Achievement Unlocked 08.06.09: The Digital Future
Posted by Rod Oracheski on 08.06.2009
Digital distribution is the future, but it's a future that brick and mortar retailers are going to do everything in their power to avoid.
Everyone 'knows' that video games, like other forms of entertainment media, are moving towards digital distribution in the future. It's now so inevitable that arguments on the topic are about the when, not the if.
Digital distribution offers up advantages to both consumers and publishers. Consumers see (theoretically, at least) lower prices, convenience, and the benefits that running from the HDD provide. The tradeoff for the consumer is that downloaded games can't be lent, sold, or traded in down the road. Once bought, that's yours and yours alone. On the PC that's given rise to 'zombie' Steam accounts, where people will start an entirely new Steam account for each purchase they make - allowing them to then sell that login info (and the game with it) in lieu of selling a physical copy.
I have to say that I find it unlikely that practice will migrate to the consoles.
For publishers, there's reduced costs for manufacture, shipping - the entire inventory side of the equation is wiped out of existence, leaving only digital storage and bandwidth to worry about. It's a case of trading one problem for another, but it's then a pipeline that they can control completely. Digital distribution is also likely to put a significant dent into piracy, though eliminating it entirely is likely too much to believe.
The only group that finds no benefit in digital distribution is the one that's going to keep it from coming to reality as quickly as it could: retail.
Retailers have no stake in digital distribution outside of their own desire to stay in business. The ability to download games directly from an online service cuts out the retail middle man and impacts their bottom line. Obviously they're not fans of that.
So in turn they put pressure back on those console manufacturers, threatening to stop stocking consoles entirely. After all, why waste the shelf space - and consoles do take up quite a bit of shelf space relative to the profit the retailer will make off each unit, also requiring security measures to prevent theft - if they are going to be cut out of the software side of things? It's rumoured that retailer pressure on Sony helped push the price of the PSP Go higher, with retailers getting a larger chunk of the proceeds as a way to placate them.
Retail snobbery
But please buy our pre-owned games!
That's why we're not seeing day-and-date releases of games on both retail shelves and download services on the consoles. Retailers would be furious - the kind of anger that was blamed when GameStop briefly pulled Dawn of War II from their pre-order listings after it was announced it would require the installation of Steam, or when GameStop refused to carry the Penny Arcade game as a boxed edition, because it would be digitally distributed first.
That sort of vitriol hasn't been seen - or at least leaked for public consumption - on the console side of things. Retailers are all too happy to sell boxed editions of Xbox Live Arcade games, for example, like the recently released Watchmen tie-in games. There have only been a few titles digitally distributed in the past, things like Warhawk or SOCOM. Publishers have reportedly had to 'incentivize' the retail release, adding in a headset for example, to add value to the retail package and make it more appealing than the digitally distributed product.
Even Nintendo's Shigeru Miyamoto has considered the concept of a digital future, bringing up an interesting point in a recent interview with the Mercury News. Miyamoto, when asked about downloadable games, says he can't see a future that's completely digital - bringing up Nintendo's new Wii MotionPlus attachment and saying "this is something that you're not doing via digital distribution."
Even if the digital marketplace swells from the current 5% or so of the market it occupies into something that would allow a publisher to sustain itself solely via download sales, there's still the need for retailers to carry the accessories associated with gaming. Even if Natal is everything they claim it is, we'll need those little 'things' associated with games - crazy plastic drum sets and guitars, boards you ride (and look stupid) on, even controllers - the most basic of accessories.
It'd be bad form to piss off retailers when you still need them to carry what you're selling...
Sega's games aren't selling, Namco Bandai's samurai can't save them, EA's losing more money than both of them combined, the DSi is selling in Japan, and Crytek might be forced to leave Germany? Oh it's a strange week in The Business.
Sega software down 60.5%
If you release games that don't sell, you won't make money. It's a concept that almost everyone outside of Sega has a fairly firm grip on, but one that for whatever reason is unable to catch on with the floundering Japanese company.
Sega Sammy Holdings reported sales dropped 19 per cent year-over-year, giving them a net loss of $108 million US - up from a loss of $111 million US a year prior. Of that loss, the consumer sector (including both games and animated films) dropped 41 per cent year-over-year - with games making up 60.5 per cent of that decline.
Reduced production was blamed, with Sega releasing about half the titles they did in the same period last fiscal year, though the under performance of titles like The Conduit - selling just 150,000 copies since release - can't be understated.
Blue Fang, developers of the well-regarded Zoo Tycoon title and the upcoming World of Zoo, have laid off 25 percent of their workforce - 15 employees in total. The company is yet another looking to get 'leaner and meaner' as they face a still-uncertain future.
It's difficult to be positive about people losing their jobs, though Blue Fang president Hank Howie said the move was necessary and isn't expected to adversely affect the upcoming game.
Despite Afro Samurai selling over 400,000 units, Namco Bandai reported a loss of $30 million US on the first quarter of their fiscal year, down from a profit of $10.5 million US in the same quarter year-over-year.
Namco's first-quarter losses may be made up with the rest of their year, which includes Magna Carta 2 and Tekken 6, but the heavy loss has to be troubling.
Sega and Namco's losses appear insignificant against Electronic Arts staggering $234 million US loss in the first fiscal quarter. Despite the large losses, EA CEO John Riccitiello reported the company exceeded expectations - losing 11 cents less per share than anticipated and showing approximately $80 million US more in adjusted revenue than expected.
