The Digital Revolution: How Consumers Are Driving the Future of Games Retail

What's going to happen to brick-and-mortar game retailers as the industry grows more and more digital?

by

The business of making and selling video games is changing. In the last five years, the games industry has gradually moved away from established business practices and towards alternative platforms and delivery channels, from digital distribution and free-to-play to self-publishing and crowd-funding. This shift, once believed to pose a threat to the industry's future, has paved the way for new ideas and technologies to take hold, establishing independent revenue streams and opening up the existing market to a wave of new creators and consumers.

But as the global gaming industry grows and adapts to these changes, more and more long-standing business practices have come face-to-face with extinction. The future of physical game media and traditional brick-and-mortar gaming retailers has been the topic of wide debate in the industry for a long time now, pushing both publishers and retailers to come up with a viable solution. While some have argued that progress is impossible without risk and loss, others maintain that the industry should strive to find a way for both old and new business models to work side by side.

So, who is correct? Will physical game media and game retailers survive? And if so, how?

Slowing physical sales

The global games market hit its peak in 2008, riding a post-Wii launch wave of prosperity, marked by the arrival of the casual consumer, an influx of new software, increased audience size, and the growing popularity of rhythm games in the West. But while global gaming industry revenues are forecasted to grow in the next three years (rising from approximately US$56 billion in 2010 to an estimated US$82 billion in 2015, according to PricewaterhouseCoopers), the amount of money made from physical software, hardware, and accessories at the retail level has been in steady decline year-on-year across the US, UK, Japan, and Australian markets.

The most recent figures from consumer market research group NPD for the North American video game market are dire. The first half of 2012 saw a double-digit percentage decline every month, with June hardware sales down by 45 percent and software sales down by 29 percent. In August, NPD released its quarterly update for the US games market: the figures showed that while digital revenue in the games market increased by 17 percent year-on-year, reaching US$1.47 billion, the packaged retail goods business managed just over US$1 billion. But while NPD acknowledged the rise of the digital sector, the company's analysts said that this increase is not yet enough to offset the decline in physical game sales.

So what's going wrong?

"In this unprecedented eighth year of the console cycle, we believe there are few new intellectual properties to reinvigorate interest in the games sector," Wedbush Securities analyst Michael Pachter wrote in July this year.

"Consumers have been offered a never-ending series of sequels, and have been offered fewer choices each year for the last several years, with the result being waning interest in new software purchases and an unprecedented three years of software sales declines. The poster children for limiting consumer choice are Activision, Electronic Arts and THQ, with each company offering 50 percent as many titles as they offered several years ago, with only one new intellectual property launched among the three companies over the last year."

With physical game sales slowing, the industry has turned its attention to the rising digital market. According to a Q1 2012 NPD report, digital format content sales in the US (which includes full games, DLC, subscriptions, mobile games, and social network games) increased by 10 percent, compared to the same period last year, generating US$1.38 billion in revenue, compared to the US$1.5 billion from new physical video and PC game software. Similar statistics have been reported in Europe: digital format sales in the UK, France, and Germany generated US$959 million in revenue in the first quarter of 2012.

While the worldwide increase in digital distribution and revenue has increased the debate surrounding the future of physical game sales, how has this shift measurably impacted game retailers?

Case study: The collapse of GAME

With physical game sales slowing, the industry has turned its attention to the rising digital market.
In March this year, UK video game retailer GAME Group--which runs both GAME and Gamestation stores in the UK and mainland Europe--went into administration after requesting its stock be removed from the London Stock Exchange. Prior to the administration period, a number of publishers, including Electronic Arts, Microsoft, Activision, and Capcom had stopped supplying GAME with their latest products, fearing the company was no longer profitable. A week later, GAME Group was purchased by OpCapita, who subsequently took control of 333 stores across the GAME and Gamestation brands, but not before the business was forced to shut down 277 stores and lay off in excess of 2,100 staff members.

Perhaps the biggest blow to GAME's international business preceding its collapse came with the news that the publisher would not be stocking EA's Mass Effect 3. At the time, GAME was forced to open up about its relationships with publishers, a rare move for a retailer to make. In a memo to staff, GAME explained that it had asked game publishers to work with them through their difficult financial situation.

"We asked them to trade with us using manageable credit terms, and for them to continue to do that whilst we work through the strategic review and refinancing of our business," Devine said in the memo. "We gave the industry commitments--we committed to integrity and openness in our dealings, and working with everyone equally."

