No Worries, Digital Distribution Won’t Kill Retail Stores
By Ron on Wednesday, June 10th, 2009 at 8:23 PM PST In Editorials, Gamer Life
The specter of a world with no physical games available at retail is one that is raised often, especially by executives of traditional brick & mortar stores. In an article at Reuters, author John Gaudiosi raises the question yet again. He makes an effort to simply present the facts about the growing role digital distribution plays in how we purchase games today, and the facts are there. However, I believe that entire premise of the article is flawed.
Digital distribution really offers gamers only two highly positive benefits: First, it’s easy. You can purchase a game without ever leaving your house. Heck, you don’t even have to leave your chair. Second, it’s extraordinarily simple to keep games purchased over a platform like Steam updated. Since the Steam client must be running to launch the game, you simply download the update before you start the game. What could be easier?
The Reuters piece even quotes that great bastion of gaming knowledge, Wedbush Morgan Securities analyst Michael Pachter (seriously, who died and made this guy king? Am I the only one who thinks he talks out his ass most of the time?), who says, “Downloads will become 20 percent of the market within five years, and probably peak at around 50 percent of the overall market in 10 years.”
I’m sorry, but this is not only purest speculation, it’s not even good speculation. Why? Hit the jump, and we’ll examine it.
PC titles are ripe for digital distribution, and they represent the lion’s share of these types of sales. After all, the platform lends itself perfectly to this type of purchasing. However, this overlooks a small problem. Many gamers, myself included, tend to want tangible software we can hold on to. After all, the economic situation of many companies means that if I have to reformat my PC in 6 months, the company I downloaded that awesome game from might not even exist. If so, I’m likely done with that game for all eternity, unless I can find a copy in a retail store. I know the younger generation of gamers is not as desirous of this as my generation is, but once the first big digital download site goes under, the backlash will hit all of them equally hard.
The second big thing that is being overlooked here is the bulk of the gaming market. Yes, I’m looking at you, game consoles. Sure, you can buy all sorts of titles from PlayStation Network and XBox Live, but the bulk of all console gaming purchases (including handheld games) is physical media. Now, the market paradigm may indeed shift away from that at some nebulous point in the future, but I don’t think it will be in this generation, or even the next one. Gamers have gotten used to being able to do things like watch movies and listen to music using discs on their consoles, and I doubt you’ll see a discless console make significant market inroads anytime soon. Additionally, many gamers still don’t bother connecting their consoles to the internet. They simple use them for single player games.
Another problem consoles face is that of limited storage. Now, this fact may change in future models, and you can always swap out your PS3’s hard drive for a larger one if you’re tech savvy enough, but how many people are going to do that? I own an average of 20-25 games for each of my consoles. If you’re conservative, and estimate a couple of gigs of data for each game, you’ve quickly filled the hard drives of all but the most expensive console SKUs on the market.
Sure, there’s OnLive, but that’s an unproven technology that hasn’t even been shown to work yet. I’m not saying that it can’t or won’t work, but there’s been no meaningful demo of it outside highly structured and controlled settings. Even if it works flawlessly, it depends on gamers relying on not only their individual internet connections while gaming (even in single player), but on the connections and hardware at the OnLive centers as well, all while paying an MMO-like monthly fee. A dicey proposition, to say the least.
The Sony PSP is also switching over to digital distribution, but that’s a minimal share of the market. It may grow some, but the entry price of $249 for the new PSP Go will be a major barrier to many who consider it.
All in all, while I am sure that digital distribution will grow in the coming years, I highly doubt you will see its market share increase much. I believe this partly because of the gaming culture moving more toward consoles, and partly because there are still far too many people who want to be able to hold their games, play their games, and ultimately trade in their games.
How do you think digital distribution will fare in the coming years? Will it ever be the de facto standard for releasing new games?
Actually Onlive has shown to work at the E3 convention. It wasn’t at the actual convention but it was at a building nearby. Everyone who went there came away amazed.
Sorry to disagree, but unless they were connecting to actual OnLive datacenters, and not local hardware, there still hasn’t been an actual test of the system. Well, at least not a meaningful one.
I, for one, like to display my physical movies and games for all that enter my dwelling to look at and admire. One looks and sounds like more of a douche when you go, “hey guys, come look at all my my game downloads, as they wait for you to access whatever storage media to display pages upon pages of downloads….woo freaking hoo”….I’m just saying. Plus, like the article mentions I like to be able to trade in the games that I would never play again. Maybe this is an old school gamer thing, but whatever. Go Marlins!!!!
It’s inevital that on-line sales are going to a growing share of the market, but I agree that there will remain a role for retail distribution. One of the things retailers have going for them is that most have a very small footprint relative to sales volume, so the economics aren’t as tough as in some other categories.