The End is Nigh for Physical Retail Games

by Dave Bast

While I have fond memories as a child of scouring the Babbages at my local mall for the last remaining copy of Zelda, I much prefer the current method of pressing a few buttons on my keyboard or joystick to download a digital version of the game I’m purchasing. Sure, I don’t mind the occasional trip to GameStop to pick up say Mass Effect 3, but I’m going because I have to – if I could download the title straight to my Xbox I would. I mean, if you don’t mind the PC version you can go and download Mass Effect 3 from EA Origin right now. Console games, however, seem to be the last physical retail holdout. For a while digital distribution was just for expansions and DLC, but now full releases are becoming the norm. Each year the number of sales through digital downloads increase, but before I explain why I think this can be both good and bad for gaming as a whole, let’s take a look at some numbers first.

The ESA wasn’t even looking at digital distribution figures (page 10) until 2009. In the two years they have, digital distribution and other forms of downloads have been almost a third of all purchases, rising to $5.8 billion in 2010 from $5.4 billion in 2009, an increase of almost half a billion dollars. This rise in digital purchases coincides with a drop in physical purchases which are down from $9.9 billion in 2009 to $9.4 billion in 2010, a decrease of almost half a billion dollars. I’m no economist, and I know better than to say that Thing one causes Thing two with just one chart, but if I were bettin’ man, I would say that the sales lost by the physical retailers went directly into digital distribution. Keep in mind these are the numbers from 2010, they have most likely grown since. What’s important here is not that digital distribution is growing, no duh, but that it is doing so by devouring the old business model in the process. Because of large fundamental changes in the way business is conducted, companies are now spending an enormous amount of time and resources to adapt before they get boxed out.

Below is a quick look at some these very large adaptations in action, mostly due to the effects of digital distribution;

–          Valve has said to be working on some sort of “Steam Box” that would possibly allow for games, movies and TV shows to be streamed directly to a television. It looks like some sort of competitor to the Apple TV.

–          Zynga has decided to launch their own website that will allow their users to play games without having to log in to Facebook.

–          EA released Origin this year and between Mass Effect 3 and the upcoming SimCity reboot, Origin may be able to compete with Steam as a primary digital distribution service for gamers.

–          Google is stepping up their game by updating the Android Market, turning it in to Google Play.

–          Facebook announced at GDC that they invested over $1.4 billion to game developers in 2011.

–          Capcom is predicting that 50% of all their revenue will be digital by 2017.

I know this week is GDC and all, but these are just the stories from the last few days, and it has been this way for a while now. It is clear that the industry is expanding digitally in order to meet the ever changing needs of its users.

Ok then, it looks like the future is going to be all digital, how does this effect things? Well first it allows for more users to access the product, or at least for users to access the product more easily. Smaller developers weren’t able to make games because they couldn’t produce 500,000 disks or cartridges, ship them, and sell them in stores around the country, too much capital and infrastructure was required. But digital distribution doesn’t have the same restrictions, so whether you are Steam with an enormously popular digital platform or Mojang with a humble website and a PayPal button, getting your game into the hands of people who want to play it isn’t the problem anymore. The only thing that matters is whether or not your game is any good. Instead of only large companies deciding which games are available, now players and smaller developers will as well.

There are other smaller benefits as well. I was old enough to have an original NES with both Mario Brothers and Duck Hunt on the same cartridge. Unfortunately after a few years Duck Hunt stopped working altogether. No amount of MacGyver-like tricks would get the cartridge to work. I was heartbroken. These days as long as you aren’t hacked or banned, a digital copy of the game will almost certainly last longer than a physical copy in the long run.

This is also all really good because it is making games cheaper, not just to make but to buy as well. No longer being tied to any physical units has given developers the opportunity to experiment with different types of release schedules and monetization options. It also reduces the initial financial risk for creating a game in the first place, so new developers will have an easier time earning a profit on smaller games. As development costs go down things like Kickstarter evolve into viable startup options. It’s all interconnected.

It isn’t all good news though. Like everything else there are potential risks as well. We likely won’t be returning very many games to GameStop anymore. I managed to get through college without spending one cent on games, I paid only in returns.  It looks like big companies are the ones who dictate how much longer places like GameStop will stay open. I could say that the sooner they fully embrace digital distribution, the sooner physical retail stores will go out of business, but with the upcoming Xbox “720” reportedly not supporting used games at all, it may be even sooner than that.

Even though this method may be good for new developers and new titles, an increase in the ease of distributing games may lead to the creation of vast amounts of bad content. Anyone who was around when CDs became the new hip thing may remember those unofficial Doom map packs which held thousands and thousands of maps. You could buy them at your local game store for roughly $5 and bring them home to laugh and cry at how bad the majority of them were. Most wouldn’t load and some would be nothing more than a giant room full of Cyberdemons. It was so exciting to be able to offer players that many maps on one disc that no one bothered to check the quality. Just because something new is invented doesn’t mean everyone is going to use it properly.