Devine then revealed that GAME had made the decision not to stock EA's March releases, including Mass Effect 3, due to the publisher not agreeing to GAME's "credit terms" during its period of need.

"As a specialist retailer dedicated to games and gaming, it is never easy to make a decision not to stock a title, particularly one with such a strong fan base. But it is imperative that we treat every supplier evenly, that we stick to our commitments, and that we don't sign up to payment terms that will hamper us further in the future," Devine said.

But while EA's decision to not allow one of the UK's biggest game retailers to stock one of the biggest titles of 2012 may have contributed to GAME's initial troubles, the bulk of GAME's troubles had started a lot earlier.

According to a source within GAME Group who wishes to remain anonymous, the retailer's biggest mistake, both in Australia and in the UK, was to expand too quickly while underestimating the operating costs of running a day-to-day business.

"The company underwent a hurried international expansion without considering the long-term effects of such a costly business decision," the source told GameSpot.

While GAME Group found a saviour in the UK, the Australian branch of the business was not so lucky. The business went into administration in May 2012, putting into motion plans to shut down all of its Australian stores and laying off more than 280 employees in the first round of staff cuts.

Looking at the Australian market, our source estimated an average GAME store pre-collapse turned in yearly sales of somewhere between A$1.5 million and A$2 million. While most businesses must produce at least a 5-15 percent profit each year to stay healthy, the source said that GAME Australia was having trouble reaching this target due to high rent, employee expenses, and an increasingly unprofitable local market.

"GAME entered Australia and expanded very quickly, choosing to open 70 to 80 stores in two years, a number which meant they couldn't easily negotiate the terms of their rental agreements and couldn't afford to be selective," he said. "As both rents and payroll numbers are fixed, GAME lost out when the local market started to fall: the business had to contend with market revenue shrinking by 20 percent in the last two years. They simply weren't selling enough games to cover all their operational costs and still turn a profit."

Our source said that a typical Australian GAME store deducted roughly 12 percent in daily operating costs to rent and 8 percent to payroll, in addition to further costs to cover things like utilities, production, warehouse costs, marketing costs, and taxes. This translated to roughly A$5 to A$6 in pure profit for the store from each game sold, numbers that weren't high enough to keep the business operational.

"What happened to GAME is a sign that the global video game retail market is struggling. With more and more consumers shopping online, and more and more publishers adopting digital distribution measures, retailers everywhere are under pressure to find new ways to survive."

The physical future

Some larger game retailers have already begun to display signs of understanding, doubling their efforts to adapt in the face of a rapidly disappearing physical game market.

US game retailer GameStop's push to establish a mobile and digital business in the North American market has been rewarded with a 23 percent year-on-year growth for the sector in the first quarter of 2012, a figure that, while not enough to make up for a shrinking packaged goods market, gives the retailer a fighting chance.

…some key players in the video game publishing world have been less confident about game retailers' ability to survive.
According to GameStop's latest financial report, the retailer expects its store sales to fall 11 percent to 5 percent in the current fiscal quarter, with full-year revenue expected to range from down 5 percent to flat. But while GameStop's digital and mobile sector still makes up the smallest part of the retailer's overall business (15.2 percent of total sales for the period ending April 28, 2012), GameStop seems to have recognized the importance of investing in digital: in July this year, GameStop CEO Paul Raines revealed the retailer is looking for new ways to grow its digital revenue by exploring options for digital second-hand sales.

Though retailers like GameStop and industry analysts like EEDAR's Jesse Divnich remain measured in their observations of the rise of digital distribution and its impact on the future of brick-and-mortar video game retail (Divnich told GameSpot that, while digital distribution remains a continued and growing threat to physical retail, he believes there will always be room for one mass-market specialized game retailer), some key players in the video game publishing world have been less confident about game retailers' ability to survive.

In August this year, EA Games executive vice president Patrick Soderlund acknowledged that though the majority of revenue in the industry still comes from packaged goods, the future will see distribution via brick-and-mortar retail outlets lose viability "sooner than people think". Specifically, in less than ten years time, according to Soderlund.

Clearly stating that his comments were personal and not those of EA as a whole, Soderlund said that he believes the new generation of gamers may not have the same enthusiasm for collecting physical games as previous generations.

