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Corporations Vs. Consumers: The Digital Apocalypse Has Arrived

As we come towards the latter half of a decade, many things in the gaming industry have changed. Some for the better and some for worse, depending on your point on view. The “Console Wars” was a phrase that was known to every gamer around the globe and an undeniable line was drawn in the sand. There are die-hard fans dedicated to one sole system and will not waver or dare cross the threshold to the other side. I myself was solely an Xbox gamer and refused to buy a Sony console for years, until they lost my trust recently. In a war between technology behemoths the only casualty is the consumer, left helpless to an ever-changing digital world.

The gaming industry had a routine for years that was anticipated and appreciated by their fan bases. It was created by the console wars and developed a system lifespan cycle of roughly 5-6 years. It is equivalent to Elder Scrolls fans waiting for their glimpse of a new roll out at E3 every summer (cough). So much hype built up for one weekend. One announcement.  A time to show off that spectacle of a machine that has been tirelessly worked on so it can out perform their respective counterparts. My most memorable moment as an avid gamer would be playing Call of Duty for the first time on the Xbox 360 at launch, in complete awe of changes in technology and graphic capabilities compared the original Xbox released in 2001. I never imagined that consoles would advance this much in a little over a decade. We now have Sony releasing a new system with their PlayStation Pro, just 3 years after the release of their eighth-generation console, the PlayStation 4.  Similarly, Microsoft is preparing to roll out their Xbox Scorpio in roughly the same lifespan. This type of unveiling of consoles was unprecedented a decade ago, but in a world with 4K and Virtual Reality gaming this was the most logical move.

 

PS4 vs. Xbox One

 

What does this mean for the little guys like me and you?  I decided to consider the question of whether the gaming industry would eventually move to a digital world without physical copies of games, and what impact this would have on the everyday consumer.  A world without GameStop (gasp), third-party vendors, and those amazing deals you can find on your everyday craigslist listing.  Would this benefit the market and those who save up that extra bit of their paycheck so they can get that new release they have been eyeing for months? Well, you must look at the whole tamale if you want the real answer.



It is no secret that the tech-giants have been moving to a digital era but not without vitriol. Microsoft attempted to take the first step by requiring games to be tied to user accounts to be played, thus ending the ability to trade games among peers or third-party retailers. Some would argue this has nothing to do with the argument of the industry switching to digital, but that is not the case. This particular move would have given Microsoft the ability to eventually cut out used game retailers and vendors, which would give them free reign to choose how they release their games. The backlash that resulted from this stance was very intense and severe for Microsoft, although Sony did their best to fan the fire releasing a video on how to share games shortly after the blow back (see below).

I applaud Sony for this assassin like move from a business standpoint, as it was a genius play which probably resulted in many players to crossover to PlayStation, myself included.  With such resentment in the minds of the consumers, Microsoft had to pivot and back away from this stance quickly.  This is the issue with the current mindset of the game industry in an overall sense, as something that is used to express profound opinions and creativity has turned into a never-ending volition for an extra comma on the earnings report. Which leads to my main discussion, will the greed of corporate technology and game companies turn the industry into a strictly digital era, or will the changes in preference among the consumers ultimately lead to this decision.

The Corporations Perspective

 

Now before I dive into this it is important to relay that I have absolutely zero affiliation with any gaming studio, publisher, or console developer and that this is purely an opinion with some facts sprinkled in. Corporations and Companies in the gaming industry have obviously been embracing the digital era here of late. Microsoft has just recently released their Netflix like gaming pass that allows you to play roughly 100 games digitally; Likewise, Sony has their gaming pass with the PS Plus subscription.  In a bigger picture, developers and platforms have been pushing digital sales tremendously over the past few years. But why?

If you analyze the overall breakdown of what a video game costs on average ($60) it will come out as such.

·         Retailer Margin – $15

·         Returns – $7

·         Publisher – $27

·         Platform Royalties – $7

·         Distribution & Costs of Goods – $4

Source:LA Times

Now let’s assume for argumentative purposes that you could save an average of $3 per game on distribution and costs on a digital game vs a physical copy. For a title such as GTA V that just reached 80 million units sold in its lifespan, if half of those units were digitally purchased you are looking at an increased profit of $120 million. That is one AAA title! It makes complete sense from a business perspective to change over to a digital only era. This is not including the amount of profits you would gain from cutting out the retailer margins and used game retailers such as GameStop.