Losing our physical retailers will also mean the end of free promotional content, or at least the version we are used to. Pre-order a game a GameStop? Here’s some exclusive sub-machine gun. Picked up at midnight release? Have this cool in-game skin to show off. Without other companies in the loop to promote there will be no more cross promotion. That doesn’t mean that bonus content is gone, but it does mean that they way in which we access it is going to change. Why give away for free what you can save for first day DLC.

Finally, the last big problem I see is that at the end of the day you really don’t own your games. You may think you are paying to own your games, but you are really only paying for the right to play through some online service, piece of hardware, or website. I know I said earlier it was safer than owning a physical copy and it can be, but that is only if everything goes according to plan. If it doesn’t, if I get banned accidentally or my account is hacked I might not just lose access to one game, I might lose access to all of them, at least for that specific service.

It is clear that we are in, or about to be in, a digital boom. There seems to be this mad dash by each company to take advantage of it in some way, to carve out their own piece of the market, like Steam has.  Not all of them are going to be automatically successful, just ask THQ and the uDraw. For those who innovate and communicate with their players however, there is a completely new way to compete in the 21st century.


  • Ness

    Fully digital scares me for that last point you bring up. I think without some physical reciept or proof of purchase we can easily be out quite a bit of cash. A problem like this arose quite recently with my Xbox live account. As a strictly digital purchase i have no reciept, and even if some proof existed i created my account seven years ago. The email account it was attached to is dead and without remember a significant amount of security questions from near a decade ago I can’t change my account. Its fine now, but the day i need to do anything to that account 7 years of history of my gaming is gone. I worry about similar problems with game purchases and memory issues. Also much like you mentioned i live off store credit. I have to because i can’t afford my gaming habit otherwise. If the industry goes fully digital i’m curious how sales numbers will look without people being able to purchase with credit ever again. It may turn it to more of a luxury than it already is, and fewer may be able to justify they expense…like me.

  • harryseldon

    @Ness – Xbox won’t let you ever change your account to a new email address. I called support and argued with them for almost an hour about it. They say it’s a ‘security feature,’ kind of like how you can’t remove the primary credit card from your account without them canceling your Gold membership. I have had to keep my crappy web service email account active solely for Xbox Live. Just glad I didn’t use a service provider email like my friend. He lost everything when he switched providers and got a new Xbox, then couldn’t remember his Live login password.

  • Sam

    I really hate the way everything is changing. Call me old fashioned, but a physical copy beats a digital one 99% of the time. As strange as it sounds I get a sense of accomplishment when I look at my collection of over 600 dvds and blu-rays. The same cannot be said of my 10,000+ song library in itunes. I miss being able to go to blockbuster and talk the to workers about any movies they’d seen recently. The way things are going we really will never leave our houses. So I implore you all to go out, search for a blockbuster they still exist, and just look around. Some things can’t be sent over the internet in forums. Wow, I feel like the lorax, but instead of trees I’m trying to protect outdated stores.

  • wraith

    Interesting, I find it humorous that people cannot remember their account information for online purchases. We have become too reliant on technology to remember things for us, as in people who do not clear their cookies so they don’t have to log in each time (then complain about their info. being stolen lol).

    I think as a whole we need to get back to rote memorization. That aside a receipt for any online purchase is generally sent to the email what I do is put them in a folder so I can reference them if needed, or if you absolutely have to print them out and write the email address across the top. If you forget your password for that account at least you have the address so you can request a change in password.

    What does worry me about completely digital media is that quite a few jobs will be lost (i.e., the people who make the discs) but on the flip side some jobs should be created due to need for additional tech support.

  • MurderBot

    I’ll keep my physical copies thanks. I’m a big proponent of the second-hand market and let’s be honest with ourselves, publishers are never gonna let us trade in digital games we’ve grown bored with for credit off a new release.

    It’ll be full price for every game and no givsies backsies.

  • Ness

    @ wraith, please if you could give me your favorite fictional character from a moment in time 7 years ago, as well as was the credit card, phone number, and address you used.

    Yes i chose a bad security question (above since its not necessarily an imutable fact) but i don’t consider myself lacking in memory because i can’t remember enough of those items to pass microsofts security. Not to mention the reminder is going to an email that no longer exists. So before you go on the lecture circuit please try to understand, my situation is an exception. Though i think it is a reasonable problem, if you don’t touch something and don’t have to think about it, for a number of years, and lose it, will you be able to remember every detail of a button click from years ago?

