Walmart’s Aggressive Price Cuts May Hurt Retail Publisher Profits

Walmart has announced it is implementing aggressive price cuts for the holiday season including $10 discounts on hit games and $50 gift certificates for buyers of Wii consoles.

Ubisoft has recently stated that aggressive price cutting has led to an overall decline in profits for them.  Contrast this with Steam’s recent announcement that aggressive price cuts for their digitally delivered games actually grow profits in the long run.  Steam has stated that moving prices back up after temporary (i.e. weekend) discounts do not affect sales negatively nor buyer perception.

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DGSpy’s Take

So what is the difference between price cutting offline at retail vs online?  Retail cuts tend to be more permanent and longer lasting due to the hassle of changing price, advertising costs, etc.  Online has much lower overhead in advertising and distribution costs leaving much greater margins of profitability for publishers to enjoy despite aggressive cutting.

Just one more financial reason publishers will embrace digital distribution wholeheartedly from here on out.