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We look at how downloadable games are affecting retail

Cutting out the middle man

The rising popularity of downloadable games – which are purchased as a file through a website or portal rather than buying a physical disk through retail – has become something of a contentious debate in the video games industry.

The argument is that if more people are downloading games through online portals, then less people are visiting retail stores, thus causing problems for the traditional channel.

In the PC games sphere, downloadable titles and content have always been a bit ahead of their console brethren – PC gamers were used to downloading patches and additional levels before Sony, Microsoft or Nintendo ever really invested in the idea for consoles. Portals like Steam are now serious players in PC games retail. This could have an impact on why there is comparatively little shelf space given over to PC titles in video games stores, despite the significant role they play in the industry.

Even if you don’t stock them, PC games still have an important role to play in hardware sales. Since the proliferation of low cost netbooks, which are generally only used for basic functions, the high-end enthusiast market has become more important for margin on hardware than ever before, and it is generally driven by a niche of hardcore gamers.

This trend is certainly on the rise, however the concern for PC retailers should be how much it is affecting the games market, which is tied into high-end hardware sales. Put simply, if lower spec, ‘casual’ games are playing a larger role in the market –which is often the case as they are easy to download and run on more machines – will that reduce the demand for margin rich, high-spec gaming rigs? Miles Jacobson, studio director at Sports Interactive (which develops the Football Manager series) thinks it’s just about choice.

“Downloading games is on the rise for the indie games scene for sure, for those titles that struggle to get retail space or even publisher deals. They’re also very useful for getting into markets where it’s difficult to organise a distribution channel. Personally, I don’t see how any route to consumers can be seen as negative. At the end of the day, as developers we make games to entertain people. The more people we can get our games out to the better. retailers and ESDs are all very different, and each offers a different level or type of service to their customers. Different people like different shopping experiences.”

If you do stock games, the prospect of a rapidly increasing direct to consumer model probably makes you worry for the future of this revenue stream. It seems logical that if one model is on the rise, the other will be taking a hit somewhere. This is certainly a concern for pure video games stores. However, some see the online boost as a stimulant to the overall industry, which will bring subsequent benefits.

“Increased connectivity is changing the way people consume entertainment with a growing trend to purchase, play and interact in games online,” an EA spokesperson told us. “Advancements in technology, pervasiveness of high speed access and consumer demand will bring new models for how games come to market in the online space. That’s a growing opportunity for the industry, however we expect the packaged goods business to remain for many years to come.”

Games are one of those sectors where even if you’re not involved commercially, they will affect your profits by proxy. As such, if there is an increased trend towards downloadable titles, there’s an argument for increased collaboration between the PC and video games industries in order to make the most out of the crossover, since they rely on each other to some extent.

“There’s quite a lot of collaboration already, but there’s always room for more,” adds Jacobson. “Our game isn’t the most high-end, although we do support many future technologies, which has brought us recognition by many in the industry including Intel –something we are very proud of. Personally, I’d love to see a PC, laptop or Mac on the market for us to recommend to consumers, or keyboards that come with pre-mapped shortcuts. Who knows what will happen in the future!”

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