Steam stumbles on regional pricing | Opinion

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We've all become wearily accustomed to seeing rapidly rising prices in the past couple of years, and the games industry has been no exception to the worldwide trend of inflation.

The current generation of console hardware has even seen a mid-cycle price increase, rather than the once-customary gradual price drops designed to bring consoles within more and more consumers' price ranges.

Even against that backdrop, however, the sudden price hikes game consumers in Turkey and Argentina faced earlier this week were pretty shocking. Steam operator Valve switched its storefront in those countries from local currency pricing to US Dollar denominated pricing, and the result was large price leaps for a lot of games – mostly in the double-digit percentages, although PC Gamer found some major titles whose prices had leaped by hundreds or even thousands of percent.

The reason for this policy change is straightforward, on the face of it – the currencies of these two countries have been incredibly unstable, with their value against the dollar collapsing so fast in recent years that it's challenging for businesses to keep up with their local pricing.

Users are understandably upset, but the most egregious cases of huge price jumps are almost certainly down to oversight on the part of publishers; Valve gave them just a few weeks to adapt to the change, and the default behaviour for games that didn't set a new regional USD price appears to be to use the US price, which would be enormously expensive in those markets.

The storefront could probably have done a bit more work ahead of the switch to avoid headline-grabbing numbers like Stardew Valley's 2900% price hike, but it was somewhat inevitable that prices would rise overall when this change was made – and if those currencies continue to decline, as seems very likely, the effective Steam prices in local currency will continue to rise.

The balancing act over how to price games and other products in local markets with very different economic conditions is nothing new, of course, and while Turkey and Argentina are extreme examples due to their collapsing currency values, the issue of local pricing is thorny in many other countries too.

Even among developed countries, we've seen significant currency movements in recent years, largely driven by the rise in US interest rates as the country struggles to get inflation under control.

The Japanese Yen has lost about a third of its value against the dollar in the past couple of years, for example – which essentially means that games sold in Japan, which have maintained their Yen pricing as previously, are now producing about a third less dollar revenue than before.

This is the core of the dilemma for publishers; do you accept that you're going to make much less money from Japanese sales due to currency movements? Or do you risk potentially alienating Japanese consumers – whose Yen may be worth less in USD, but that doesn't mean they have any more of it to spend, as salaries have remained largely flat in the country – by setting higher Yen prices in order to keep your USD-denominated revenues consistent?

This is a universal problem – substitute Japan for any other country in the above example – and in general the most profitable answer has been to set pricing at a level that the market can sustain, even if that results in major disparities across regions. That's a luxury game publishers have; games are an incredibly flexible product in pricing terms, as the actual unit costs in terms of materials and distribution are close to zero.

Consequently, it's been common for games to be sold at very different prices in different parts of the world. However, with digital products, a whole other problem has emerged, one which lurks in the background of Steam's policy change in Argentina and Turkey – the issue of consumers from other regions finding ways to access marketplaces in countries with weaker currencies in order to buy products more cheaply.

This, too, is not a new problem by any means – but in the era of "grey imports" and physically moving discs between continents, let alone mod chipping your consoles, it was a marginal problem at best.

It was so marginal, in fact, that efforts to prevent grey imports tended to cause more problems than they solved – as the industry tacitly admitted when region locking on consoles went the way of the dodo a few generations back.

Digital storefronts, however, have enabled this activity on a much larger scale, and countries with collapsing currency values – and hence collapsing game prices – are an especially enticing opportunity in this regard.

Pricing set low to allow consumers with weaker currencies to buy games is being used by consumers with much stronger currencies to get steep discounts

Detailed instructions for how to use various combinations of VPNs, identity services, disposable prepaid credit cards and grey-market companies to access digital marketplaces intended for other countries proliferate on various forums.

Argentina has been a particularly popular country for this activity in recent years, at least according to the sheer number of posts about trying to access marketplaces like Steam through "spoofing" identification as an Argentinian consumer.

It's not an entirely straightforward process – companies are aware of it and do try to create barriers where possible – but it's hardly difficult, either, not least because being too aggressive in creating barriers to this behaviour tends to also make it difficult for legitimate local consumers to purchase anything.

To the consumers following these guides, it doesn't feel like they're doing anything illegitimate – after all, they're not pirating anything. On the contrary, they're paying the price for the game, on a legal storefront, which the developer chose to charge for it in that country; the only wrinkle being that they're not actually in that country. Still, you can see the logic, even if you disagree with it.

You're not doing anything wrong by going to Argentina and paying local prices for a steak that could cost ten or even a hundred times more in your home country; why is a game any different?

The moral question is valid – reasonable people may disagree on its answers. From a business perspective, though, the reality ends up the same regardless of the individual morality of the consumers' actions. Pricing that was set very low to allow consumers with weaker currencies and low purchasing power to buy games is now being used by consumers with much stronger currencies and high purchasing power to get steep, unintended discounts.

This is understandably infuriating to developers and publishers, and while most of the very high prices being seen on Steam following the shift to dollar-denomination are likely just due to developers not updating their prices for the local markets in time, the change itself is at least in part a consequence of publishers being fed up with seeing US and EU consumers talk on forums about how cheaply they've bought games through the Argentinian Steam storefront.

"If region locking of these services becomes more strict and secure, it will ultimately cause inconvenience and potentially loss of access to a great many more consumers"

Unfortunately, it's legitimate Argentinian and Turkish game consumers who have been caught in the middle of this. It's not their fault that other people are finding workarounds to access the Steam storefront in their regions to buy games cheaply, but they are the ones who now bear the brunt of a USD-denominated pricing policy which will have the effect of making games more and more expensive in those countries as their currencies decline further.

There could be worse to come; if region locking of these services becomes more strict and secure, it will ultimately cause inconvenience and potentially loss of access to a great many more consumers.

Publishers' annoyance at region-spoofing to get unwarranted discounts is understandable, but their response needs to be measured and careful. All too often in the past, attempts to "secure" media from piracy or grey imports have ended up inconveniencing legitimate consumers without actually doing anything to stop pirates or importers.

The incredibly stupid example of legitimate DVD purchasers and cinema-goers being subjected to lengthy anti-piracy videos that were not present on actually pirated versions of the movies being a classic of the genre, although the games industry has its fair share of similar clangers, with DRM systems that impacted game performance such that pirated versions of certain games actually played better than legitimate ones being an especially jaw-dropping own goal.

The outcome of these price hikes in Argentina and Turkey will likely be more piracy in those markets – we can acknowledge that as a consequence of the change without condoning it, and it may be a trade-off publishers consider worth it for stemming some of the abuse of these regional stores by people in other countries.

Still, it's important to acknowledge that this is a move that harms consumers – and to consider any further countermeasures first and foremost in terms of their impact on legitimate consumers, no matter how annoying the wave of digital grey importing may have become.