Philippe Paquet Tech blogging from Los Angeles

1Dec/08Off

The future of game distribution

I would like to speculate a bit about the future of game distribution and take an educated guess on what is going to happen.

I've been thinking and talking about that for years actually. To me, the future of game distribution is 100% online. I have been expecting that to happen years ago but it seems that in the consumer space, time is relative. So, here is my guess: in 5 years, the only way to buy a game will be online. There are several reasons for this:

  • Online distribution would eliminate the cost of goods. On the scale of the game industry we're talking about hundreds of millions of dollar spent every year on cartridges, discs, manuals and boxes. That's a pretty big saving for publishers.

  • Online distribution would eliminate real distribution. By going online, you would eliminate wholesalers, retailers and all the associated marketing, shipping and logistic costs. Not only we are talking about billions dollars of saving across the industry but at the same time we're talking about eliminating the latency of distributing physical goods. As a consumer, you will get the possibility to buy any game at any time. Did I say instant gratification?

  • Online distribution would eliminate the used game market. When you buy a second hand game in a shop, the retailer is the only one making money. And retailers make a lot of money out of the second hand market as they usually take a bigger cut on a second hand game than they would on a new one. If a retailer push you toward a used copy of a game instead of a new one, don't be surprised. They're just trying to maximize their profits. Eliminating the second hand market would significantly boost publishers revenues.

  • Online distribution would reduce if not eliminate piracy. Games purchased online will be able to use online authorization systems to confirm authenticity and tie them down to a specific machine while at the same time reducing hassles for honest consumers. No more incompatible copy protection system that prevents you to play the game you bought. Reducing piracy would also boost publishers revenues.

  • Online distribution would eliminate returns. While I'm sure that all the publishers will put in place some way for consumers to get refunded if they are dissatisfied of an online purchase, they wouldn't have to deal with physical returns.

  • Online distribution would give control of the rental market to publisher and platform owners. Again, that would significantly increase publishers revenues.

After a long list of publishers benefits, what does the consumer itself get from that shift? I already mentioned instant access to games and a more transparent copy protection system as direct benefits. In addition of the direct benefits, I can see some indirect benefits:

  • As margins increases, publishers will be able to spend more money on producing games. Overall quality should increase across the board.

  • Because of the suppression of physical inventory, publishers will be able to take more risks. That should increase the originality and diversity.

  • As you will no more need to build an international distribution network to compete, the market place will open to Indy publishers. Again, that should increase the originality and diversity.

Does that mean that stores are going to disappear? Probably not. I can see them becoming very similar to what mobile phone stores are. They will still be there to sell you a console, an online subscription to go with your console and some accessories.

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