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As Steam starts hosting software, we wonder what this means for the retailers who still care about boxed products

Analysis: What’s left for boxed software at retail?

Download service Steam started hosting software as well as games as of September 5th. It’s by no means the first nor the last company to offer a range of downloadable software but Valve’s current strength in the games market means software developers and retailers alike will be watching with interest to see how this works out.

It’s part of a trend that points to a move away from boxed software at retail, to a download-only era that’s getting closer at high speed.

A statement on the Steam website read: “The software titles coming to Steam range from creativity to productivity. Many of the launch titles will take advantage of popular Steamworks features, such as easy installation, automatic updating, and the ability to save your work to your personal Steam Cloud space.”

There had been hints for some time that Valve might make a move in this direction. A recent update to Steam’s Android App revealed a range of new software categories, and founder Gabe Newell has mentioned discussions with Adobe in recent months.

Valve’s not the only firm planning big things for digital software. EA, which has its own Origin streaming service (solely for games at this point), also thinks we are on our way to digital domination.

EA COO Peter Moore told Reuters that: “There will come a point, when we say ‘We are doing more in digital media now than we are in physical media’ and it’s not far away.”

So what does it all mean for those retailers and developers who still care about boxed software? Are there still opportunities out there?

Software publisher Serif, which says it already works with a number of digital distribution partners including Intel, Amazon and Valve, thinks a decline at retail is inevitable.

Sales and marketing director Ashley Hewson comments: “Sales of software in bricks and mortar retail is already in fairly rapid decline. This is primarily driven by more consumers preferring to download software, which in turn is accelerated by retailers dedicating less of their shelf space to software products.

“There is some opportunity here if you can keep your products on the shelf while your competitors lose their slots, but even that only presents a short term win. In the long term, I would expect most opportunities for in-store purchases of software to come from cross-sells made at the point of purchase of a hardware item.”

Jon Atherton, VP for distributor Entatech, points out that though there is a decline, there are still benefits in selling software for indies: “The software market is becoming increasingly focused on downloads, moving away from the more traditional boxed products. Whilst Entatech can accommodate and support this shift in supply, we still cater for the traditional boxed market – in our experience our smaller independent retailers still prefer to have a tangible product as they find this aids their sales.”

Publisher Focus Multimedia is more positive – having had recent experience of selling Angry Birds on PC at retail, despite it already being available for free online, and it continues to sell a range of software solutions at retail outlets too. The firm’s Alan Wild says: “There are still great opportunities at retail. People want to be entertained and are prepared to spend.”

Distributor and service provider Gem agrees that the market still has some life in it. Head of marketing Katie Rawlings says: “The industry is still redefining itself. Just look at the growth within the mobile and browser areas; these are very recent developments in the last few years. While some cannibalisation is to be expected, boxed and digital will most likely work together side by side for many years to come.”

Gem is also in the interesting position of having acquired a digital distribution arm earlier in the year. Talking about Ztorm, Rawlings tells PCR: “Developing our offering together with Ztorm for both online and in-store activities where we can offer tie-ins between physical and digital products is very much on our agenda.”

Serif’s Hewson leaves us with: “We, and in particular retailers, will have to accept that within a few years nearly all consumers will just buy software online. What share of that action the traditional retailers can get through building their own app stores against competitors – such as Microsoft, Apple, Valve, and Amazon – I guess is their challenge.”

An interesting thought. Software players in the IT channel need to consider their digital options. Selling physical media alone just might not be enough any more.

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