Digital games are quickly overtaking physical video games as the preferred way to buy gaming titles. However, despite being free of many physical game distribution costs, digital games often cost the same or even more than their physical disc counterparts. But why?

Why Should Digital Games Be Cheaper Than Physical?

In the early days of digital gaming, when many of us looked at our paltry dial-up modems and believed it was impossible, one of the benefits of digital games touted was a reduction in cost.

After all, putting a boxed game on store shelves is expensive. The final price you paid at the cash register combines manufacturing, transport, and the retailer's profit margin. So it's only reasonable to expect that those cost savings should be passed on to gamers.

In practice, this hasn't really materialized. You can expect to pay the same price for a digital copy of a game as you would in a brick-and-mortar store. At launch, a game might even be cheaper in-store, as retailers cut into their own profit margin to get feet through the door and perhaps sell a few other items besides a hot new game.

Digital Games Are Priced for Retail Parity

Paradoxically, the main reason you pay the same for a digital version of a game has to do with those same physical stores. For the moment, retailers remain a crucial part of the sales network for video games and video game hardware. If digital storefronts from Sony, Microsoft, and Nintendo undercut retailers by a large margin, those same retailers may choose not to stock physical games at all. Even worse, they may also stop putting related items such as gaming consoles and accessories on their shelves.

Digital gaming is growing quickly, but it's far from being the de facto way to buy video games. If retailers shut out console makers, they'd see half their sales evaporate in territories with good internet penetration---and almost completely disappear in territories with poor broadband coverage.

Apart from this need to keep retailers happy and onboard, there's little motivation to reduce prices. After all, digital games are also more profitable when the platform holder can pocket money that would have gone to the retail supply chain.

Digital Games Have Hidden Costs

In the interest of fairness, it's important to acknowledge that digital games have associated costs that physical games do not. The most obvious one is that digital games need infrastructure to maintain them. The game has to be stored in a data center and served to users all over the world using top-tier bandwidth.

When you buy a physical game disc, it doesn't cost the platform provider anything for it to sit on your shelf. New digital games partially subsidize the upkeep of older games that may not be selling as much anymore. If you want indefinite access to download your digital games, then someone needs to pay for the system to make it possible.

There are some alternative models of course. Good Old Games lets you download a DRM-free copy of any digital games you buy. Steam allows users to store an offline backup, although it does need to be unlocked with an online check.

Of course, physical games also need this infrastructure in modern times, to allow for patches. However, in most cases, these updates are optional and still represent a smaller cost than serving full games as a first-line sales channel.

Digital Games Benefit From Dynamic Sales

Digital games may have standard retail prices at launch, but they can benefit from early, frequent sales. Digital games offer instant and detailed sales data to developers and platform holders. They can respond to a drop in sales of a title and detect market saturation at a game's current price point.

So while the initial asking price might be the same between physical and digital games, it's unlikely that you'll actually pay the full amount. Then again, physical games also experience clearance sales and there's a used game market that is entirely absent on digital platforms at the moment.

When Will Digital Games Become Cheaper?

It's hard to envision a situation in which digital games, on consoles, in particular, will have lower prices than physical games. Should physical games eventually go the way of the dodo, then the retail parity argument will no longer exist. In the PC gaming world, this is already true and PC games do indeed generally cost less than their physical console counterparts.

In the world of consoles, a shift to a fully digital gaming market may actually lead to higher prices yet. Unlike the open PC gaming market with many competing digital storefronts, on consoles digital-only means a complete price monopoly. With only one place to buy console games, you'd either have to pay the asking price or do without the game.

Ultimately, digital games will be priced at whatever level gamers are willing to pay. The only way to change that is to refrain from buying games when they are more expensive than you think they should be. If enough players do that, prices have no choice but to change.