The most interesting fact about this change is that the amount of digital purchases since 2009 has increased from 25% to 74% in a 7-year period in the United States (see below). It is fascinating to see where the gaming industry is heading. If this trend remains consistent we could see a complete shift to a completely digital industry within the next ten years. This is certainly great news for developers, publishers and platforms. But where do the consumers interest lie in this debate?

Source: Statista

 

The Consumers Perspective

 

Consumers are the heart of the gaming industry, as is with any multi-billion-dollar industry.  Personally, I have always been a huge advocate of physical game copies and will remain so if things stay at their current trajectory. The little things are what makes the experience of getting a new game unique and forms long-lasting memories. Waiting in line for hours in preparation of a midnight release, opening the collector’s edition to find all the goodies inside, detailed map posters, and that addictive sound of unwrapping a fresh cartridge. You simply can’t gain these experiences from patiently watching the download bar after purchasing a digital copy. I know where I stand on the subject, but what does the majority believe?

In a study conducted in 2014 by Digital Distribution called “The Democracy of Downloading: What Gamers Expect (and Want)”, the findings show tremendous support for physical copy purchases. MarketCast interviewed 1,000 users, including HD console owners across current and past generations (PS4, Xbox One, PS3, Xbox 360) and PC service users (Steam, Origin) ages 13-45. What did the study find? That most gamers agreed that digital distribution is the future of gaming, but they were reluctant to join the “revolution”. A strong majority of the users believed that a digital era would make the gaming industry overall:

·         more democratic by giving gamers more power to “vote” with their money

·         would level the playing field, putting smaller independent creators on equal footing with bigger AAA

·         easier transition for gaming, since movies and TV have paved the way

Still, over 50% of users in this study preferred physical copies for several legitimate reasons. The biggest of which would be the post-purchase market and the ability to buy, sell, or trade their used games. Other concerns included a sense of ownership or “tangibility”, hard drive space concerns, and server issues. Clearly the consumers of the gaming industry are not quite ready for the transition to a digital era. Here is a detailed image provided by MarketCast.

 

So this begs the question of why so many people in the gaming community are increasingly purchasing digital copies at an alarming rate if they truly feel they are not ready for the change. No one knows for sure but the single most predominant feature of digital purchases is convenience. American culture overall has become more lax and lazy, so when an opportunity presents itself to obtain the item we want without having to leave the couch, we will take it.  Almost every single time. Less than 25% of game consumers in the United States prefer digital copies, yet only 26% of game purchases last year were physical. That should say everything. Doing something you are not prepared to do for the sake of convenience.

Whether the industry will convert to completely digital is beyond my capabilities to predict, but one thing is certain: Consumers want to be heard. The best path forward in an era with such technologic advancements and streaming capabilities is for companies to pay attention to their respective user bases and forge a plan to keep physical copies on the shelves and refrain from alienating individuals such as myself, while at the same time catering to people who prefer digital purchases. I will never be prepared to fully give up my special edition copies and I know that several of my peers in the community feel the same as I do.

 



Evo
Names Devin Pratt but my friends call me Evo. No I don’t drive one.

Founder of Sick Critic. Avid Gamer. Lover of beer – ask me to get one with you and we might become best friends. If Bethesda doesn’t announce Elder Scrolls this summer I think I quit. (Update) It didn’t come out… I quit. Follow me on Twitter. Game on #StaySick

PSN: S1K_EVO

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1 Pings/Trackbacks for "Corporations Vs. Consumers: The Digital Apocalypse Has Arrived"
  1. […] Although we’ve crossed from the physical to the digital era, there’s no reason for demos to disappear. The first level of a platformer or the first half hour or so of an adventure game could be free to play on steam or hosted elsewhere, and if the players liked it they’d buy the full version. However, even before we went fully digital, game demos had already become few and far between. I’m a young guy, and my first console was the Wii. I have a hard time thinking of demos I had access to, and even if I remembered them all I could probably count them on one hand. For one reason or another, free demos were disappearing. […]

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