High Time for a Digital Divorce

Has the marriage of inconvenience between retailers and publishers reached a turning point?

by

Once upon a time, retailers and publishers enjoyed a happy union, with both parties pulling toward the same end: selling games. The more that sold, the better it was for both of them. Retailers needed someone to fund and create titles, and publishers needed someone to get those games into consumers' hands. It was a mutually beneficial system, until the temptress known as digital distribution entered the picture.

In every unsuccessful relationship, there comes a point of no return. It's a point past which the union cannot be saved. But it's almost never at the end of the relationship. Things instead are drawn out, with confused participants believing that perhaps things are still salvageable, feeling that they owe it to their shared history to keep working through things. It's understandable, but the inability to recognize when that point of no return is crossed only leads to prolonged and compounded miseries. For retailers and publishers, that point was the moment digital distribution became a legitimate way to sell games.

It's difficult to work together when you can't stop bickering.

As Valve's nearly ubiquitous Steam service set the standard for downloadable PC games and Xbox Live Arcade spawned the first hit downloadable titles on consoles, publishers fantasized of a future where they didn't need retailers. After all, the only thing retailers did was serve as middlemen between the game makers and their customers, someone to buy a game for somewhere in the neighborhood of $50 and then turn around and sell it for $60.

But now that publishers' digital distribution efforts represent a clear threat to retailers, the relationship is getting awkward. Retailers like Amazon, Target, Best Buy, and Wal-Mart have jumped into the used-game business, a practice that publishers see as taking money directly out of their pockets since they don't get a cut of secondhand sales.

In acknowledgement of the coming cataclysm, the largest used-game seller of them all, GameStop, has been acquiring its way into direct competition with its partner publishers. Since 2009, GameStop has purchased its own online gaming portal, Kongregate, a downloadable storefront in the Steam competitor Impulse, and even a game developer and publisher in Jolt Online.

But at the same time, the retailers are getting chummy with publishers on marketing initiatives and preorder incentives, often to the detriment of consumers. Take a look at Electronic Arts' new Season Ticket promotion, which touts GameStop as a retail partner even though it has no retail component. For $25 a year, EA Sports fans get a handful of perks, chief among them the ability to download titles like Madden NFL 12 and FIFA 12 several days before they arrive in stores. The downloaded editions of the game will be complete and fully functioning, indistinguishable from their on-disc counterparts (except for, perhaps, improved load times). However, to keep retailers happy, EA is making sure those downloaded versions will stop working on the day of the game's retail release. So any gamers who put down the $25 for the subscription and downloaded a hefty multi-GB file to their console still need to make the trek to GameStop or Wal-Mart or wherever to buy a physical copy of the game they've already been enjoying for days. Presumably, GameStop is marketing the Season Ticket promotion in its stores in exchange for EA inconveniencing its own customers like that.

Clearly, there are no technical hurdles remaining in the path of digital distribution. This is simply publishers hamstringing an offering to consumers because it somehow appeases their retail partners. And it's far from the only time gamers are hurt by the intricate political dance taking place between the two parties.

Consider the changing approach to preorder incentives. Publishers want to push reservations as much as possible because retailers order each game based in part on the preorder activity surrounding it. A retailer with an "exclusive" add-on will market it in stores and e-mail newsletters, giving customers a reason to pick the game up from that chain instead of a competitor with no perks.

This started innocently enough. "A Viewtiful Joe bobblehead for picking the game up at GameStop? Yes, please." But now the web of exclusives has resulted in some pretty substantial content being split up between multiple retailers. For Mortal Kombat's launch, Warner Bros. Interactive Entertainment introduced the uniquely abhorrent concept of retailer-exclusive fatalities. WBIE created classic costumes and fatalities for Sub-Zero, Scorpion, and Reptile, but split them up as exclusive preorder bonuses for Best Buy, GameStop, and Amazon, respectively.

I'm just going to pretend this is whoever proposed having retailer-exclusive fatalities.

That ignoble experiment apparently worked out pretty well for WBIE, as the publisher is expanding on that approach with this fall's Batman: Arkham City. Best Buy has a new playable character in Robin. Amazon has a comic book. GameStop has a challenge map in North America and a Batman Beyond-inspired skin in the UK. British retailer ShopTo.net has a 1970s-look Batman skin, while New Zealand outfit Mighty Ape has a pack of three different skins. So depending on where diehard Bat fans purchase their game, they could be dropping $150 on a premium edition and still be missing out on a level, a playable character, a comic book backstory, and a handful of character skins.

