Sony faces lawsuit for alleged ‘monopoly pricing’ of PlayStation downloads

A gift card like this goes less far due to Sony's monopoly control of the PlayStation download market, according to a new lawsuit.
Enlarge / A gift card like this goes less far due to Sony’s monopoly control of the PlayStation download market, according to a new lawsuit.

In Apple’s opening statements in the Epic Games vs. Apple On Monday, the company argued that “the law protects Apple’s choice to have a closed system, just as it protects Sony and Nintendo.” A new proposed class action lawsuit against Sony’s alleged monopoly control of the downloadable PlayStation game market looks set to test this argument in the near future.

The lawsuit, filed in federal court in northern California (first reported by Bloomberg News and obtained by Polygon), alleges Sony’s monopoly control of the PlayStation Store leads to “supercompetitive prices for digital PlayStation games , which are … [priced] significantly higher than they would be in a competitive retail market for digital games. “

No more competition from retail codes

Microsoft and Nintendo also maintain digital storefronts which are the only legitimate way to download software on the Xbox and Switch platforms, of course. But the lawsuit says the PlayStation Store differs from its console competition for several reasons.

On the one hand, in 2019, Sony became the only console maker to stop allowing the sale of digital game codes through physical and online retailers. In doing so, the lawsuit alleges that Sony “specifically intended and effectively eliminated price competition from other digital video game retailers”, limiting gamers to “a single source to purchase any digital PlayStation content” and forcing those gamers “to pay a higher price. for digital PlayStation games than they would in a competitive free and unrestricted retail market.”

The costume suggests that “when download codes are available from outside retailers, retailers compete with each other and with in-console stores for the best price.” This seems somewhat true in other console markets; at the time of this writing, numeric codes for games like Xenoblade Chronicles: Definitive Edition and New Super Mario Bros. U Deluxe sell for $ 39.99 on Amazon, less than the price of $ 59.99 for a direct purchase through the Nintendo online store.

But the costume doesn’t give similar, pre-2019 examples of digital PlayStation games that were cheaper through retail download codes than through the PlayStation Store itself. Instead, it provides a handful of examples where digital PlayStation titles are currently more expensive than their disc-based counterparts at retail (a phenomenon we’ve noted in the past on other Sony platforms).

The lawsuit uses this price comparison of digital and disc-based PS5 games to attempt to prove the anti-competitive effects of Sony's alleged monopoly.
Enlarge / The lawsuit uses this price comparison of digital and disc PS5 games to attempt to prove the anti-competitive effects of Sony’s alleged monopoly.

The lawsuit attempts to argue that in a truly competitive digital market, the prices of downloadable games at retailers would be even cheaper than those discs. “There is no legitimate reason for digital games to be more expensive than their physical counterparts,” the lawsuit said. “In fact, given the savings on packaging and distribution, prices for digital games in a truly competitive market would likely be lower than for games on disc. [sic]. “

At the same time, the lawsuit recognizes that “physical games are not substitutes for digital games” and that “an increase in the price of digital PlayStation games will not cause a significant number of consumers to purchase physical copies of PlayStation games. in place”. According to this argument, cheaper physical games do not seem to be good evidence that games controlled by Sony digital the versions of these games are necessarily overpriced.

The lawsuit also says that Sony’s price controls are particularly pernicious because “consumers continue to spend records. [sic] increasing numbers of digital games, “with digital sales accounting for 62% of PlayStation sales in 2020. But the growing willingness of consumers to pay these” monopoly “prices for digital games again suggests that comparisons with the prices on disk are not so relevant.

Who sets the prices?

The second difference between PlayStation consoles and others, according to the lawsuit, is that publishers of PlayStation games “must cede full control of the retail price to Sony.”

The lawsuit cites a PlayStation Global Developer and Publisher contract filed with the SEC which states that local Sony Interactive Entertainment affiliates have “the sole and exclusive right to set the retail price to users for digitally delivered products sold or otherwise made available. for purchase on or through PSN. in its territory “and to” modify the retail price of any product delivered digitally at any time without notice to the publisher “. This contrasts with Microsoft and Nintendo, which “allow developers who sell games through their platforms to set the retail price.”

It is not clear how often Sony uses this clause to enforce price changes on digital PlayStation games or to what extent Sony’s “applied” prices are different from those recommended by the publishers. Nonetheless, the lawsuit alleges that “Sony has largely prevented price competition among video game publishers because they can no longer execute a strategy of offering lower retail prices to gain a higher share of the products. sales”.

Sony has an incentive to keep digital game prices high, according to the lawsuit, as the company bears the marginal costs of each game download (such as bandwidth fees). On the other hand, according to the lawsuit, if publishers directly controlled the prices of digital PlayStation games, they “would maximize their profits at a lower price but at a greater volume of sales compared to Sony.” The end result, the lawsuit alleges, is “reduced production and supply of PlayStation video games” because “lower prices would generate both increased demand and increased supply to meet that demand.”

The lawsuit proposes that anyone who has purchased a downloadable game on a PlayStation console since April 2019 could be a party to this lawsuit, and it seeks the usual mix of monetary and injunctive relief to correct Sony’s “anti-competitive behavior” and “illegal monopolization of the relevant market. “

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