Everyone knows that digital distribution is the future of gaming, but nobody can agree on when it will hit. Specialty retailer GameStop and its shareholders would like to know, since digital distribution would make things difficult for the company. The latest guess comes from Broadpoint Amtech analyst Ben Schachter. He told IndustryGamers that the bell will toll in 2017:
There is little doubt that over time more and more media content will be delivered digitally to the home. However, the question of the timing of this trend is critically important as it relates to GME’s stock. In our view, it is unlikely that digital downloads will have any meaningful impact to GME’s business this console cycle (which we think will run through at least 2014). Technologically, full game downloads to a console are feasible already (and there is already a small library of full-games available on Xbox Live), but limited hard drive space (we estimate approximately 70% of current-generation consoles have no hard drives) and bandwidth limitations (full games can be 20GB+) create significant barriers.
These barriers will obviously change over time, but the timing of the replacement cycle is key. Even if one assumes that by 2014 all new consoles have capabilities that eliminate storage and bandwidth concerns (which we believe is unlikely), it will still take several more years before these consoles have significant household penetration.
Hard drive space is a small issues. Storage gets cheaper and cheaper all the time and I have no doubt that the next generation of consoles will have significantly larger HDDs than this generation. I found it curious that Schachter bothered to point out that 70 percent of current-gen systems to not have hard drives. That’s a bit misleading; the Wii is obviously the best-selling system this generation, but its customers are less likely to download full retail games in the future than PS3 or Xbox 360 owners. Hell, a lot of Wii owners can’t be bothered to buy more than one game. I don’t really see a point in him bringing it up.
The big issue is broadband. (I’ve gone on this rant before on TheFeed, so some of you know what’s coming.) ISPs are the biggest roadblock to digital distribution. Things like bandwidth capping and bandwidth shaping are bad for digital distribution. Cable and phone companies being reluctant to push technology due to a lack of competition is bad for gamers. While it sucks that broadband in America isn’t what it could or should be, I’m pretty sure GameStop is happy about it.
Why does nobody bring up that digital distribution will face severe anti-competitive backlash? You will only be able to buy from PSN or Live. No competition for price. It would really mean that retailers could then refuse to carry their machines. No incentive for selling them then.
@smartguy
i'm sure that the actual publishers will have direct downloads available from their websites, like EA to name one. This should come up with some competitive pricing. The publishers will probably make more money selling direct to the end user rather than distribute it to PSN or XBL. I think the big issue is our internet services, we need to beef up the broadband capacity and have the providers extend the broadband cap. I don't see digital being fully available on the next consoles until this issue is resolved.
@Tok
Yeah I use the same talking points about the caps and availability. However I do not foresee MS or Sony or Nintendo allowing someone else to put executable software on their machine. They want full control. They'd rather get the sale and then remit the developer's share after funds clear or are spent. I see it very much like the App store. It's apple's device and they control the store. You can't buy apps for the Iphone unless it goes through Apple. I am fully against being able to only buy games from MS or Sony. For example, have you seen what MS deems Table Tennis worth? I'm also against anything that destroys a used product market. I'm into owning the game, not having a lease on it.
@Smartguy That is a very interesting point. I wonder if other online retailers can get a piece of the pie, similar to how Amazon "sells" PSN, XBLA, and Wii games.
@Ray
You don't think that MS chose MS points because they want others making money on their store did you Ray? By creating a new or different unit of account, MS in a way disconnects the consumer from a true cost. Realistically if they drop something by 300 points is it really that much cheaper since you can't buy individual points?
I see that Sony is using some redeemable card for PSPgo games, that could be an option, but Sony still sets the price for it. Unless you can find some store who just eats the price for some reason. I don't see that happening with digital property. Games go on sale or clearance because of inventory concerns…those concerns aren't an issue with a digital store. People might hate physical media..but it will keep prices fair in my opinion.
@Smartguy I absolutely believe MS went with "points" to mask the true dollar amounts. It's easier to spend make believe currency than real currency.
Honestly, I haven't been watching Amazon's prices for digital downloads. I'm curious to see if the company has sales on games. I don't know how its setup works.
@ Smartguy and R Pad
When I worked at a games retailer (years and years ago), we made zero money off of the consoles themselves. We got an employee discount on everything in stock EXCEPT consoles. Even the used ones (I actually got written up for doing it). Most of the profits came from used inventory. The new inventory… not so much because we had to stay competitive. But, if you think of how prices are higher at store without a used inventory, you can see the point. Regardless, the consoles are a set price everywhere, no matter what and the stores only sell them as an accessory to where they really make their money, the games themselves (but you guys probably knew that).
That said, Smartguy's point is valid. If digital distribution is the future of gaming, retailers will have no reason to sell the consoles and therefore kill console gaming as a whole.
… maybe that's the idea.
going digital is kinda good, but i still want to own a plain copy of the game. when i was a kid, all i had were bootleg ps1 games. ( i lived in the philippines back then, and buying original ps1 games would cost us a lot of money.) its a shame though. if these games:
-final fantasy 7
-FF8
-legend of legaia
-suikoden 2
-metal gear solid
-fighting force(god, i loved that game, the sequel ruined it!!)
-megaman legends
-megaman X4 and 5
-parasite eve
-RE 1 to 3
-syphon filter 1 and 2, 3 kinda sucked
-crash bandicoot 1 2 and 3
-spyro the dragon
-and so on…
can you imagine all those games of mine back then were bootleg? for shame…
oh yeah, before i had a ps1 i had an snes that's still breathing! i was playing donkey kong country 2 earlier! it was AWESOME!!!! now i need to find earthworm jim b4 it hits this gen's consoles
Also you have ATT saying that whole gaming isn't essential for broadband use when helping the new FCC define broadband. I really think the US system of broadband will make digital distribution a moot point for a LONG time.
Steam is the anomaly here. I'm sure Valve is making bails of cash with it. Though they missed out on quite a few sales from me since I had no broadband at my last house, they at least put things on sale for ridiculous low prices. I still prefer sales in brick and mortar stores or an online store that gives me the physical media.
@N8R The accessory market would still be pretty lucrative, no?
@Ray
If a store stopped carrying machines because there was no incentive from software sales anymore, I'd imagine that accessories would not be in as many stores either. That shelf space could be used to sell ipods or something lol.
@ R Pad
When I look at all the Wii accessories…. I fear that future.
It could even become a standard for publishers (which would only be console manufacturers) to MANDATE an accessory from each developer for each new title (if that's the case).
How badly would THAT suck?