates between the two aforementioned countries later, and £55 translates to a hefty $80.50. Pricing in the same store in the US is just $60.
The above image clearly showing the cost of Overwatch on the UK PlayStation Store.
The above image clearly showing the cost of Overwatch on the US PlayStation Store.
There are many impassioned opinions circulating around the United States about the release price for games being overly-expensive. Many in the UK would agree, if the cost was the same, but it seems much more pricey in the UK. After again consulting the magical exchange rate machine for guidance, the typical US $60 retail price translates to £41. So, after a simple calculation, that translates to a difference of £14, or $20.50.
There are currently various pieces of information, utilised as arguments, which have been used to demonstrate the pricing of video games as fair; this mostly concerns physical versions. Some frequent arguments include:
Yes, good, old-fashioned tax. Currently, value added tax (VAT) is added to every purchase within the UK and that currently stands at 20%. In the US, tax is typically added after sales once the sub-total is calculated, resulting in a purchase with the tax added. But, typically in the United States, taxation is handled differently depending on the state and is generally lower.
Newly released video games often demand monstrous amounts of money, especially when pre-ordered. Often, the reasoning for this is the publisher's attempt to make their money back as quickly as possible--especially since modern AAA games can cost hundreds of millions to develop. Typically, they make certain to position large shelves and dramatic illustrations of their investments right at the entrance to supermarkets or specialist video game stores to coax the customer's attention into purchasing them. With the constant bombardment of marketing and advertising reminding consumers prior to release dates, this is their convenient reminder, or guarantee of sale, assuming the consumer was interested from the beginning.
Furthermore, there are general expenses for all countries -- meaning stores need to cover these before any profits can be calculated. Doing business in the UK is considered to be more expensive than other countries, such as the United States; the cost of renting stores, hiring staff and shipping their products around the country are apparently higher. This particular argument has been used for practically everything in the UK, so it's not entirely concrete if it's plausible.
Obviously, the retailers themselves want money also, or they simply couldn't continue to operate. As for the reasoning for the different costs in retailers, with there being a myriad of different stores offering these products and each differing in terms of size and popularity, this appears to be a grey area and one perhaps too political to explore.
As a quick breakdown, it costs companies to ship products in bulk through foreign customs in mass. Companies also often lose money developing for countries where they may not receive a return on the cost of production without a price hike. It apparently costs significantly more to make video games available in the UK and the rest of Europe than the US, hence the price difference. Here's the kicker: none of this applies to digital downloads, whatsoever.
Online digital distribution remains slightly higher apparently to prevent those stores undercutting retailers which would result in their potential closure. Analysing other media forms, books for instance, Amazon's Kindle has been the death of countless specialist book stores--especially the smaller businesses. Then, analysing music stores, everything was essentially the same; iTunes became much more prominent and specialist music stores began closing down everywhere simply because digital downloads and ordering online were more convenient and quicker.
There are hundreds of stores which have closed due to online popularity.
Video games obviously rely on retailers for profit, but they also rely upon retailers for popularisation of the media and its continual sales. With retailers still being the popular option, whether ordered online or attained from the street, that avenue naturally needs to be protected.
But, regardless, without all of the expenses mentioned above relating to retail, digital video games in the UK still feel too expensive. It's difficult to imagine why this is when products come from essentially the same stores as other countries and obviously take no physical disc, packaging, or logistics.
It seems the simple fear of undercutting retailers is the primary reason for this conundrum, since realistically, general retailer expenses and logistics do not seem to apply. If that's the only plausible reason, for making newly-released UK digital downloads so exorbitant, perhaps this bears further investigation? Leave your thoughts in the comments below.