One sunny afternoon in May I cycled across town to a meeting of some of the keenest minds in the east of the UK talk at a presentation called ‘Life Beyond the CD.’ The spring back chairs greeted a half full lecture hall of local and not so local representatives of games developers, tech companies and mobile phone network businesses. And me. On the agenda was a number of topics, from the success stories from the world of digital distribution to the pitfalls of self publishing. This has all been whirling around in my head since then and I’ve waited for buzz from E3 to simmer down so I can share some of my thoughts with you.
Digital distribution is a strange yet inevitable technological progression. It’s more convenient to press a button and wait than to take a trip into town, it’s free from the excessive packaging we’re used to, it doesn’t take up any physical space, save for a hard disk, a greater control over piracy and it’s easy to transport. Of course, this being in it’s infancy it doesn’t escape from an issue or two either. I’m sure you or some one you know has been the victim of a dead HDD. All that information, your information, lost in a millisecond. Then there’s the retail and industry aspect of it. What do shops sell if they can’t beam it to your doorstep? Where do the manufacturers make their cut?
As with most good ideas on the internet, digital distribution grew outwards. Every month that passed brought with it a new online outlet, proving that competition on the web was going to be just as aggressive as it is on the high street. For a while there was a sense that we were in the middle of the technological wild west. The easier it became to make a website, the easier it was to make money. Money that was not being spent elsewhere.
These are all things we’ve touched on before but it’s worth noting that right now we are fast approaching the point when games bought in physical retail and online retail are even. Online sales for the global games market are now at thirty percent. That’s not bad for a relativity new distribution method.
When the PlayStation 3 arrived in front of TVs in 2006/2007 the Xbox and Wii had already hit their stride. Seeing the potential for an avenue straight to the pockets of the consumer Xbox Live Arcade was the first to market with a number of solid titles, a points for cash system and a size limit. Sony saw the potential weaknesses in Microsoft’s model and worked to carve it’s own slice of the market releasing the first full digital download only title on a console, Tekken 5: Dark Resurrection Online. The number of original, exclusive titles on the PS Store is growing, including full retail games, Sony have taken the digital distribution ball and run with it.
So, with the announcement of something like the PSP GO, Sony’s new download only handheld, where does this lead out thoughts for the future of the PlayStation 3 and the of digital distribution in general.
Going back to the lecture I was subject to some seriously weighty numbers. As you’ll see in the slideshows I’ve included below, the projections for the future growth of network retail make for an interesting read. The current statistics relating to video games revenue sees the retail sector with a healthy 70% share. The interesting stuff lies in the that 2% taken up by the sales of games, updates, and DLC purchased online. Judging by what looks to be one of the fastest expanding areas of computer game retail this will become a more prominent method of distribution, not just for the PC but for consoles too. The PlayStation 3 in particular, being the only console with a standard HDD, is capable of taking this route further than the competition by offering full titles that can easily go toe to toe with the disks lining your shelves. How much further are Sony willing to push this method?
Whilst the progression of digital downloads seems positive there’s no doubt in my mind that this won’t signify the death of high street retail. Cutting out the shops with the PSP Go is a risky move but one that is eased by the continuation of the standard PSP 3000. Committing to a download only service on a full console will amplify that risk tenfold. Regardless of the benefits, all the major players in the industry need the Games and the Argos’ for those street level sales and the ever important route to market.
The only way to progress in the near future is to strike a balance. By testing the waters with the PSP GO Sony are able to build the foundations necessary to move forward with the PlayStation Network and offer more than just the standard bite sized games with the hindsight of keeping the retailers sweet. How this balance will be achieved is unclear, but over the next three years we will see the signs of Sony’s progression into digital distribution widen.
When David Braben took to the stage I was instantly aware that I was watching a man in his element. David has many thoughts on the fate of the disk. For someone of his experience, who has spent many years watching the industry grow, to confesses that by far the easiest game to release was Lost Winds is a nod to the future. Being the primary launch title of Nintendo’s Wii Ware service Lost Winds sold well, but the attractiveness of submitting a file and the instantaneous nature of the console stores is sure to be a draw for developers.
David Braben believes that the future is still a way off. As an industry always looking towards tomorrow there are always predictions of the next step. Something that has rocked the boat of late is the global recession. Despite the apparent healthy nature of this industry it’s impossible not to have noticed the large numbers of casualties in six months. It’s not just the unwillingness to commit to new hardware from a financial stand point. It’s also the fact that the current crop of consoles, as E3 has proven, have been designed for expansion and longevity leaving the prediction of new hardware with uncertainty.
The other elephant in the room is sitting there pointing at that ethernet port. The current figures surrounding the console connectivity aren’t as large as we’d be led to believe. As the leader of the online pack, Microsoft’s Xbox 360 had 65% of owners going online shortly after launch. That figure has dropped to around 50%, presumably as more consoles were sold. Can you really present an online only market to an audience that is so hesitant to plug in? Add to that the figures of broadband enabled households and there’s a big chunk of the market excluded. In 2007 the US was at 53%, by 2012 the US plan to have 70% coverage. What of the other 30%? Not only that but it would take around 10 hours to download the volume of data the latest games weigh in at. I dread to think how long MGS4 would take.
Some developers, however, have decided to make the leap. Team 17, responsible for the beloved Worms franchise amongst others, have decided to focus purely on download only titles. The rise of XBL and PSN have seen many new developers get the chance to see their low budget titles enjoyed by many and is still acting as a springboard on to the big leagues. The casual PC market has pretty much exploded. Multiple sites hosting hundreds of attention diverting games at a small price bringing home some serious revenue. The MMO genre has gotten very comfortable and has brought the popular micro transaction to the masses leaving the costs hidden but spread out. Subscription models are much less popular with the console bound gamers but with a number of MMOs heading our way, expect some to adopt this method.
What of the dreamy concept of cloud gaming? OnLive’s announcement was a huge shock but anyone aware of the technology is convinced it is still years away. Regardless of the speeds presented by the marketing, looking at the figures above, I’m sure you can guess that it’s reach isn’t likely to be wide enough to sustain it.
The feeling I got from the lecture hall was that the download only console still some time off yet. Until high speed broadband is as common as the toothbrush, until mass data storage is the standard, there’ll still be a shop in town selling you what you want. The download only market will continue to grow but without taking away the option for physical property, it will no doubt provide a choice.
So, how would you like you game sir? Sunny side up?
Rick Gibson from Games Investor Consulting: Download Slideshow
Alex Chapman from Sheridans the Creative Business Lawyer: Download Slideshow
David Braben from Frontier: Download Slideshow
Thanks to Games Eden for organising and inviting me to the event.