The dishonesty of "real money" App/console stores

[Uncle Mike]

Over the last few weeks, I'd been toying with the idea of buying Diablo 3 and/or Destiny digitally. (This is on PS4, but the point will hold, I think, for all the online stores - Xbox, iTunes, Google Play) Obviously, you log on there, and you see the ridiculous online mark-up: £60 for Diablo compared to £44 on disc from Amazon.

This is pretty consistent across the board for digital retail titles, as everyone knows. They are expensive!

And, everyone cheered when MS turned the XBox Marketplace from using MS Points to using currency - no more silly exchange rates! It's just real money! Yay!

As I was looking around though, it's not quite that simple, is it? You can easily buy PSN vouchers (and I assume the same is true for all the rest of them) for less than the face value. I picked up £35 PSN vouchers for less than £30, for example.

And you can buy them at face value in Sainsbury, Tesco and so on. I assume the online stores selling them at less than face value aren't losing money, and I also assume Tesco etc aren't selling them with zero markup.

So that £35 voucher isn't costing anyone in the chain other than the end consumer that full £35. Which means, presumably, if you buy your titles direct from the PSN store with your credit card, you're giving Sony a lot more money than if you buy it with vouchers you picked up for face value in Sainsbury. And the same is true when you buy it with a voucher you bought for less than face value online.

So there is an exchange rate going on. Sony (or MS or whoever) aren't assuming they are going to get £60 for Diablo 3. If CD Keys are happy to sell me a £35 for £29, (and assuming they don't make a loss on that) then Sony are presumably also OK with only taking £45 or so for Diablo 3.

So, £60 doesn't really mean £60 in an online store, does it? There's a hidden exchange rate still going on, only it's disguised because the storefront talks about it in currency all the way through.

I think it might have been more honest when it was space bucks. At least then you were constantly reminded that there was an exchange rate.

[Simmy]

How is it any different to getting itunes gift cards cheaper than face value, for instance?

You shop around for a decent deal and you'll almost always get one. I don't really see the problem tbh.

[RubberJohnny]

It's basically identical, yeah. It's just perception.

[Lag]

idgi

an item is priced somewhere at £40. Alice buys it there. The item is as described.

the same item is priced somewhere else at £50. Bob buys it there. The item is as described.

the same item is priced elsewhere at £60. Charlie buys it there. The item is as described.

Where is the dishonesty?

[Jg15]

Its for this very reason that I don't actually have any kind of card setup against my Xbox/PSN profiles. If I want to buy something digitally I just get some reduced credit from a place like CD keys. Same with renewing a 12 month subscription, £40 direct from the Xbox vs £25 code on CD Keys.

[Simmy]

idgi

an item is priced somewhere at £40. Alice buys it there. The item is as described.

the same item is priced somewhere else at £50. Bob buys it there. The item is as described.

the same item is priced elsewhere at £60. Charlie buys it there. The item is as described.

Where is the dishonesty?

Basically, there is none.

You shop for the best deal, you'll get it. I don't get the problem either.

[Uncle Mike]

How is it any different to getting itunes gift cards cheaper than face value, for instance?

It's not - I explicitly said it's the same thing.

[Simmy]

I'm not sure what the complaint is, though? That you can buy PSN (or other) digital gift cards cheaper elsewhere?

I think it's a fantastic thing, actually. Spend a few minutes looking around for good deals on gift cards and you'll get the game a lot cheaper.

[Uncle Mike]

an item is priced somewhere at £40. Alice buys it there. The item is as described.

the same item is priced somewhere else at £50. Bob buys it there. The item is as described.

the same item is priced elsewhere at £60. Charlie buys it there. The item is as described.

I think the dishonesty isn't in what's being charged. It's in the sort-of pretence that £60 is £60.

It is entirely normal that you can purchase £x vouchers for these online stores for less than their face value (and that wholesalers are obviously purchasing them from the Marketplace holder at much less than their face value.) So it's not simply a method whereby people without credit cards can also join in on these online stores, it's also a case that doing so is cheaper.

[rafaqat]

The dishonesty is in the fact that we're told that the price is set by the publishers and the platform holder have little say in the matter when clearly it's a crock of shit as they're able to sell PSN/Live credit for less than face value. The publishers are NOT getting £60 for that game. They're getting whatever the hell they agreed with the platform holder, which probably won't be THAT far off the retail slice they get (retailer keep banging on about what a big chunk the publishers take and how thin margins are). Basically they could sell it for less than they do now quite easily.

[Simmy]

The alternative - that all gift cards have a face value that stays put no matter what, and cannot be bought cheaper - is that the preferable alternative we're discussing here?

[Clipper]

I'm not sure what the complaint is, though? That you can buy PSN (or other) digital gift cards cheaper elsewhere?

I think it's a fantastic thing, actually. Spend a few minutes looking around for good deals on gift cards and you'll get the game a lot cheaper.

because the digital retailer takes this into account.

