Oliver Hall

the death of the disc—part 2

Today, I thought I’d continue my discussion about the current transition from physical to digital media, and how different industries are coping. In this post, I’ll have a look at the ways in which the games industry is dealing with this upheaval.

The games industry is a constantly shifting field. A large amount of the market revolves around the mighty console triumvirate of Nintendo, Sony and Microsoft, with their respective platforms. PC gaming, a strong force in the ’90s and early 2000s, has shrunk in recent years, but has seen a mild resurgence with the rise of indie games, which have boomed with online distribution methods. Recently, there has also been the explosion of mobile games, as well as casual gaming, which has also grown massively in the past couple of years with the advent of Facebook games such as Farmville.

pc—doing it right (for the most part)

The PC gaming market was traditionally driven by physical media, but a combination of the rise of the internet and massive surge in console market share has led to a decline in physical disc sales. Now, increasingly, digital is seen as the go-to method for games procurement, with platforms such as Steam and Origin offering massive selections of games within a click or two.

Digital has also been a godsend for indie games. Previously, an intrepid developer wishing to release his beloved creation to the world would have to stump up the money to print discs, and then would probably struggle to distribute them. The internet offers both ease of download, as well as handy methods for gaining publicity. The recent success of Minecraft, which gained interest almost entirely through word-of-mouth on the internet, is an impressive example of this phenomenon.

Digital downloads have also tackled the second-hand games market, long hailed as damaging to the games industry. Essentially, if you are done with a physical copy, you can take it to a store, and trade it in for money or credit towards newer games. The resulting revenue go to you and the reseller, not the games publisher. Digital downloads can’t really be resold in the same way—once it is tied to an account, generally it is permanent, and is non-transferrable.

consoles—getting there slowly

Whilst all three of the major players have their own online stores, these have been, until recently, filled with indie titles or older games – the biggest blockbuster titles have almost always been released on disc. However, there are signs of change. Nintendo announced this year that with the release of their latest console, they would allow customers to purchase all Nintendo-published content either digitally or physically. Similarly, Sony and Microsoft have started offering some of their biggest titles digitally.

This is mostly due to the internet making its way to consoles in a big way. Originally just used for multiplayer gaming, all three of the major current generation consoles offer full internet access, and with high percentages of consoles connected, it’s not surprising that the console manufacturers are making the jump to digital. Remember the second-hand games market I mentioned in relation to PCs? Well, that market is far larger for consoles, and the manufacturers are cottoning on to the fact that they can claw back that lost revenue by shifting towards digital.

Console games also tend to have a short shelf life. A new game will come out, and will be in the games charts and in store for several weeks, but after that, it will gradually disappear—often attributed to the second-hand market. Gamers will buy a game upon launch, play it for a few weeks, and then trade it back in. As a result, a month or two after launch, the game is readily available second-hand for a lower price, cutting into sales of new copies. Digital games, or those with digitally downloadable content, have been shown to generate more revenue than physical copies, at least in part due to the longer exposure to the audience, along with the lack of a second-hand market.

However, the console publishers need to ensure that they conduct the transition in a reasonable way. Steam and its ilk are so popular at least in part because they have frequent sales, and will happily reduce games to fractions of their original cost. This allows people to obtain new copies of games for similar prices to that which they would’ve previously paid for a second-hand game. This keeps the customer happy, as well as pleasing the publishers—they get the money that would’ve otherwise gone to second-hand games retailers. There are rumours, however, that console publishers may be planning something different. They may decide to go all-digital, but not offer reductions on older titles. This would massively hurt the consumer, as they would have to pay more for the older games that would previously have been available second-hand.

to game or not to game?

Consoles are increasingly used not just as games machines, but as entertainment hubs, with VoD services such as TV and films available. Indeed, some of our team have been involved in making it happen! Interestingly, more people use Netflix via consoles than any other method. This is a rapidly developing area, and it’ll be interesting to see whether VoD content providers adopt a similar pricing strategy to platforms such as Steam, or whether they will try a subscription-based model.

free-to-play actually makes money

Games piracy is an oft-mentioned issue, as I touched upon in my last post. One approach that has been taken by an increasingly large group of publishers is to move towards a free-to-play model. This tactic was first seen in MMOs such as NeoPets and Runescape, but has since spread through mobile and PC gaming. It allows publishers to offer a highly-accessible experience, and make their revenue through microtransactions-players can purchase various items in-game, that may change their gameplay experience, or modify their characters’ appearance. Indeed, some games companies have found some people will happily spend vast sums of money on such micro-transactions, which can actually make the free-to-play model more profitable than conventional sales for publishers.

so, in summary?

There are of course more aspects to the current state of the games industry than I’ve covered here, and indeed I could write far more on the subject—this is intended to be but a brief overview of the situation. The games industry is, by and large, coping well with the transition to digital media. PC gaming is in a good place with platforms such as Steam and Origin offering the flexibility and ease of purchase that they do. Consoles are taking longer to switch, but are gradually realising that they can make more money out of a given title by publishing it digitally. However, it remains to be seen whether they make the right choices or end up hurting their consumers.

What are your thoughts? Do you wish more content was available digitally for your console or your computer, or will you mourn the death of the bargain second-hand games bin? Please let us know!

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