Again, the consumer winds up being hurt here. To keep up relations with its retail partners and get a bit of help marketing its game, Warner Bros. Interactive Entertainment has spread the exclusives far and wide, ensuring that all but the most spendthrift fans will miss out on some content they'd love to have at launch.

The relationship has soured and is producing increasingly irrational behavior from all parties. Sony launched a digital-distribution-only hardware platform, the PSP Go, and sold it through retail stores, even though those outlets had virtually no incentive to carry the hardware, much less promote it (PSN points cards didn't count in a pre-PSN security breach world). And it's not like Sony really went out of its way to promote the thing, either. The phrase "sent to die" comes to mind.

By this point, there's little denying that retailers and publishers are trapped in a broken, loveless marriage, and it needs to end. Both sides are acting erratically, tiptoeing around each other, afraid to confront the truth of the situation and the seemingly inevitable dissolution of the relationship. Unfortunately, both sides still need each other at the moment, as the bulk of the gaming business remains in retail. However, that segment has been trending downward since 2007, and publishers are now madly chasing the growth where it can be most easily found: in digital revenue streams.

However this plays out in the next 10 years or more, a schism is coming. The sooner the separation can be made, the more civil, sane, and mutually beneficial the situation will be afterward. But given what we've already seen, I'm betting this is going to be one ugly, messy, acrimonious divorce.

Discussion

110 comments
ALLoY1717
ALLoY1717

I clicked on this because I saw portal. What is this about?

Redrivar
Redrivar

I don't like buying things I can't physically hold, but often its unavoidable, as is the case with game expansions/ add ons. I've always been untrusting of digital libraries especially with PSN's track record of going down. Hard. Real hard. My big point is that if games go all digital, the dependency on online will be more severe, as in DRM's requiring constant online connections to play a digital copy that at some point we wont own at all. That will lead to paying a monthly premium just to turn the system on. Who wants to pay 60 bucks a pop for that?

buft
buft

@cassadyH I agree, there are major hurdles still in the form of consumer rights, there really needs to be a standard put in place so that the end user always knows what to expect when they download a title. can i redownload it? for how long?basic things like that

HughBonner
HughBonner

This is like the book vs the kindle, some people just prefer a hard copy

CassadyH
CassadyH

"Clearly, there are no technical hurdles remaining in the path of digital distribution. " I disagree with this statement. There may be no hurdles where you live but in rural areas or other countries where internet is slower, less reliable, or have a capped monthly data limit, digital distribution is far less attractive than it may be to you. That being said, yes eventually there will be no remaining hurdles, but i think that is a little further away than a lot of people think.

jekyll
jekyll

The big difference in this divorce is that one of the 'spouses' will disappear: retailers (at least those like GameStop that only sell games). They'll limp along for a while on pre-owned non-current gen titles, but honestly it's very likely that next gen Sony and Microsoft consoles will be download-only for all new titles, having a disc tray for DVD/Blu-ray/backwards compatibility. There won't be any such thing as used game sales.

dlhoff
dlhoff

Let me first say, I do use Steam to some extent, but only for somewhat older and/or less expensive games. If I am going to pay $50 for a brand new game, I want the box, disc, manual, etc. I don't want to be charged that same $50 if I am only getting a virtual copy. Also, ever since the PSN downtime fiasco, I am worried about having too many games that are only virtual copies that can only be played via Steam. Finally, games keep getting bigger and bigger in filesize, and I can't even begin to imagine how long it takes to download some of the current games, even over a high speed internet connection.

Makana
Makana

Am I the only one that still thinks game box art and physical manuals are cool? When I'm playing a game, and if it's an amazing game then for months or years afterward, I still love to see the box set up on my desk or gaming table, and my older favorites on my 'book'-shelf. Steam and especially Kongregate are fine for freebies and mindless fun, but I for one can't see myself ever going to the world of digital distribution. If I am to spend my hard-earned cash, I want something to own in my hands!

toddx77
toddx77

As a PC gamer I love using steam because I have all my games in my place. I do buy some guys retail though such as blizzard games, bioware games, and mmorpgs. I try to buy a little of both retail and digital, just like with books I buy novels on my kindle and comics in print. Having the game boxes do look nice but with the amount of games I have that is a lot of shelf space, my shelves are already getting super full from all the marvel/dc and manga graphic novels. I would hate to see actual retail hard copies go away mainly because I would hate for all those people to loose their jobs and sometimes you just need a pshycial copy for whatever reasons. I hope in the future that there is an even divide of people buying retail and digital.

