The Impact of Community Involvement on Game Life-Cycle: Evidence based on Gaming Platform Steam

Abstract

Later stages of the product life-cycle are characterized by diminishing sales and declining prices. Especially firms with substantial product development costs, as is the case in the video game industry, are dependent on long product life-cycles to amortize initial costs. This confronts firms with the fundamental challenge of maintaining the value of their product from the consumer’s perspective and thus delaying the natural price decline. We investigate whether product features that facilitate community involvement and interaction are an effective means to keep the product stimulating and relevant in the long run. Using extensive data from the PC video game market, we show that the inclusion of interactive, community-engaging features allows firms to both charge higher prices and delay the natural price decline of their product. However, for one of the investigated features we find the opposite effect, which we explain by subsequent analysis. Thereby, we gain valuable insights into the importance of robustly designed incentive systems in community-focused features. Our findings could help firms in their efforts to design attractive and economically viable products with prolonged life-cycles. Keywords: Product life-cycle; digital goods pricing; user communities; co-creation; digital gaming platforms.