Sony sell Diablo 3 and on the site it costs £60...

if you pay with a credit/debit card then Sony get £60

If you pay with "giftcards" then Sony get less than £60 as the giftcards are sold by 3rd parties with a markup for them included

so for sake of argument lets say sony sell giftcards to the retailer for £25 for a £30 card. They got £50 for that £60 worth of credit you bought Diablo 3 with.

so when you bought Diablo 3 using giftcards sony only got £50.

So when digital stores like Sony price their stuff the "dishonesty" is that they price stuff high to account for fact they will lose out if people pay with giftcards.

So the honest hing to do is Price it at £50 and dont have cut price giftcards. We are being conned into thinking we are getting a "deal" when in actuality the digital stores inflate their prices so they dont lose out if people pay with giftcards.

[Simmy]

because the digital retailer takes this into account.

Sony sell Diablo 3 and on the site it costs £60...

if you pay with a credit/debit card then Sony get £60

If you pay with "giftcards" then Sony get less than £60 as the giftcards are sold by 3rd parties with a markup for them included

so for sake of argument lets say sony sell giftcards to the retailer for £25 for a £30 card. They got £50 for that £60 worth of credit you bought Diablo 3 with.

so when you bought Diablo 3 using giftcards sony only got £50.

So when digital stores like Sony price their stuff the "dishonesty" is that they price stuff high to account for fact they will lose out if people pay with giftcards.

So the honest hing to do is Price it at £50 and dont have cut price giftcards. We are being conned into thinking we are getting a "deal" when in actuality the digital stores inflate their prices so they dont lose out if people pay with giftcards.

Ah I see what you mean, yeah.

I can't complain though - cheap US PSN Cards, buy games on the US Store Digitally for a nice big saving.

It might not be fair, but I don't mind as long as I get the games cheaper.

[Clipper]

Ah I see what you mean, yeah.

I can't complain though - cheap US PSN Cards, buy games on the US Store Digitally for a nice big saving.

It might not be fair, but I don't mind as long as I get the games cheaper.

Using the US store is a different matter, there you are making use of a loophole that allows you to take advantage of exchange rate and lack of sales tax etc.

Different issue and one with a minor impact on prices.

[Uncle Mike]

It's worth noting that this model doesn't exist elsewhere. There isn't (to the best of my knowledge) a shop selling Amazon gift vouchers for less than face value (there are marketplaces where consumers can ditch their unwanted codes for discount, but that's a slightly different manner). And no-one's turning up at Tesco with a card loaded with £50 of Tesco pounds that only cost them £35.

[Simmy]

Perhaps not, but Tesco for instance had/have £10 gift vouchers for a fiver the other month. Not sure about Amazon because I haven't checked but I'm sure it exists, just not to the extent that it does in our other examples.

[Flub]

I think the really fucking shitty thing is why the hell Diablo III is ever priced at 60 quid in the first place. The stupid cock lords.

[Spacehost]

AFAIK when you buy prepaid cards Steam/ Sony/ Microsoft/ Nintendo make a smaller margin than they would if you bought via CC but it's balanced out by the lack of payment processing fees (whoever you bought the gift card from is eating that instead) and the fact you're locked into spending that money on their service dramatically increases the probability that you'll complete the transaction (I forget the number, but the aborted purchase rate on CC purchases is a lot higher than gift-card ones).

[RubberJohnny]

No, but you do get coupons or codes for specific goods on those websites (see also GMG), which is the same thing - a cheaper option for price-concious consumers to root out, and one for those who don't care so much (and a special edition for those with more money than sense).

The concept is called price discrimination and it's everywhere, surprised that you're surprised tbh.

You only have to look at countries like Russia, which get the same games at a far cheaper price regardless of exchange rate, to see it in action.

[Clipper]

It's worth noting that this model doesn't exist elsewhere. There isn't (to the best of my knowledge) a shop selling Amazon gift vouchers for less than face value (there are marketplaces where consumers can ditch their unwanted codes for discount, but that's a slightly different manner). And no-one's turning up at Tesco with a card loaded with £50 of Tesco pounds that only cost them £35.

presumably this has been done to "soften the blow" of more people going digital i.e. GAME et al arent cut out of the loop completely ... yet.

Obviously publishers and digital stores think they still need those physical stores on side and solvent for the moment... presumably marketing reasons so games have a high street presence.

[Flub]

I don't think high speed internet has penetrated deep enough to make doing away with physical copies viable in most cases.

[Spacehost]

This might sound weird but does buying and using a gift card create money? I mean, the card itself presumably costs fuck all to make, then you buy one for £25 and Apple or whatever get a large cut of that, the rest going to the retailer, so there is £25 taken from your account and given to Tesco/Apple etc, such as with any purchase, and the books balance.

Then you use the card on the store and a new £25 appears. This isn't deducted from anyone else's account is it? It's just virtual money that appears for you to use and spend on the iStore, so this new money is transferred to the app creators and Apple takes another cut from it. So not only has the initial £25 been spent once on a card, it's spent again on the apps, isn't it?