EA, whose digital business reached US$1.2 billion in its most recent fiscal year, remains convinced that the lion's share of its revenue will soon stem from digital products. Earlier this year, EA COO Peter Moore stated that though the publisher will never abandon physical media while there is still consumer demand for it, its digital revenues could be just two to three years away from surpassing its boxed gaming business.

The rise of digital has also kept other game publishers in high spirits. In March this year, Ubisoft posted its full-year financial results showing a return to profitability thanks to a doubling of its digital and online sales, a 111 percent jump year-on-year.

Earlier this year, Codemasters cofounder David Darling took things a step further by saying the next-generation of consoles must embrace a digital-only future or face extinction. Darling pointed to digital distribution as a model that gives publishers access to a "worldwide marketplace", while side-stepping the often-expensive processes involved with the distribution of boxed games.

"Sony and Microsoft cannot let the retailers dictate game prices going forwards if they want to break free from the current over-priced model," Darling said. "If hardware manufacturers do not manage this transition soon, they will be overtaken and left behind by companies who are embracing digital distribution wholly and completely. Companies like Apple and Google are not tied to brick-and-mortar retailers with shackles, and are not being held back by them."

EA, whose digital business reached US$1.2 billion in its most recent fiscal year, remains convinced that the lion's share of its revenue will soon stem from digital products.
But those in the industry who have worked closely with game retailers believe things aren't as simple as waving goodbye to physical retail and saying hello to digital. Firstly, there's the idea that people enjoy owning tangible products: it's easier to attach oneself (and one's memories, for that matter) to something that can be seen and touched. Secondly, there's the realisation that a digital marketplace will never be able to replicate the experience of dealing with other human beings, something that physical retailers so easily do. This latter point may not be of concern to the experienced, core consumer who may prefer to do everything digitally, but it remains an important part of the point-of-purchase experience for the mainstream consumer.

"I think people underestimate just how important physical game retailers are to the promotion of games as a whole in the mainstream consumer market," an industry source who wishes to remain anonymous told GameSpot.

"Retailers do a lot to push and promote gaming to this growing audience. While the digital market is still quickly growing, it's also still maturing, and is not yet as effective at selling games as physical retailers are."

The humble brick-and-mortar game store may be of some use yet.

Discussion

0 comments
TOTALFILM
TOTALFILM

I already buy all PC games on STEAM at least 3 years. 1500+ for now i have on my account.

Also i have PS3, but downloading speed from PSN is too lazy, that why i still prefer BD.

FyreHeart
FyreHeart

The biggest problem with digital games, IMHO, is the used market. I buy most of my games used, and I typically wait until the price point drops. Retailers are very sensitive to supply and demand and update their prices accordingly. Digital copies take forever to change in price, if they ever do. If GameSpot can find a way to buy/sell/trade digital-only copies, I could see doing more business digitally. Until then, I'll buy mostly physical copies.

Kiigora_LoP
Kiigora_LoP

No more physical copies, no more games for me.

corteztheg
corteztheg

Just because digital sales are at the up for mobile games does not mean it will translate the same for console games. also i think low sales and low profits for publishers are not as a result of 2nd hand games for many other things like the economy leading to low disposable income, the increasing game development cost which in turn has led to developers taking low risk and overpopulating the fps and tps genre as well as reducing, removing and restricting game content to sell as dlcs which has cheapen the value and experience associated with gaming thereby even reduce customer interest and game's purchase value even for 2nd hand games. Publishers can continue to reduce cost  and restrict flow of resellable or 2nd hand games but they are not really addressing the problem and maybe destroying the joy of console gaming in the process.

JoeJoeLaker
JoeJoeLaker

So what will happen to special editions?

toddx77
toddx77

I have grown to love digital purchases not just with games, but with movies and books too.  I am running out of shelf space in my room so digital works great for me but I do kind of like having a physical copy at times too.  I have found the best thing not just for me but for brick and mortar stores is combo packs.  For example games that require steam works or origin I buy physical so that way I have the box to get autographed when the voice actors show up at a con, the disc for quicker installation, the game game is linked to my account as if I bought it digitally, and the brick and mortar stores get part of the profit too.  With blu rays I always try for the digital combo packs so I have the physical disc and then a digital copy to take with me on the go, with comics I always buy the ones with digital codes so my friend who owns the comic book stores still gets a sale and I have the physical book as well as the digital copy in my comixology library.  