Oloryn
Oloryn

I think another related issue for me is a general flooding of the market with content. I've been an avid gamer for the past two decades, and I never felt like there was so much on my plate like I do nowadays. With so many games, and so many of them great, coming out, I feel I have to pick and choose my battles with both the games I play and the manner in which I buy them. Do I drop $60 on a game to support my favorite developers? Do I wait for an inevitable online digital sale? Do I buy 3 used games for that price that were AAA bestsellers last year that I haven't got to yet? Do I bother with those games at all, when I can get a great gaming value for the same amount of money with some smaller downloadable games (Bastion, Outland)? Something to think about.

h3rb
h3rb

[This message was deleted at the request of the original poster]

h3rb
h3rb

[This message was deleted at the request of the original poster]

h3rb
h3rb

This is a great article... Spot-on truth. I do wonder what the end solution will be. Inevitably it will hurt the consumer for a while, if not forever. I personally am a huge fan of Steam. I have purchased 90%+ of all my games from Steam over the past 6 or so years. For those that share that feeling, wouldn't it be nice if EVERYTHING was available on Steam? Sadly, the powers that be won't allow it. What frightens me now is that digital distribution is going to become distributed itself, across multiple Steam-like platforms, because all the publishers/retailers want a piece... This is going to force us consumers to use several different platforms, decreasing the value of our favorite distributor (Steam or D2D, etc). Imagine a world where media is no longer needed to be manufactured at all (BRay, Games, DVDs, CDs, books). The technology is here now! It would be a huge benefit to the environment. Sadly, it's the retail, publishing, manufacturers, and even some consumers that love their physical packaging; they refuse to let it die! But hey, we have the technology to drive cars that use much less, if not ZERO oil resources too... That's a hard business to kill too. EVOLUTION IS SLOW. I'm sad now. Good article though.

Highchroicleas
Highchroicleas

Digital download is a fantastic way to get games you want without leaving home. But say you are in Canada and have the 60GB D/L limit a month? You can pay for the overflow for a whopping $2.00/GB or you can pay to have a higher limit. Either way it still will cost us more for gaming. Additionally if your like me and have a 20GB 360 and a 40GB PS3 you might come upon having to delete and re install different titles to make room for new ones while keeping their save slots (PS plus is good for online saved data but for yet another $60 a month, i think i'll pass There is also just something about having that connection to your local retailer. Maybe its the guy or girl that you see every time and have a chat about games or the ability to look through the titles and have a more hands on approach that makes it that much better

Chaodyn5
Chaodyn5

@Buck_Swaggler I used to enjoy the disc, manual, box etc but these days its not worth it 90% of the time! I even have a soft spot for dumb collectable doodads (bought all the Halo special editions including the fancy case'd halo wars and I've eaten lunch from a fallout3 tin box) But today's developers are getting more and more lazy! Where once a box had a manual a half inch thick stuffed into the little receptacles in the dvd case its now hard to find a game that comes with enough of a manual to even be held by them. (and in canada they print a french and an english manual!) The content is low and the games are and the games are short and easy however titles like bastion or terraria are awesome 10-15 dollars for a quick download and loaded with awesome content the avalibility of a digital market place seems to have promoted a growth of smaller games that are absolutely excellent, they try new things and fly or fail they promote further experimentation with the model. I'll take cheap and delightfully inventive indie games over the mass produced, serialized shooters, drivers, sports games and even RPG's (sorry DA2 you really crushed my faith in bioware we had a brief thing but when I think back to DA you just look like a cheap set of makeup)

blehbeast1234
blehbeast1234

I have a question for those who bought MK - Since they were exclusive preorder bonuses, were they codes you entered or specific data written to the discs?