Am I missing something? Does Apple have to deduct a certain amount of money from their own accounts every time they make a new gift card, more than the production cost of the card? Or is the £25 you spend to buy the card kept in limbo until you use it on the store? My brain hurts. Somebody help.

So you give Apple £25 for a gift card. You then get £25 worth of credit on the Apple store. Essentially you're loaning Apple £25 on the proviso that they give you £25 worth of stuff back eventually.

[Xevious]

It's worth noting that this model doesn't exist elsewhere. There isn't (to the best of my knowledge) a shop selling Amazon gift vouchers for less than face value (there are marketplaces where consumers can ditch their unwanted codes for discount, but that's a slightly different manner). And no-one's turning up at Tesco with a card loaded with £50 of Tesco pounds that only cost them £35.

You can frequently buy Amazon gift cards from supermarkets at a slightly reduced price. Tesco and Sainsbury vouchers are sometimes given away with subscriptions or other incentives.

Do you have a similar issue with the Nintendo online store selling physical games at the same price as other online stores? How about Game selling at the same price as the local indie, even though the local indie has had to go through a wholesaler while Game has its own warehousing operations?

[Cosmic_Guru]

The accounting (by platform holders) is interesting for sure. I don't know if the codes sold to the likes of cd keys are individually tracked and can thus be directly allocated, but I suspect it's more likely some overall percentages are applied to the unit sales regardless of the method of payment.

[Spacehost]

I'm pretty sure gift cards are bulk ordered and paid for in advance, so Digital Retailer X basically gets a buttload of money from Physical Gift Card Retailer A-W and Y-Z who buy the cards, which eventually converts into purchases made against Digital Retailer X, but in the meantime, free money.

[MikeBeaver]

This might sound weird but does buying and using a gift card create money? I mean, the card itself presumably costs fuck all to make, then you buy one for £25 and Apple or whatever get a large cut of that, the rest going to the retailer, so there is £25 taken from your account and given to Tesco/Apple etc, such as with any purchase, and the books balance.

Then you use the card on the store and a new £25 appears. This isn't deducted from anyone else's account is it? It's just virtual money that appears for you to use and spend on the iStore, so this new money is transferred to the app creators and Apple takes another cut from it. So not only has the initial £25 been spent once on a card, it's spent again on the apps, isn't it?

Am I missing something? Does Apple have to deduct a certain amount of money from their own accounts every time they make a new gift card, more than the production cost of the card? Or is the £25 you spend to buy the card kept in limbo until you use it on the store? My brain hurts. Somebody help.

Apple take your £25 and stick it in their bank, they give you £25 of credit to use on their store as you wish, from the initial £25 they have to pay for what ever you purchase with it, so if you click on a 99p App, 99p is deducted from your credit and they pay the App's creator the agreed amount between the creator and Apple, the difference in this is their profit I would assume ( although there may be other costs such as server space, bandwidth to download etc).

Apple are more than happy with this, as once you give them the initial £25, you are locked into spending it, if you don't they have made money, if you do, they have made a little less money.

Of course, if you buy the £25 from a separate retailer, then their share is also deducted from the money Apple have to play around with.

[Wickedkitten]

It's worth noting that this model doesn't exist elsewhere. There isn't (to the best of my knowledge) a shop selling Amazon gift vouchers for less than face value (there are marketplaces where consumers can ditch their unwanted codes for discount, but that's a slightly different manner). And no-one's turning up at Tesco with a card loaded with £50 of Tesco pounds that only cost them £35.

Not precisely the same, but you can do almost the same at Tesco with clubcard vouchers.

[Graham S]

Loads of gift cards and vouchers (in general) don't even get redeemed. A quick google suggests about 10-20%.

[BeeJay]

Interestingly I have recently discovered that my work benefits scheme thing includes being able to buy store vouchers at a discount. For example toysrus for 8% off. This is compounded with all other offers/cash back etc. So good deals can become great deals. Another example of where a retailer is effectively selling their credit for less than the retail price.

[Lag]

The dishonesty is in the fact that we're told that the price is set by the publishers and the platform holder have little say in the matter when clearly it's a crock of shit as they're able to sell PSN/Live credit for less than face value. The publishers are NOT getting £60 for that game. They're getting whatever the hell they agreed with the platform holder, which probably won't be THAT far off the retail slice they get (retailer keep banging on about what a big chunk the publishers take and how thin margins are). Basically they could sell it for less than they do now quite easily.

1. There's no dishonesty in the price of an item being above what one could sell it for and still make a profit. A game might be priced at £200 that could be profitably sold for £20, there would be no dishonesty if someone handed over £200 and received the game.

2. Digital distributors get 30-40% (iirc SEN and LIVE 30%) of the price paid by the customer and the publisher the remainder (possibly less because of VAT, I don't remember). I have never seen anyone in the industry suggest the publisher gets the full amount.

If someone's losing out here, it seems to be the digital distributor selling credit for less than its face value (but there must be a benefit to doing that) not the customer or publisher.