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

One year later, HL2 came out.

[88NoSoup4U88]

And then to imagine that once Half-Life 2 finally came out, most of those videocards the game came bundled with were allready quite outdated.

Still, I know alot of people who, imo, fell for it.

Re:One year later, HL2 came out.

[mog007]

I bought my 9600XT just because it came with the voucher. I won't lie. I needed a video card, and I had just received my second batch of bad luck from an Nvidia offering. I figured ATI must be better at it, hell they make cards themselves, not solely whoring out the GPU to other third parties. Sure, they whore out their chips too, but they'll also sell the card themselves. Just tells my subconcious that ATI has more pride in their work than Nvidia, that's all.

Granted, I had to get my card locally for the voucher, but I was in dire need of a new card, and the 9600XT was in my price range, and it had the horsepower that I could use.

I still use it today, and it holds up pretty well, so I'd call it a sound investment.

ATI troubles

[niskel]

I got an ATI card because I was told it had better performance than nvidia, especially in HL2. Now that I have my 9800, I realize what a waste it was, especially in Linux. HL2 was okay but definetely not worth getting this card for, especially for all the trouble it has caused (in an amd64 system). Next time I'm going nvidia.

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.

Re:No Kidding!

[Ford Prefect]

HL2 units are CDs and booklets, nothing more, and valve can mass produce them like crazy.

Hellooo, Mr. Ieshan, 2005 called. Remember that Steam thing?

My copy of Half-Life 2 is just bits and bytes, and my authorisation details in a database somewhere. No physical packaging whatsoever - and I believe this is how many of the ATI vouchers were redeemed.

If the cost per unit allows them to hire talented people and take as long as they like on Half-Life 3, just like 2 was funded by the sales of the original game, then I'll be happy. Plus I've had excellent value for money out of the game so far anyway... ;-)

Re:No Kidding!

[Leroy_Brown242]

If you think the cost of an application is just the CD and leaflets included, you are obviously not a programmer.

Lack of information

[deinol]

Ok, so they spent 8 million getting peoples attention. That's nice. Did they sell 8 million worth of video cards? Or even better, did they even sell enough to make 8 million in profit from video cards? It's been a while since I felt the need to upgrade my video card. Then again, I don't have as much time to play games as I would like. And when I do, a console game is cheaper.

Certainly I like the fierce competition between Nvidia and ATI. The more they try and get an edge over the other, the better and cheaper the cards that end up in my PC or Console. I wouldn't want either to win however.

Re:Lack of information

[harks]

Even if they didn't, they have increased their market share and (hopefully) attracted some satisfied customers who could buy more ATI cards later on.

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.

Bought the card for the game?

[faloi]

Nah, this is just like any other incentive. Not much different from bundling games with video cards (as has been going on for a while). The only difference was they bundled a game that didn't exist yet. I don't think anybody bought the card because it "came" with HL2. Having HL2 bundled with it *might* have been the last straw that pushed someone on the Nvidia vs. ATI fence over toward ATI. So ATI wins, they get possibly more people buying their card. Valve wins, they get pre-market sales to count on their accounting sheets before. And the customer wins, they get a decent video card and a good game.