TrueProphecy22
TrueProphecy22

I find more variety and value on Steam.  80% of my game purchases over the last year have been on that service.

 

When it comes to physical game purchases, and purchases at full price, I'm much more selective than I used to be.

 

I can wait to play most big title games these days, where it used to be that I just had to have them at launch.  It just makes more economical sense to wait for a price drop or sale; most new releases will inevitably double their price in post launch DLC.

 

There's my big gripe.  If you don't mind waiting, why buy a game at $60 and then buy $30 worth of DLC when you can wait a year and get it all for $40 or $50; separately or in some GotY package?

 

Large expansions have never bothered me.  It's the nickle and dime DLC at outrageously high prices that do.

 

Say what you like about not having to buy it, but that's content that could have been in that $60 package.

abdougamer
abdougamer

There is nothing good than a trip to Gamestop or Bestbuy and wait in the line to get your new game .

 Who agrees with me ?

shrolag
shrolag

EB games and GAME have always been too expensive in australia, if people where buying physical copies, JB hifi was one of the more likely places to go, only reason i ever went to GAME or eb was when they had sales, otherwise i bought my physical games from online suppliers such as ozsave and ozgameshop, too many gamers in australia know we are getting ripped off in physical stores with games selling for pretty much 1/3 more than alot of other countries.

Celsius765
Celsius765

i don't think I could switch to digital only if there aren't alternate payment options like the cash cards

richten71
richten71

As of lately, we have been getting some pretty good prices on digital games that we wouldn't have got buying physical copies of the games. I'm sure a lot of people bought a bunch of games during Steam's summer sale, I know I did. Today, you can buy any Battlefield game, including BF3, for only $10. I'm glad everything is moving to digital because I am running out of room to store all of my games. Pretty soon I'll have to rent a storage unit just to house everything. I've got 2 DVD stands filled with games. I've got 3 boxes in my closet filled with PSOne, PS2, and Xbox games. I've got boxes in the garage filled with GameCube, N64, PC, DS, Gameboy, PSP, SNES, NES, Genesis, Game Gear, Dreamcast, Saturn, TurboGrafx, 3DO, Atari, Colecovision, Odyssey, and Intellivision games. I seriously don't have the room for anything else. When I can get the game in digital format, I do because it saves me physical space and it makes it easier when I want to play games since I don't have to get up and switch out one disc for another. And with physical drive space (hard drive) getting larger and larger and cheaper and cheaper, there really isn't any reason why we can't just start storing everything on our systems or even on cloud (is it on cloud or in cloud). The future is coming and it can't be stop and digital media is the way that's it's going. I'm trying to remember if I ever saw any one with discs on Star Trek or Star Wars, or any other future movies you can think of.

jsmoke03
jsmoke03

the biggest problems of decline have to do with sequel fatigue and game prices. its just that simple. $50 was a sweet spot for gamers. $65 just seems a bit steep, and games are being categorized as either day one purchases or price drop purchases. maybe they would move more units if they realized some games are $65 offering

 

i don't want an all digital future because if a company goes out of business, then all my digital content would go down the drain. if there is a fail safe, i would still have to compete with millions of gamers who are trying to save their digital content...digital distribution isnt the same as having physical copies of games.

 

and the digital sector's growth is unclear to me. are they separating arcade/ casual game titles in the same category as AAA blockbuster type games? im pretty sure that they just hammed those two types of games in one category under digital distribution. Its not an accurate data because most casual games and gamers make microtransactions instead of the full $65. Is there also platform distinction in the data? i imagine most digital copies are being sold on steam and not as much on consoles. that makes a big difference.

 

 

keldarironfist
keldarironfist

For those of you pushing an *all digital* future, you can go to hell. Sorry but, the day I can't actually own the content I worked hard to pay for is the day I and MANY others stop gaming. Unfortunately, with each successive and younger generation who grows up not knowing that once, you actually could *own* your games, it will become harder and harder to go back. People don't see to realize they don't OWN the digital content they buy, be it from itunes or xbox live or steam. You buy a LICENSE to use your content, its like renting your game, movies, or music, only more expensive, boy that sure is swell! People had such a hard on when MS starting pushing DLC when the 360 launched, and while some of us KNEW it would spell doom for the consumer, most morons fapped away at the idea. Well now you have seen what happens when content providers and platform holders (MS, Sony, Valve, etc) have ALL the control, and YOU have NONE. Endless crappy sequels, nickel and diming you to get what would have been a complete experience on the disc/cartridge in days past, and of course the wonderful prospect that you can have games pulled entirely from the virtual store you bought it from, and when your device is old and not supported or goes to the crapper, you are left with....let's see....NO games? But hey digital is the future right? Sorry but I have every intention to fight that future. You should too.