The losses incurred have to be troubling internally, as they come in a quarter that saw three massive releases: The Sims 3, EA Sports Active, and Fight Night Round 4. The Sims 3, for example, reportedly sold 3.7 million copies. EA Sports Active proved EA's most successful Wii title, moving 1.8 million units, with their Wii portfolio buoyed by Tiger Woods PGA Tour 10, EA Sports Grand Slam Tennis, and Rock Band 2.
The company has a number of major releases in late 2009 and early 2010, including the newly announced Madden Arcade - a downloadable title in the vein of the 3-on-3 NHL game.
EA lost $95 million US in the first quarter of the the first quarter of the previous fiscal year.
Japan continues to be dominated by handhelds, with Nintendo's DS/DSi line leading the charge. The DSi, as of August 2nd according to Nintendo, has sold over three million units in Japan. Sales spiked with the release of Dragon Quest IX, a title that's moved over three million units itself.
Nintendo has forecast selling 30 million DS units worldwide in the fiscal year, ending March 2010.
Saving the strangest for last, Crytek may find themselves on the move if a proposed German bill is passed into law. The bill would ban the production and distribution of violent games, and is expected to be passed into law by September.
If passed, and given Germany's reaction to the topic of violent games in the past it very well may pass, the bill would force Crytek - makers of Crysis and the underlying Cry-Engine - to either farm out work or relocate the company entirely.
German citizens are rallying against the bill, with a petition reportedly having over 64,000 signatures.
No word on whether or not that's an online petition.
For some reason I've received G.I. Joe: The Rise of Cobra, a game I'd never have picked up otherwise after seeing the first batch of screenshots that circulated.
To be fair, the game looks a bit better than those screenshots when you're actually playing, if only because your character is fairly small on the screen - it's the cutscenes that look ridiculously last-gen.
The game consists of running from cover to cover, spraying shots with wild abandon and spamming special attacks against the odd boss encounter. You can either go it alone with an AI partner, with the ability to switch characters at any time, or play two-player co-op. Neither is fun for very long.
While it's nothing amazing and there are certainly better games out there, it's probably worth a look for G.I. Joe fans as a rental - much like the upcoming feature film, I'd guess.
I still say they should have just re-skinned The Outfit as a G.I. Joe game though...
In other gaming, the upcoming NXE update continues to improve with an update for those in the preview and some additional discoveries. For some reason, the update makes installed game sizes smaller - considerably smaller in some cases.
Cheapass Gamers accumulated a list of install differences with over 40 showing over 1GB worth of improvement between pre- and post-update installs. Raiden Fighter Aces, for example, went from 3.4GB to 484MB - a 2.9GB improvement. Left 4 Dead's install slimmed down by 1.3GB, while Tomb Raider: Anniversary dropped 3.4GB.
Another look at 'Splosion Man this week, as I was busy with other projects and didn't get a chance to capture a lot of video. Either tonight or tomorrow there should be a video or two from the IL-2 Sturmovik and Madden 10 demos, as well as a G.I. Joe video put up, so check back or add the YouTube channel to your favorites or followers, or whatever the hell the procedure is.
If you have any questions or want to request any videos, leave a comment below. Until next week, I'm out.
Hate to break it to you, but the majority of the consumers don't want full digital distribution. We still like little things called cases, discs, cover art and instruction manuals in our home looking at us oh so intently to say play me. Sure I download DLC games, but I will always like and treasure my discs more. I appreciate and respect that digital games are here to stay, but I think there is market for both types of games. The problem is that the software companies want to ram down our throats this idea of full digital distribution.
People get after Gamestop, but they are just a business in a capitalist economy. They buy goods off people, they sell those goods at a markup. It's been done in every business for years. You get the items as cheap as you can and sell it back as much as the market allows. If you don't like it, simply don't buy or sell to Gamestop/EB, simple as that. I buy very rarely from them myself and usually only on impulse.
And by the way, don't kid yourself...software/console makers are in it for the money. They desire the day when they can make $60 games and make it digital only. They have no intention of making things "cheaper" for the consumer. I'll go along with convenience (to a point) and benefits of a HDD (except that a well taken care of disc lasts longer than a well taken care of HDD).
You make good points, but the idea that the consumers will benefit is not entirely true.
Posted By: Kedrix (Guest) on August 06, 2009 at 08:34 AM
Digital distribution will only work if they offer new releases, the upcoming On Demand with games that are two years old won't work.
The main issue with digital distribution is the device itself, the console. Digital distribution works very well for music because of the iPod, since it's portable. Music gets loaded directly into the device, then that device plugs into your car, home stereo, and of course your headphones. Great fit and ideal for music.
When was the last time you took your console on the road? But when was the last time you took your copy of Guitar Here over to a friend's house? It's a simple use case as to why digital distribution won't replace discs quickly if at all. Hard copies of games have a place, one that is hard to replicate digitally.
Posted By: Wii60 (Guest) on August 06, 2009 at 11:24 PM
You can snap off your HDD and take that to a friend's house - so long as you're connected to Live so it can be authenticated that should work.
I doubt we'll see day-and-date releases any time soon, which is a pity since that's what we need to get it increasing in popularity.
Posted By: Rod Oracheski (Registered) on August 07, 2009 at 12:21 AM
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