Ghosthunter54
Ghosthunter54

I like having a physical copy of what I'm buying. Lots more things can go wrong with a digital copy than a hard copy, and if things don't work on the digital, who are you going to talk to? Some far away tech support? If a disc doesn't work just take it back. I'll stick with disks, thank you.

diggyman
diggyman

Yeah... A world without proof of physical ownership? No cases? No instruction manuals? Another way that the consumer is getting the crappy end of the stick. Not to mention, even though digital distribution is technically cheaper than physical, we still may be paying around the same prices we are now for games, once this becomes the full-fledged norm. I won't say I'm scared of the future, but I am a little concerned.

diggyman
diggyman

Yeah... A world without proof of physical ownership? No cases? No instruction manuals? Another way that the consumer is getting the crappy end of the stick. Not to mention, even though digital distribution is technically cheaper than physical, we still may be paying around the same prices we are now for games, once this becomes the full-fledged norm. I won't say I'm scared of the future, but I am a little concerned.

diggyman
diggyman

Yeah... A world without proof of physical ownership? No cases? No instruction manuals? Another way that the consumer is getting the crappy end of the stick. Not to mention, even though digital distribution is technically cheaper than physical, we still may be paying around the same prices we are now for games, once this becomes the full-fledged norm. I won't say I'm scared of the future, but I am a little concerned.

sneezebox
sneezebox

I see many people in the comments below, and in the article above, claiming that digital downloads will cut out the middle-man and make games cheaper. This is incorrect. It may be true right now, but only because the developers need to incentivize people who would rather be buying a physical copy of the game. Plus, a digital download is a less complete game. I can't take my digital download over to my friend's house and play. I can't trade my digital download with anybody, Gamestop or otherwise. A discount for a less complete product is not the same as an identical product being sold for less money. The idea that getting rid of the booklets, discs, and cases will also cause a price drop is even more ridiculous, since the production of those materials is almost null compared with the cost of development. I'm willing to bet that less than fifty cents of your sixty dollars goes into producing the booklet, case, and physical disc for your game. The most important factor is that developers have already seen what consumers are willing to spend for these games. As I previously mentioned, the ten dollar price difference is a lure to get people to buy a less complete product. If, in some future world where pigs fly, retailers have disappeared and the only way to get your games is to download them direct from the developer, you can bet your life they'll cost sixty dollars or even more.

Buck_Swaggler
Buck_Swaggler

I understand the logic behind this article. But the reality that will never change for me is "when I buy a game I want the disc, box and manual." Maybe that's old school talk, but that's the way it is.

P-Ball3179
P-Ball3179

I prefer not to replace my HD every year because I buy alot of games. You can only store so much, I'll stick to Blu-Rays please.

punisher70
punisher70

The good part about the digital download feature is if your consol or PC fries you can always re-download it, an that's about it. i have down loaded about 8 games in the past year from xbox live an lost my internet for a few weeks. I could not play any of my games that i bought at "full price". It seems like because i had no internet i got ripped off. Well i have learned my lesson, with the accual disk you can play every time, bring it over you friends house , and can even buy it used at half to a third of the price. i mean the Original Assassins Creed 20$ on Xbox live 7$ at Gamestop

FMD129
FMD129

When a new game comes out I make sure I have the Physical copy, I only pick up the CD's at the sides (I still have CD's from years ago with not even a spec of dust on them) I try to keep the books safe, as well as the covers. I only spring for the limited editions when it adds something specific to the game (even though lately most limited editions are only limited by how long they wait to make it a DLC pack)but all in all, thats just me. If I find it on sale in steam a few months or years later, and its at such a low price that you cant ignore, ill pick it up there. Thats just how I see it. I think both will play a huge part even way down the line, BUT, the online distributer will be owned by its parent retailer (Probably called something else than the retailer) Steam is safe. Gamestop, not sure yet, Impulse always kinda sucked, and you can seriously forget about support (although that was before Gamestop took over). I can tell everybody right now Origin will suck. Still feel terrible that im getting BF3, but im getting it for benchmarking mostly, even if Origin is filled with bloatware. Either way, if a retailer has the best of both worlds, theoreticaly they should be at least safe (Steam being the main exception, it would be awesome to see a Steam store but when their main platform is selling digitally I cant picture that lol)

dah_master
dah_master

I just like buying retail because i'm old school... That and my net kind of sucks when it comes to downloading games.

100proofsoco
100proofsoco

Why don't we buy right from Rockstar or Activision or whoever and cut Gamestop right out of the picture.