nsfn
nsfn

So much fear. Fact of the matter is you're only nickel and dimed if you have cash to spare. Target audience of game industry is people with more money than they know what to do with. So digital or not digital everything will be business as usual.

ggregd
ggregd

All this is irrelevant old news in PC gaming, where the transition to digital has pretty much already happened.  People said the same resistance to change stuff you would expect to hear in a retirement home about wanting their physical copy; everything everyone is saying here.  In the end it happened and PC gamers are cool with it.  Console gaming just needs to follow suit.

666Nephilim666
666Nephilim666

My big issue with digital versions of games is that as a consumer I prefer to spend my money on something tangible. I hate the fact that due to the digital revolution (hehe) we have already lost one of the joys of buying a game, the instruction manual. I remember buying games for my genesis or even my N64 and on the drive home carefully openeing the box and pulling out the (usually) colorful and informative instruction booklet. Now I get a strip of paper folded over with advertisements and health warnings.

 

My other grip with the digital revolution is that we are now paying for easter eggs that developers would include in the game as perks for being awesome.  A great example of this is Mortal Kombat. When the original three came out all of the hidden characters were just that hidden. Not another peice of the game you have to buy to get the complete experience. Now if you want Kenshi or Rain you have to buy the DLC. No skill involved no reward for the player. just another $4.99/ per character out of pocket on a game that already cost $65.99 new.

 

Aside from consoles I have also been a PC gamer and they get this right. Updates and patches are free. When a new raid is introduced you dont have to pay an additional $4.99 per boss, or armor set. In fact some PC titles even give you the SDKs so you can create and share your own content. Sure there are expansion packs you pay for but not per boss.

oldschoolvandal
oldschoolvandal

That's just sad...I know that I'm more attached than I should to my PHYSICAL games.

I enjoy how cool they look all lined up, my complete collections....the chance to check a cool manual.....

Don't get me started on Limited or Special editions....man....the future sucks...

diff0
diff0

What about Special Editions? Getting an actual book and model, maybe even a T-shirt (Super Meat Boy - ultra edition) is much more impressive than flicking through a pdf game guide or artwork booklet on your PC.

joeboosauce
joeboosauce

I echo the comment below that if the publishers want digital (which they should so they can get more of the profits) then they need to price these products more competitively. They should price out the used game purchase. For example, they need to price out Gamestop when gamers buy a game on day one, beat it and then sell it to Gamestop. Cover the price of that loss for the consumer and it will be more attractive.

 

The main problem I see with digital anything is that:

 

1. There would be NO competition and COMPLETE control over a game's distribution.

 

2. Price control. Go to Amazon for their e-books and see how often they are competitively priced with used and clearanced physical copies. People complain about the current costs for digital versions. Day 1 releases are often exactly the same.

 

3. You don't really own the property. It was recently pointed out that a paying consumer cannot transfer or sell their collection to someone else.

 

4. So, this then cuts into the used market. Your ability to sell YOUR (or not as I pointed out) product to recoup costs or buy products used. No more craigslist or evil Gamestop. Or your buddy selling you his game he’s done with. Also, none of that loaning of games God forbid!

 

Digital is convenient. But it’s often through convenience that we accept measures that will ultimately be inconvenient. That is if you value cost and ownership of your purchases.

Kiigora_LoP
Kiigora_LoP

One more thing, how can you can over a billion dollars in one month a 'dire' situation?

nsfn
nsfn

 @toddx77 It looks like you've put a lot of thought into this whole thing. Congrats.

Me? I just want to buy shit and be able to resell it. Is that too much to ask?

nsfn
nsfn

 @TrueProphecy22 People who have money to burn don't like waiting. If you must wait or if it "makes more economical sense to you" that's your problem.

