Its really an interesting time to be in the digital game distribution business right now. Many new developments are happening at the moment. Not just for games, but for all entertainment medias. iTunes, Spotify, Netflix, Playstation Network, Xbox Live and of cause Gamersgate. Consumer are adapting to the new way to get and consume media, althou owners and publishers aren’t alwasy as fast. More and more publishers are focusing more on digital distribution. Retail is still important to reach the mass market, but digital distribution becomes a strategic part of the overall strategy. One example is Capcom who really see the importance to lead when it comes to offer their games digitally. I also remember an article some time ago were the CEO of EA said that they expect to see an increase in revenue from selling digitally.
And digital distribution is also the biggest threat to traditional retail. As DD spreads and people are more comfortable to buy games this way, retail will feel this first. In an interview with my CEO on Gamesindustry.biz, he talks about this and how DD will rule on a couple of years.
From a publisher point of view, one thing digital distribution can help counter is the big pre-owned market. Retail chains like GameStop make millions in profit on selling used games. They offer customers to sell their used games to Gamestop, who then sells the games to a new customer. And this second sale of the same game are usually to a much higher price then what they bought in the used game for. And the difference will straight into Gamestops pocket, and nothing back to the game publisher. Publishers only earn money on the first sales, all sales after the first goes to the retailer. Consumer are happy cause they get to buy new games cheaper, but to the industry as a whole it isn’t good. Recently Amazon declared they’re entering the pre-owned game market. A news that probably let to the big fall of Gamestops stock value. And Gamestops CEO didn’t hestitate to doom Amazons used game investment.
Even if those to big companies weigh war against each other over the used game market, the money generated here won’t return to the publisher and developers. This is probably one of the big reasons downloadable content (DLC) have expanded though out the industry. The possibility to expand the experience for the player, but also the extra one money for the publishers. Not only won’t the retailers get any part of the revenue from DLC, its also a way to fight piracy. Digital is definetly the way to go, here to stay and conquer.
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