Is 20% Off Enough To Win Gamers To Amazon Prime?

If there’s one subculture that’s undergone a transformation from media pariahs to retail darlings, it’s the video game community. While the early days of Pong, Joust and Galaga might have been for diehards only, a game from a AAA studio can rake in millions and even billions of dollars from all types of consumers.

Needless to say, appealing to this market is no longer a niche prerogative, but a necessity — and Amazon is doing what it can to stay at the front of the pack.

The eCommerce giant announced a new discount plan for Prime members looking to beef up their video game collections: 20 percent off on all physical game orders. Does the math work out for Amazon or its customers, though? With most high-profile releases clocking in at $60, that means a yearly fee of $99 — or lower if shoppers managed to score one of Prime’s special temporary reduced rates — nets gamers a savings of $12 on each of their digital entertainment purchases through Amazon.

But just how big of a move is Amazon’s olive branch to the gaming world? Venture Beat explained that most other retailers in the industry offer similar programs, such as Best Buy’s 20 percent discount for new games in its Gamers Club Unlocked program, and GameStop’s 10 percent store credit for trade-ins and 10 percent off on used merchandise. So if Amazon is joining the crowd more so than breaking new ground, why start to offer such a run-of-the-mill discount program to begin with?

The answer may lie in the abstract side of video game development and marketing. While the entire industry relied on physical vehicles over decades for their products — cartridges, CDs, memory cards — only recently have digital downloads risen in popularity. These products that seamlessly transfer to customers’ gaming consoles or computers have taken off in recent years with Steam, one of the most popular PC digital marketplaces, raking in close to $3.5 billion in 2015, according to independent researcher Sergey Galyonkin. That entire segment is worth about $27 billion globally, which puts 15 percent of it squarely into the hands of a single retailer, a situation that must have Amazon supremely envious of Steam’s position.

That’s not all, though — League of Legends and other MOBA (multiplayer online battle arena) games don’t require physical media at all and are in fact free to play, and yet they routinely pull in tens of millions of dollars every month on the backs of hundreds of millions of players worldwide.

“It takes League of Legends about five days to earn that same amount of money [as rival game Dota 2 makes in a month],” Joost van Dreunen, CEO of SuperData Research, explained in a blog post. “Even though earnings have started to plateau around the holiday season, due to the major releases on other platforms, League of Legends still had a monthly run rate of over $123 million in January [2015].”

So if the immensely lucrative video game industry is moving to a more digital state of mind, Amazon’s 20 percent discount on all physical copies, new or used, takes on a different inventory-reducing light. While the occasional collector’s edition with special features might pop up for highly anticipated games, all the price drop might do is help the retailer recoup some costs from its already ordered inventory, while signing up a few more Prime members in the process.

But Amazon isn’t the type of retailer to look at a thriving space like video games and think that the only worthwhile thing to do is to dump some inventory if possible. It might be a bit of a long shot, but Amazon has seen rapid and high-profile success with its internally created video content, so is it that far-fetched to imagine digital games produced by a studio all Amazon’s own?