LE5LO
LE5LO

 @shrolag buy online though and you don't get that f***ing huge AU classification sticker in the bottom left of the cover and on the spine, for the price and rarity reason buying only Aus. distributed games with this retardedly obvious classification label on them has become an obsession of mine.Yes, there's probably something wrong with me, I hate that sticker but I'm so pedantic I can't live without it now.

 

:S

Lotus69
Lotus69

 @keldarironfist Legally you never did "own" any game, same goes for music and movies on media.  The intellectual property always has belonged to the Publisher & Creator.  It was only because of technology that your license that you purchased just happened to be on a CD/DVD (or cartridge).  

You can fight it all you want but eventually there will be no one making physical media anymore.  It just won't be profitable to do so. In fact I have a friend who produces music/records and getting CD's made is becoming more and more difficult.  He told me that there is only one place that he can order from now (though there may be others).  

While like you, I prefer to hold physical copies (I have many PC & console games in boxes atm) I also own 100 or so via Steam (and a couple via Origin & GOG).  Many of these games are playable "offline" and this is where your fight should be, to free the game from "always on" connections and allow games to be passed into a DRM free state.  Look, the publisher owns the IP they can do what they want we can only fight back with our dollars, that's the only way they will listen.

We need to convince them to allow (or keep) the ability to play a game offline (ie. installed locally on HDD etc.) especially when a game is moving into "legacy" status (little to no sales).  It would be nice if when a game is no longer being supported the publisher would release a patch allowing for offline play.  Take a look at stores like www.gog.com, they have lots of older DRM free titles for sale.  Buy lots of games there and publishers will take notice.

So digital distribution isn't your enemy it's the DRM that forces you to play a game online, Diablo 3 I'm looking at you or the digital distribution service (Steam) that forces you to be connected to them to play or reinstall the game.  Ideally the end user should have the ability to backup and restore their games regardless of how it was purchased.

keldarironfist
keldarironfist

 @ggregd No not all PC gamers, myself being one of them, are cool with it, thanks. Many of us hunt down physical copies, often imported from europe because people who don't value ownership buy from steam.

Diablo-B
Diablo-B

 @oldschoolvandal  lol, you sound like my grandpa. relax, let the kids play on your lawn. the future will be ok

ggregd
ggregd

You should be able to sell your license for a digital product.  The trick is making it stop working on your system after you sell it.  Once they figure that out the next huge Internet business will be an e-bay for consumers to swap digital media.

TC_Squared
TC_Squared

 @joeboosauce Well stated. I also wonder if this will decrease the birth of classics. I lost count of how many times I fell in love with a game or my friends did by lending our copies to one-another. If we loved it, we went out and bought our own copy. I want to introduce my friend to Mass Effect, but even though I have the disk copy, he simply wouldn't have access to the DLC. If I owned the digital version, I wouldn't even be able to introduce him to that. This may be preventing my friend from becoming a ME fan.

toddx77
toddx77

 @nsfn Nope not all.  With my comics and blu rays I can do that because I want to to sell the physical item I can and still have the digital one.

TC_Squared
TC_Squared

 @Lotus69  It's like if I decide I don't want the disk anymore, I can sell it because that copy of the disk legally belongs to me. However, if I decide I don't want the digital copy anymore (which has actually happened to me on more than one account) I can't sell it. Digital copies have more in common with rental than ownership.

keldarironfist
keldarironfist

 @Lotus69 Again, I am not talking about legal ownership of the IP. I do however have direct tangible ownership of the physical goods I purchase, which is why I can sell my copy, and is why gamestop exists frankly, if it were otherwise, they could not. Even with that not being the case, by owning a physical item, I protect myself. The holders of the IP are not going to come into my home and take my game because they pulled it off the market, that can however, happen with digital goods, even IF legally the two are viewed the same.

keldarironfist
keldarironfist

 @Diablo-B  @oldschoolvandal Listen "sonny", many of us are in our early mid 20's, hardly grandpa. And when I bring up the topic with younger gamers who are INFORMED (sadly, most are not, which says a lot about the current younger gaming generation), they actually end up preferring physical copies when they learn they don't OWN the games they buy digitally.

Lotus69
Lotus69

 @ggregd The technology is there, digital does allow us to do it it's just not implemented yet. As soon as they figure out how to make money from it then it will happen.  The reselling of used games is a huge (Gamestop etc.) is a huge poke in the eye to publishers.  They don't get any of that cut.  Eventually I see something or would like to see something liks this:

1. user purchases digital copy of game

2. digital license allows for game to be gifted 3 times ???

