Digital distribution on the rise

Digital distribution of gaming content is finally set to take off, according to a new report released today by Screen Digest.

The London-based media research firm expects that downloading and streaming of PC games and console add-on content will experience strong and constant growth in North America and Europe until 2010, at which point it is forecast to be a $400 million market.

"Toward the end of the 1990s, when the world was gripped in Internet-based business fever, industry commentators were heralding the potential of digital distribution for games, and estimating that within a few years it would have a significant impact on the makeup of the industry's supply chain," reports the study's author, Piers Harding-Rolls. "Fast forward to the midpoint of 2005, and although these predictions have yet to materialize, over the last 12 months the market has shown signs of getting into its stride, and has produced a number of noteworthy success stories in both the download and Games on Demand sectors."

Companies like Trymedia and Valve offer full download of games to a PC for a one-time fee, while Games on Demand services like those offered by Yahoo, Comcast, and Verizon allow users to stream a selection of games to their computer, but not to keep them, for a monthly fee.

The report expects the console digital distribution market to take off in the coming years, as premium-content downloads become a larger focus with the next-generation systems. In 2004, sales of premium gaming content through Xbox Live accounted for 11 percent of the Western world's digital distribution market. Harding-Rolls also expects publishers and developers to further embrace the market and offer more current AAA PC titles through download and games on demand services.

Though the report pegs the digital distribution industry as hitting $400 million by 2010, it's important to keep in mind that this figure is only for the Western world. If one were to factor in Southeast Asia, where online gaming is a huge growth market and where game developers are increasingly building titles around the idea of micropayments for premium game content, the worldwide market for digital distribution would be significantly larger.