The Necessity of Regional Pricing in Game Distribution: An Opinion

A visit to a local supermarket in Amsterdam, Netherlands, reveals that the price of a kilogram of rice can range from €1.79 ($2) to €4.99 ($5.50), whereas in Argentina's capital, a similar product can be found for around 400 Pesos or $1. This disparity in pricing can be attributed to various factors, including disposable income, production costs, distribution expenses, and demand and supply levels, which ultimately affect the purchasing power parity. The Economist's Big Mac Index, which measures the purchasing power parity by tracking the local price of McDonald's signature burger, has shown that the Euro is overvalued by 4.3% in raw data and 15.5% in GDP-adjusted terms against the US dollar price, while the Argentine peso is overvalued by 33% in GDP-adjusted terms due to soaring inflation and strong currency devaluation. Similarly, digital products and services, such as those offered by Netflix and Spotify, have regional prices that are adjusted to maintain a relatively consistent level of accessibility. During my tenure at BoaCompra (now PagSeguro), we supported Valve's initial release of local catalogs and pricing outside of major currencies, including many countries in Latin America, and advised on applying a similar logic to suggest reasonable discounts for Argentina and Brazil (and later Turkey). However, this approach became cumbersome to maintain and required excessive communication and understanding of current economic conditions. Since 2012 (and 2014), the world has undergone significant changes, particularly with regards to the devaluation of the Argentine peso and Turkish Lira, and Valve has struggled to address these issues. The recent decision to discontinue local currency support and adjust pricing by switching to US dollar-denominated values has resulted in game prices increasing by up to 4,298%, which is an inadequate solution that fails to address the root cause of the problem. Simply increasing prices is not a viable solution to the underlying issues of digital games and platforms being easily accessible via VPNs or resellers misreporting sales. The gaming industry can learn from the tools and strategies employed in other areas of the digital media spectrum, such as the free-to-play segment, which has successfully handled these issues for over two decades. For instance, Spotify analyzes the country or region of issuance of a user's payment method alongside their access details (IP) and adjusts their account accordingly or locks them out from purchasing from a different region. Netflix requires valid tax IDs or other guaranteed local parameters to be provided for specific regional pricing and offers to be accessed, and many free-to-play MMOs, such as Garena's FreeFire, allow for globally accessible keys at a higher price and limit lower-priced keys to be redeemed via specific servers and regions only. It is essential for publishers to collaborate with strong partners that enable third-party distribution partnerships to effectively cater to local gamers and extract a reasonable value. Regional partners and local heroes are best equipped to understand how to present products and deals to their audiences, reach their target groups with promotions using the right channels, and provide local payment methods that local users can utilize at the right cost-benefit. These partners can help publishers generate much-needed additional revenue streams without cannibalizing other markets. In light of Valve's recent move, it is crucial for publishers to expand their distribution channels.