3. digital license allows game to be resold (at a lower cost or what the market can bear?)

4. owner of digital license (end user/you) makes a portion off the resale as does the developer and/or digital distributor

 

So in real world terms; I buy a game for $60 from Steam. I finish playing the game and resell it for $30 back on Steam's "Used Game Market Place" and I recoup $20, Steam gets $5 as does the Publisher.  I just made those numbers up but you get the idea.

oldschoolvandal
oldschoolvandal

 @TC_Squared  @joeboosauce First, I totally agree with both of you.

That said, all you mentioned is from a consumer point of view....unfortunately from the companies point of view it's a completely different animal.

EA says the future is digital...if you had a company that sold something and I could cut the middle man to turn in more profit AND enhance the control you can have over what people do with it would you do it? Saddly, yes...most of us would do it. It sucks but it's true.

 

LE5LO
LE5LO

 @toddx77  if you do plan to resell items with used codes it'll obviously diminish the resale value, unless the codes expire at some point, with that said, I'm all against this crap, and for that reason when I get these codes I never use them so the product does actually retain its original value (minus the shrink wrap).

 

I could murder the diabolical idiot that came up with the infamous 'network pass', I'm sure second hand retailers also feel the pain from that. These types of codes are just wasted paper to me.

Lotus69
Lotus69

 @TC_Squared I know there's been legal work done to stop the commercial reselling of games or at least giving the publisher a cut of the sales.  Not sure where that got to.  But like I stated just above, would it make a difference to you if you could "resell" your digital copy?  Put it up for sale on the Steam Used Marketplace?

Lotus69
Lotus69

 @keldarironfist So there is a way to embrace the future!  I work in the industry as well and it's a well discussed topic.  I also would always love to see the "Special Edition" versions (hard copies).  It's why I buy Blu-rays and box sets, I want the "extras".  The industry just needs to be proactive and not reactive much like they were when Napster was all abuzz.  If they had moved to monetize it immediately things might of been much different today but instead they tried to stop it fueling individuals to feel entitled to "free" music (and movies, games etc.)

keldarironfist
keldarironfist

 @Lotus69 No I would not, and have friends in the game industry who would feel ok with that. That being said, I still would like to see companies offer packaged goods, even if they are only sold directly from them and are a "premium" limited run, much like vinyl records. 

Lotus69
Lotus69

 @keldarironfist You have to look at from the view of the people who make the games.  It's all about control.  They take the risk and spend millions to make a game so they should be allowed to say what happens to it.  Now, it's not great for business if you piss off your consumers but I'll side with you and say this system needs to be more robust to allow for the things you are suggesting.  Would you be opposed to a digital world if you could play your game at any time/offline, make a physical copy/backup or resell the digital license?

Diablo-B
Diablo-B

 @keldarironfist 

The issue lies in the DRM and licensing agreements. But the future will be just fine, no need to worry. At least not about that.

keldarironfist
keldarironfist

 @Diablo-B I am, but not when it is used in poor taste and flippantly, especially  about something as serious as ownership rights. Second, the only way we have been able to curtail complete control as dictated by that license agreement is to own physical copies. Courts have already come down on the fact that as consumers we "own" the physical goods we buy., if it were not so, selling used games, cd's, movies, and more would in fact be illegal. With an all digital future, we have no recourse and are subject to the whims of the platforms.

Diablo-B
Diablo-B

 @keldarironfist  

I see you arent a fan of sarcasm

But anyway you don't OWN most of the games you but today. Check the End User License Agreement for your games, you don't own most of the software you "buy".

ggregd
ggregd

Suppliers have to provide what people demand.  If one publisher tries to force the market into digital faster than customers want by limiting their options, another smarter publisher, actiing in their own self-interest will step in and fill the unmet demand.  Gamers and developers will move to them.  The pushy publisher will lose and either backtrack or go out of business.  Only a monopoly has the power to do what you suggest.

 

We're discussing games here, not economics in general, but how exactly does lobbying the government get people to buy things the don't want?  Most lobbying in 2012 is an effort to reduce regulation and free up the market so suppliers can provide what buyers demand.  The government's interest is in preventing monopoly, crime and practices that are harmful to the general welfare, Business interest is in making sure the government doesn't overstep its bounds.  In the end consensus is approached.  The idea that there is a smoke-filled room of corporate and government fat-cats deciding everyone's fate is hyperbole and a excuse grasped at by the unsuccessful.