_MEDUSA_
_MEDUSA_

Propaganda i say, The FACT of the matter is thus, NO Developer nor Publisher will ever go over to exclusively online distribution, its just financially not competitive, it Will shut out an entire market segment of consumers, and any publisher will GO and will STAY wherever there is money to be made! I do however think that a lot of publishers will expand their own online stores, where the consumer will be able to choose between a DD or a physical copy (to be shipped) in that way the developer wont be so dependent on retailers, however, retailers do additional marketing for titles as they want to make more money off a title, marketing and advertising the Publisher doesn't pay for, yet due to that advertising they Will make more money! One thing a do agree on, From a consumer p.o.v. both publishers and developers need to stop their bickering, as its hurting the consumer and in a way 'pushing away' the individual from a particular publisher or retailer, (and then the big boys will make less money, they wont like that!) WE all want the same game! The same FULL game, if they want to give retailer exclusive content, at least make that content public DLC a week or so after release! Its all about the MONEY! a consumer will spend the most money where he/she is most comfortable spending it, and wherever that might be (the lounge, the mall, the local corner 'no-name' store) the Game will be there, we will spend and they will make Money!

cachinscythe
cachinscythe

I personally still enjoy having my game cases with their instruction booklets and the actual game discs, but I agree with this article, and the cost to manufacture the discs and instructions just keeps the cost of games higher than most consumers want them to be nowadays. Digital distribution is probably on its way in. What I'm really concerned about, though, is hard drive space. Great, I can buy my games off an online store, but what good does that do me if the console that plays them--assuming a console is necessary once this is the norm--won't give me enough space to store more than 5 games? If digital is the future of our games, then the next round of consoles better have some hefty hard drives for those of us that want to own everything. Otherwise, we'd be better off continuing down the road we're already on.

deathwatch28
deathwatch28

This new preorder culture is annoying. I hope that with the new batman at least all the content you don't get will be released as dlc but I doubt it. And whats with dlc maintaining its price long after the games release/death. Sometimes you can now pick up the orginal game cheaper in stores than its addon pack online????

fadersdream
fadersdream

I figured this was going to be an article, it's an editorial. Writer likes Digital Distribution and framed it as unbiased. We need a system wars sticky just for pro/anti physical copies so we can have less of these.

sco-fisticated
sco-fisticated

author: Fear monger. so what, the relationship is breaking down, they should just quit? like a quiter? and what about the jobs those retailers supply? entry level jobs, too.

merleage2
merleage2

i hate the way gaming is going. i like having a disc. and right now i have a slow internet connection so digital download would be horrible. but if i get and sustain some really really really good internet then i wouldn't mind digital download, but i still like to have a case and a disc. although games would be a lot cheaper to buy since there is no middle man. it's all good

Cruisemissile
Cruisemissile

Also if their going to end up being digital distribution why not make it so you can still get a hard copy delivered to you be alot better and cheaper for me as i wont have to go over my limit for every game i want

Cruisemissile
Cruisemissile

@yoda101280 well where i live there's a video rental store open for business and that's probably because the internet around here is rubbish for downloading stuff so most of us actually get hard copies because of this issue. if downloading games becomes the only way to get a game then places like where i live which is a village in the East midlands UK, will miss out on new games, because we don't have the speeds to download them all i can do is play multiplayer on games not download them and i also have a 10gb limit the bill for that would go sky rocketing if i had to download games

defan88
defan88

That's why I love my PC. Games are so much cheaper. Why? No retail involved and no physical packaging and disc to increase prices. At first, I was not comfortable buying games digitally with no physical package, but I soon got over that with all the money I saved. Deus Ex: HR is only $44.99 right now on Steam and they always have awesome sales. I got Mafia 2 for $9.99 like 3 months after it came out. I love Steam!!!!

