Paying $22.00 for a $20.00 Steam Wallet Code
How Online Platforms are Making Their Stores Financially Accessible
One of the sources of Steam Wallet Codes in the Philippines is Datablitz, a retailer that sells video games and computer accessories . I can pay P1,100.00 ($22.00) for a P1,000.00 ($20.00) Steam Wallet card if I pay in cash, or I can purchase it from their website for P1,015 ($20.35) if I use PayPal.
To many Americans, this proposal seems ludicrous. But then again, to those same Americans, they probably think that retailers like the Epic Games Store or GOG are a good deal. They’re not — at least that’s the case if you’re living in a developing country like the Philippines.
One of the shortcomings of the tech and gaming media is that they approach it from a US paradigm, which limits their perspective. If you want to know why digital platforms like Steam (or even stores like iTunes or the eShop) are successful globally — and to a certain extent, why the Epic Games Store’s 12% revenue share does not make sense — you can’t limit yourself to American insights. In this case, the answer is simple: they make their stores financially accessible.
But what does it mean to be financially accessible?
Let Me Give You My Money
Here’s something Americans probably take for granted: they have credit cards. In the Philippines, Filipinos may have bank accounts (and thus have access to online banking), but that’s no guarantee that they own a credit card. I’ve witnessed several of my coworkers have their credit card applications rejected by banks numerous times — and these are people who were earning more money than me at the time. And it’s not a unique phenomenon: I can’t monetize my Medium posts for example because Stripe does not support countries like the Philippines.
I can’t shop at your store if you can’t find a way for me to pay for your goods. The Epic Games Store doles out a lot of free games on a regular basis (which is good for consumers), but as a revenue model, loss leaders are only profitable if that translates into customers buying something else at your store. And in this case, unless I own a credit card, I can’t.
Companies like Valve, Apple, Nintendo, etc. tackle this problem using different models, but they all have one thing in common: they have prepaid cards available for purchase at local retail stores. This means that consumers who only have access to cash are nonetheless able to shop at their digital storefronts.
Here’s where we start talking about financials. Physical prepaid cards eat at your revenue. It costs money to print and transport them. You’re also selling those prepaid cards below their listed price to distributors. The reason Datablitz has to sell a P1,000.00 Steam Wallet card at P1,100.00 is most likely because they acquired it from their distributor at P1,000.00 and need to apply their own markup to churn a profit. And it’s highly unlikely that said distributor are selling those cards at cost, so they most likely bought it from Steam at a price lower than P1,000.00. Having no insider knowledge, it’s hard to know how much their profit margin is: is it 5%? 10%? 30%? What I do know is that if I use Steam Wallet to purchase a game, less than 100% of the retail price goes to Steam. It’s a cost of doing business, but it’s one that makes it financially accessible to consumers.
Equitably, Not Equality
The daily minimum wage in the Philippines is $10.00 a day, not an hour (which is the case in some States in the US). Basic services like food and water might scale with the region (i.e. food is cheaper in the Philippines), but luxury goods are another matter. Products like Nintendo Switches or Apple iPhones don’t get cheaper here just because the average income is lower; in fact, it’s the opposite, as said products are more expensive compared to their retail price in the US (a $399.99 iPhone SE 2 is priced at $499.99 here).
The economy’s initial solution to this problem was piracy. Back in the 1990s, pirated video games were the norm: Imagine competing against retailers that would sell pirated Playstation discs of Marvel Super Heroes vs. Street Fighter for a few dollars and stocked them by the spindle. When the iPhone first debuted, one of the new shops that appeared in tiangges were those that offered to jailbreak your phone and offer you a bunch of Apps for a minimal fee.
Stricter Intellectual Property (IP) laws didn’t really solve piracy. What did was a paradigm shift from all the stakeholders.
Datablitz’s claim to fame was its reputation: it was the most prominent retail chain at the time that sold legitimate video games and accessories. It had an uphill battle to fight but a few years later, they won — or at least the concept of selling legitimate software as opposed to pirated CDs. And they did so via regional pricing: while the Collector’s Edition of Warcraft 3: Reign of Chaos was consistently $99.99 around the world, the regular version sold for $29.99 in the Philippines, half the amount it would fetch in the US. It was still cheaper to purchase a pirated copy, but at least the price now was attainable — and you didn’t have to worry that the pirated CD contained viruses. This practice would be mimicked by the video retail industry as affordable VCDs and DVDs (but not quite Blu-Rays) entered the market — which some consumers chose over illegal copies.
Here’s where the spectrum of regional pricing developed.
Online retailers like the Epic Games Store and GOG are at the bottom of the list. Not only do they not offer alternative modes of payment, their concept of regional pricing is over-simplified: a single price no matter where you are in the world. Unfortunately, their baseline price is that of the US. Everyone is treated equally, except it assumes you’re earning at least $10.00/hour.
Next on the hierarchy are stores like the Nintendo eShop. Nintendo has regional pricing in place. The problem is not every region has a store. Many Filipinos will probably default to the US store although it’s possible to acquire Southeast Asia-only games like Super Robot Wars T from the Hong Kong store.
Apple iTunes and Google Play is in some ways similar to Nintendo’s eShop, except they support significantly more countries (as opposed to one or two shops per continent). It’s possible to set different prices for each country. The problem, however, is that a lot of developers don’t take advantage of this, and in this context, I can hardly blame them: how would they know what’s a good price for their product in a country they have little experience with?
And then there’s Steam. Every country has a different price. The Philippines gets around 50% off compared to the US price. Russia might get it lower. The reason a lot (but not all) of games in Steam get regional pricing is it’s actively encouraged by Steam itself (to the point that some developers aren’t aware of this “feature” and don’t know how to use it to their advantage). It makes recommendations on what price to set in X country after inputting the price in your local currency. If we were being truly equitable, the price in the Philippines should be 1/8th of the price it costs in the US (if we’re just using minimum wage as a metric), but we’ll settle for ½ and it conveys the message that at least some thought was put into the pricing.
Long Live Retail
Another takeaway here is the symbiotic relationship between retail stores and online retailers. Whereas stores like the Epic Games Store seem to exist to compete with local retailers, the other companies — Steam, Nintendo, Apple, etc. provide local retailers with a way to earn from their success, and they in turn promote the platform of said companies.
Microsoft’s deal with GameStop may baffle some people, but if executed properly (and I want to stress that’s a big if), is a natural evolution of what the relationship between retail and online retail could be. There needs to be a link between physical and online stores because the latter can be unfair or shut out some people. The more winners there are, the better it is for everyone. And the first step in doing that is to make your platform financially accessible.