  • Gil

    I’m a big fan of physical media for all my games. The last 3 COD games I bought all came from a store which was either the same or cheaper than Steam. The funny thing was that when I went to install it, the game still had to download itself off the Steam server before installing. Essentially I have an almost blank disk with a bit of code on it that says “open steam and download//install (insert game title)”. So I basically have that digital copy attached to my steam account of which I can no longer resell it, but I know that if something were to go wrong with my account I could get it back because of my physical proof of purchase.
    I like the idea and ease of an all digital media, but I also worry about what happens when something goes wrong. I got burned years ago when my ipod (gen 2) took a dump and lost all my music. This happened shortly after my computer did the same thing and so I didn’t have a backup other than the ipod. I can’t remember how many hours of music I lost because of all that. A lot of it was free but I can only imagine how pissed I’d be if it was a couple hundred dollars worth of games. Trow in a random event like that and a customer support that’s unwilling to help (I’ve heard bad stories of people trying to get help with their accounts) and it’s almost enough to start a rampage.
    I’m not against change and moving forward, but I think sometimes the industry tries to take leaps before they are fully ready.

  • Adam

    You can download the full game of mass effect 3 on the Playstation store. If you are a plus member you can play the first 60 minutes free before purchasing it.

  • I’ve read about this in several places and they never mention that a decent amount of game sales come from less-developed countries, where only like 5% of costumers have the kind of broadband we’d call “acceptable”.

    Sure, the industry spins around the big markets like the US and Japan where downloading a full game isn’t a big deal. But I’ve lived in a lot of places where the standard broadband is just 1 Mb/s, and many gamers don’t even have an internet connection at home. I’m not even talking about some god-forsaken village in El Salvador, I mean most of Latin America, with huge cities where you can find a bazillion GameStop-like stores. Even Blockbuster is still holding on over there, since Netflix has only just arrived and isn’t yet known whether it will succeed in a market with poor broadband service.

    Going fully digital, right now, would kill these foreign markets, because gamers’ internet access isn’t reliable enough to force them to log in everytime time; and downloading a full game (especially next-gen) would take anywhere between 20 and 80 hours. And these markets, altough not the biggest, surely mean a lot to manufacturers and publishers.

    If full digitalization goes on in the US and some other places, it would still be easy to get physical copies of games, imported from other regions where digitalization is still decades away.

  • By the way, I had no sources for my comment other than having lived there a long while and struggling with any kind of streaming media. So take it with a grain of salt.

  • The all digital future isn’t viable until high-speed broadband internet is universally available.

  • Mumu

    I don’t think going fully digital is a good idea as someone above mentioned about Latin America, it is the same with Africa and other ‘third world’ countries. We don’t have internet in our home, most of the legal versions games we have are bought by families and friends we know in America or the UK. It seems to be very easy for these games marketing people to forget that we in the ‘third world’ exist and play video games.

  • SYL

    @ Sverrir Sigfússon : Indeed, that is the main reason why we don’t need to worry about “full digital” just yet.
    PS : I live in Belgium and high -speed broadband internet is expensive as hell here.

  • Marco

    It has to be also mentioned the cases where people can actually lose thousands of dollars worth of game library if Steam decides to (rightly or not) ban their accounts. In the past it would be like Nintendo dropping by your house to take your Pokemon Red cartridge away from you.

  • Amy

    I remember something about buying a Sims (Can’t remember if it was Sims 2 or 3 anymore) game from the EA store as a download purchase. In the process, it asked me if I wanted to spend money to save the game for more than 2 years. Seriously? So, okay, it saves my information in case I lose the fracking-long serial number, up to 2 years. Then, I have to pay for it if I need it. So… I smell bullsh*t.
    I believe I got around it by putting the files of the game on a DVD and writing out the serial number on the case. Yeah. Lame.

  • Gengyo

    I believe that if something like this is to go into effect it needs to be treated like as if the game were, in fact, a hard copy. I play a lot of games and I’m in the lower class of Americans, and while this is true now I’m going to have plenty of money starting here in the next year or so. If I put $700 into a digital game library and then can’t play them because X company decides they are going to ban me for something ignorant… In my mind, they stole $700 from me and I’m going to be on a war-path. I do not support the idea of this kind of digital distribution method, for this one reason: They could easily put out crap games that they know no one will really like on occasion that are sold based on hype alone. They make a ridiculous amount of money and then when folks say they want their money back, “Well, sorry. You purchased a digital copy and we cant verify that you actually removed it from your computer. And even if we could do that, we wouldn’t be able to verify that you haven’t made a copy of it on some other device.” and use that as their excuse to keep all their ill-gotten gains.

  • Vonter

    Well at least Nintendo is trying to keep on with tradition.