The Price Tag of Exclusivity: ATI and Valve

The Inquirer has a piece up breaking down the millions of dollars ATI spent securing a "special relationship" with Valve prior to Half-Life 2 being released. The relationship resulted in a voucher being included with ATI cards for a free copy of Valve's hit game. From the article: "ATI gave Valve $2.4 million in cash for the deal. ATI also invested $1.2 million in marketing this great game. And last, but not least, was a cool $4.4 million that ATI and its partners spent for bundles. That amounts to some $8 million dollars....[ATI] sold an incredible lot of 9800XT and 9600XT cards just because of the nice voucher [for Half-Life 2]. That small piece of paper convinced many people to go out and buy an ATI card." A little salt with this article will help it go down easier.

Comments

No Kidding!

[Ieshan]

This is marketing. Plain and simple.

The real "dupe" is in the price per unit of HL2. Although to the regular consumer, HL2 is around 50 bucks, to the company making the game, HL2 is pennies to produce once they've paid back RnD costs. HL2 units are CDs and booklets, nothing more, and valve can mass produce them like crazy.

Which means ATI can buy lots and lots of them for mucho cheap. And means that your "50 dollar value" game isn't really worth 50 bucks to either company.

But this sort of thing is done all the time. Macys, Filenes, Sears... almost all of them give away free gifts with purchase that cost little to the company but appear valuable to the consumer. Perfume cases, and samples, pretty silver trinkets, or computer games - really all the same. It just happened to bait lots of geeks this time.

Re:No Kidding!

[FriedTurkey]

Paid back the R&D costs? Do you have any idea how much it costs to produce a game like Half Life 2? The CD manufacturing costs are nomimal but paying back the programming and overhead costs isn't going to be recouped in selling a couple of boxes. It wouldn't be wrong to assume Half Life 2 has to sell a million copies to break even.

Valve did some work on their part too

[misaochankun]

I bought one of these bundles as well, and the instructions said you had to mail it in to get the game software.
However, when the game came out, I put in the code directly into steam and it worked. No pesky snail mail, no need to wait for hard media. It gave me access to everything software wise. I think Valve did a good job on this, even if steam is a little clunky to deal with.

Re:What d'ya mean, salt?

[Ford Prefect]

The real winner here is Valve, of course.

Yup - and there doesn't appear to be any ongoing appreciation of ATi by Valve. After all, the upcoming Lost Coast expansion needs an Nvidia card to run fully, the appropriate ATi hardware not actually being available yet...

Oh, and I'm still rather fond of the tale of the terribly expensive 'launch party' funded by ATi... ;-)

If Gabe Newell had his way, he would have spent September 30, 2003, lying low at the Valve office. He was deeply embarrassed by the slipped date and frustrated that the fans were berating Valve on the Internet. In other words, he just wanted September 30, 2003, to quietly pass. Unfortunately, that wasn't a possibility. He had a prior obligation: the Half-Life 2 launch party, which graphics-card manufacturer ATI had scheduled months in advance--fully assuming, of course, that the game would ship on September 30.

ATI, which is rumored to have paid more than $6 million to Valve as part of a broad endorsement deal, planned a massive fete to celebrate the launch of the game and a new ATI graphics card. ATI rented out the entire island of Alcatraz in San Francisco and planned to host the party inside the prison. Newell wanted to pull out of the event but couldn't. It was an obligation to a business partner--a partner that was "none too pleased we missed our date," he says.