Originally Posted by Stargazer
Originally Posted by Tyhan
...It's not as if there aren't costs involved in what steam does. Bandwidth isn't free after all.
Bandwidth cost is peanuts to the point where many hosting providers offer free unlimited bandwidth. And the ability of Steam (and GOG for that matter) to offer discounts of up to 80-90% during sales is another pointer - those prices are still profitable. Ditto with the pay-what-you-want HumbleBundle, IndieRoyale and other bundles.

Compared to physical DVDs where you have manufacturing, printing, assembling, storage, transport and inventory management (damaged returns, etc) costs, "fair price" for digital products shouldn't really exceed $5 per item.

A retail game at $60, is a profit of $7 for the publisher and the developer might not even see a single cent of that or at best $2 if they have some sort of deal.

Steam's standard deal is 30% cut to Valve. So let's assume a game costs $20 on steam, 30% of that is $6, which means that the publisher, or in a better case the developer earns $14.
One third of the price, yet it earns you DOUBLE the profit.
I have no idea how it is on GOG, but this should give you a good idea as to why digital is so big (and why I personally do not buy physical anymore, and instead make my own boxes)