[see more from Megan Fox at her primary site, Glass Bottom Games]
There's this (very understandable) worry amongst folks looking at the market currently enjoyed by Steam (and Impulse/D2D et al), PSN and XBLA. This idea that somehow, it will be infected by the same malaise that has driven mobile pricing to 99c. That game value is eroded, that content is without value, that we'll never have another Ultima or similarly higher-cost game again and that we're all doomed to a world of flying on Tiny Wings away from Angry Birds.
First, let me be clear: I love Tiny Wings and Angry Birds. Tiny Wings moreso I think, but that's beside the point.
Second, if I say "downloadables," I generally mean Steam (and Impulse/D2D et al), XBLA and PSN. Yes yes, I know, iOS is also downloadables, just... run with me. I am tired of typing that entire thing out.
Third, let's get to the point: I don't think we're going to see a race to the bottom in pricing in downloadables. "But!--" you say, but - hold on, let me at least run you through the reasoning.
Mobile games pre-iPhone meant Nintendo GB/GBA and DS, mostly. The market was priced well below AAA big-box console games, around $20-$30, and it was of course a massive industry. The team sizes were typically below 10 (call it 7-ish on average?), the dev times were a matter of months, and it was high volume as a result.
You drove a small company based on contract work, and had to sell yourself well to keep going, unless you scraped together enough scratch to run with an original IP and got lucky with strong sales.
The occasional game came out with a longer development cycle or a larger team, but typically on the back of a larger company or IP that could be counted on to sell much better. You also had people risking substantial savings on long shots, and losing out miserably if they weren't so lucky.
Aside from the price, that... sounds a lot like modern iOS development, doesn't it? Very similar team sizes, very similar development timelines. I'd say product visibility was easier to control, and team sizes were larger, about twice as big, though these days that's inching back up.
What really changed was the price, yet these companies are still staying in business about as well as they managed before (which is to say, it's risky as heck and difficult to drum up enough business entirely on original IP, but that isn't much of a change) making games of a very similar appeal and scope.
This suggests that the content, stripped of debatably higher graphical quality and platform-related overheads, had an actual cost of something closer to less than $5, though tiering drove them more toward 99c.
Now let's look at downloadables.
These games were born from the market of AAA $60 titles. Massive team sizes (100+, easily), massive budgets in the many multiples of 10s of millions, development times of 3-5 years, and massive sales. Now we see team sizes of usually less than 20, budgets below or in the very low millions, development times more like 1-2 years at most, selling for $15-20, and in every way competing with current gaming tastes.
You have Torchlight as a $20 Diablo, Shadow Complex as a game you would have paid $50 for last generation, Limbo too, Monday Night Combat, Overgrowth, Braid et al, etc, and that doesn't even count those more focused game types that are being pulled off famously by still smaller teams for $5-10ish. Blueberry Garden, Osmos, World of Goo, Monaco, the list goes on. Then you include the small-team f2p's, Riot games with League of Legends, or World of Tanks, and compare those against the previous stock of huge budget MMOs.
Downloadables are immune from race to the bottom conditions because they already have raced to the bottom.
This is the price it takes to make these games. This is the price at which these games can be made and still be profitable. Just as iPhone has shown the price at which mobile games can succeed, Steam / XBLA / PSN have shown the larger games the scale at which they can still succeed and be profitable.
The minimum you can scale an action RPG, or how low you can go with a physically-active combat game about rabbit ninjas and still have it be awesome - we're already pretty much there. In fact, we're swinging up a bit, as this market grows.
The worry that if we hit 99c or bust prices, that these games would vanish, because they can't be made at that scale? Well yes, that was what would have happened, which is why the market put on the breaks above that point.
I'm not sure there's any great boogeyman here to face. I think we already faced it... and came out fine. And the cries that 99c gaming will still devalue gaming on a whole, and that nobody values content anymore?
After I play Tiny Wings when I get home, then I think I'll finish Bulletstorm. And then I need to finish that Dragon Age DLC chapter someday. Devaluation indeed, harumph, quit telling me that I can only like one kind of game.