 

I do agree about the price collusion though.  Retailers should be able to sell games and hardware for whatever they want.

Lotus69
Lotus69

 @joeboosauce  @nsfn  @ggregd 

I agree with you, that model probably won't work.  But if no one thinks about it, considers it there will only be the solutions provided by the monopoly.  Spoon fed by the corporations into believing we have "choice" when really we don't. 

joeboosauce
joeboosauce

 @ggregd 

I was not saying anything about consumer spending being passive. What I am saying is that consumers do in fact passively accept the conditions that affect their consumer behavior and choices. Big difference. Consumers are generally woefully ignorant of the issues that underlie their behavior. They are generally ignorant of how the market is shaped by industry lobbyists and on industry price collusion. Ask most consumers if they have read the T&Cs of their purchases and they haven't (this is by design) and they don't  know they don't really own these digital products. I think you are missing the point that consumers choose based on the available options in the market. Who provides these? It's the illusion of choice (much like our elections). If we look past the rosey theories of the market, we see the market is manipulated in favor of the producers. Even recent history should inform people of that.

ggregd
ggregd

Consumers don't passively buy anything.  It's an active decision.  Money and spending is the most important thing in the average person's life behind their immediate family.

 

Businesses have no power to force customers to buy anything.  Something like 90% of all businesses fail within 5 years, Big businesses fail every day, and new ventures and new models by existing businesses fail as much as new businesses.  The main reason they fail is not giving their customers what they want.  You're just stating a personal bais against business in general.

 

Digital will fail if not enough buyers want it, physical copies at retail will fail if not enough buyers want them.  It's that simple.

joeboosauce
joeboosauce

 @nsfn  @Lotus69  @ggregd 

Yes, business has a surprising (not really) way of compromising ones ethics. In the end, any business venture is about how to exploit consumers, workers, business "partners", etc.

 

This model Lotus proposes won't happen. There is no difference between a used digital copy and a new one. Maybe the publisher can create a self-destruct mechanism that breaks the copy after certain amount of resales or after a certain amount of time after it is sold the first time. I know this sounds absurd and that is my point. There is no real used market when its all gone digital. Used is gone. The next thing to consider is transfer of ownership. Currently, you can't do that. Apple will not allow legal transfer of an entire iTunes collection to anyone when you die. (People have dropped some serious cash in theirs.)

 

I see only single person "ownership" and complete control by the publisher. You won't even own but be renting it. This inevitably ends up leading to monopolistic practices. Businesses exercise undue influence and control over consumers in the market. Sadly, most consumers are passively accepting the dictates of big business.

nsfn
nsfn

 @Lotus69  @joeboosauce  @ggregd Yes that's great. Now where is you argument. Your pitch if you will? I must be able to fly among the fools who believe ethics and morals have any place in business (they believe that right up to the point they open their own business ;) Get to it buddy :)

Lotus69
Lotus69

 @joeboosauce  @ggregd @nsfn 

I agree with you, I'm not sure how the model will work but you're wrong in thinking it would stop new game sales... there is already a used game market cutting into new sales yet they still happen and they don't get any of that cut.  The model I propose would give them money back in their pocket. There has to be a way to make things work that benefit both the consumer and the business.  Business will always try to do what's right for them (make money) and it's up to the consumer to show or teach them how much they want something by spending their money in the right places.  If no one bought digital copies you can bet they would return to a full retail, product on the shelves format.  If 'we' don't buy cloud based streaming they won't do it.  Things change but we do have a voice in this, we just need to put our money where our mouth is.

nsfn
nsfn

 @Lotus69  @ggregd Ok, all you have to do now is present a nice argument why the developer and/or digital distributor should get a cut of however many resales and you're all set. Get to it buddy :)

joeboosauce
joeboosauce

 @Lotus69  @ggregd 

I don't think they would let you "gift" digital items for free. And I don't see how a "used" game market would function. Why would anyone want a "new" copy when the used one is the same and cheaper? I don't think this is possible except by transfer of license. And guess what? Done with game, just keep transferring it forever from person to person thereby cutting into new sales even more. This is a tough thing to manage. With a cloud based streaming format which it will eventually come to, we may have to accept never owning anything and no reselling.