Sanguis_Malus
Sanguis_Malus

If it ever gets so that all full price titles are digital only I will barely buy any games.

nyran125
nyran125

Might be high time to flag future gaming? and just play games pre 2012? lol. never have to upgrade again yay. back to Pacman and counter strike!!!

nyran125
nyran125

i still know people that dont have the internet and play games offline for console and pc...I buy games when they decrease thier prices. Im not a fan of buyind brand new at all. Id rather enjoy what i have and just buy it 6 months later. Its cheaper and by the time i buy it all the DLC is out AND i get a bug free game. Its a win win. Dont think the digital downloading situation is compleletely teh future yet. When games start hitting 30 GB - 50 gb's in 5 years time. Digital downloading will be EXTREMELY expensive way to go fro new titles. Thisindustry is in way over its head unless they start working with ISP's directly so Downloadign purchased games doesnt go towards usage costs. Because DLing 30 gb's AND paying \$60-90 for a game is expensive as hell AND they are starting to implement Subscription fees for FPS MP games now too. Battlefield gamers? dont think your game will be free of SUB fees IF call of duty Elite takes off.. I know people that play Diablo 2 and Left 4 dead offline, because they cant be bothered with the online BS. Theyd rather just stick STEAM into offline mode and play offline.

BelmontWolf
BelmontWolf

there is too much demand for physical copies to go all digital tbh if all games went digital the number of pirates will skyrocket and the industry will just crash and burn

Dualmask
Dualmask

I for one adamantly refuse to buy a full retail game via digital download. $60 is a lot to drop for something that can disappear or lose functionality if my internet connection should go sour for any reason. I have no problem paying $10-15 for a smaller game. But all of this talk of digital distribution and pre-order incentives is exactly why less games overall are being made and less games overall are selling. Too focused on the wrong issue. Developers and publishers don't need to resort to this sort of crap to sell games; stop dancing around the issue and admit that the games themselves are the problem, not how you're trying to sell them. Think about the customer for once...we're not stupid. If you make good games, we'll buy them. You don't have to hype and trick us into buying good games with horse and carrot schemes.

N4o7A
N4o7A

...confused...

jamyskis
jamyskis

This article fails to address even one of the most fundamental problems with digital distribution from a publisher perspective - the fact that average per-unit purchase price of a title is around 25% of that in retail. Thus, while the actual PERCENTAGE GAIN on a per-unit sale is far higher (average 30% in retail to 70% in DD), the absolute gain on a per-unit sale is often twice as much in retail (usually around 15-20 euros in retail, about 8-10 euros in DD). A typical 60 euro game in retail needs to sell at around 25 euros digital for it to have the same kind of profits. The vast majority of sales on digital platforms are from heavily reduced titles and casual titles. Contrary to what the major publishers may insinuate (but note, never openly state), full-price AAA titles do NOT sell well on platforms like Steam or PSN. I've noticed that Paradox started their sabre-rattling a while back by saying "they don't need retailers" anymore, given that "90% of their sales are from digital". Note the choice of words - "sales", not "revenues". If you read the blogs of indie developers, you'll note that they all say the same thing - they usually get around 90% of their digital sales when their games are dropped to below the 10 euro/dollar mark.

niklev83
niklev83

...This kind of thing really upsets me... Why not get rid of the publishers and leave the retailers and developers alone!? ...I collect my games, period.

RegularGangs
RegularGangs

And Another Thing i dont Mind Pre Order Exclusives But When You HAVE 5 DIFFERENT PRE ORDER EXCLUSIVES EACH FROM A DIFFERENT STORE Thats What pisses me Off

RegularGangs
RegularGangs

I Dont Like it This is Crap I rather Collect my games Line them up And Smile at it ( Im not that much Of A nerd ) But Why not Download illegal pirated games If There Just Going To be All DOWNLOADABLE I Just hate it Bottom Case I Dont Want To have To Download my Internet Is Super Slow Its only Good Enough For Multiplayer On Xbox Live And Another thing not everybody has internet Even if there is only one game store where i live All the rest are pirated copies :(

Needles-Kane
Needles-Kane

This sucks, I want to collect my games, not be tethered to broadband, not be forced to have broadband, and be able to sell my games so I can buy others. DD seems to be working okay on PCs since retail ones are tarnished by heaving DRM anyway but this is going to be trash on consoles. On cosoles there will be no competition, 1 seller on each system, sony, MS, nintendo, and there will be no sales. For everyone supporting DLC, streaming, and digital content on consoles, you are making a bad environment for the next gen- it is not going to be cheap deals like on the PC.

USDevilDog
USDevilDog

I love Steam for certain games, but I prefer a physical copy for most of my games. I like collecting media and sharing games with my nephew without needing him to log onto my account.