The Monday ‘Joe: Digital Killed the GameStop Star

The Monday 'Joe

Mondays are usually slow for news as people start to stir for the coming week. Therefore, every Monday, we will address one topic to start the week and get discussion flowing. It stimulates the week like a cup of coffee, hence the title.

As seen on Game Politics, at the BAFTA Question Time event, Jagex (Runescape, War of Legends) CEO Mark Gerhard believes that traditional retail will fall by the wayside within ten years because he thinks that digital distribution channels have managed to serve the needs of consumers very well. He thinks that, ten years from now, people will think nostalgically upon physical retail centers like GameStop or WalMart as if they were museum pieces, and there’s not much that could give these places a second life.

This week’s question:

In ten years, will the act of going to the store to purchase a physical video game be a thing of the past?

Joshua Moore: Part of me wants to agree with this. After all, digital distribution works out better for the consumer and the publisher because of lower distribution costs and lower prices for the consumer. This becomes blatantly obvious with Steam sales, where I can buy $20 games for $5. At the same time, digital copies don’t come with extra swag. I’m talking about plushies, posters, CDs, calendars, etc. Some people, like myself, love these things and would not enjoy seeing them disappear. But thinking feasibly, this could still be supplied via online retailers like Amazon.

In all likelihood, I think that online retailers such as Amazon will continue to get physical media for limited editions that come with special bonuses. But for the majority of their consumers, I think eventually the industry will move to digital distribution as the primary means of selling their products. Pretty much anyone who plays PC games has Steam. Likewise, PSN and XBLA have seen quite good sales. Finally, Nintendo is moving to the future with the WiiU and the 3DS with DLC and digital games. All of the big players are now going to be on the same page, and the only limiting factor is the availability of good Internet in the U.S. and other regions. Within ten years, I think reasonably fast Internet will be available in the vast majority of places, so this limiting concern will have been addressed. That means the rise of digital distribution is free to take over.

Mel Ngai: If the game market shifts towards more digital distribution, then that’s how it goes. My main concern with this method has always been the possibility of hackers going to town, but I would think the increased prevalence of digital distribution would lead to better security as companies and consumers continue to adjust. In other words, my main concern regarding this is likely to become more or less moot. Once that happens, all I can do is adapt. It’s still sad to think of the old retail going out of date, though. However, given that other “outdated” mediums still exist (e.g. newspapers), I don’t think retail will go out completely. It just might not be the big go-to place for video games as they were before.

Crystal Steltenpohl: I think it’s possible that a few brick-and-mortar stores are going to go under due to the rise of digital distribution, but I don’t know that it’ll get wiped out completely. GameStop and the like will probably survive as they have the resources to move onto other things if necessary, and WalMart deals with stuff other than video games so it’s not like they’re going to die out. I can see where Gerhard is coming from, though, in that digital distribution has made it easier for indie developers to get out into the world and that this model is likely going to catch on. I can see it changing the game, but I don’t know that brick-and-mortar stores will ever be completely gone.

Mohamed Al-Saadoon: There have been many proclamations in history regarding new inventions: Radio will kill newspapers. Television will kill radio. The Internet will kill everything.

Years later, people still read newspapers and listen to the radio. Not to the same degree as they did before, of course, but they’re still around more or less.

Retailers will react and adapt to the changing market conditions as time goes on. Thus, the cheaper prices of games on digital distribution platforms will eventually force one of either two things: Either brick-and-mortar retailers will lower their prices to be close to digital offerings (perhaps a few dollars more to account for the manufacture and transportation costs), or they’ll stock more goodies with the copies to justify the higher price like cloth maps or soundtrack CDs. We’re already seeing some collector’s editions of games coming out that are so crazy, I haven’t seen anything like them since the good old days of Working Designs! You can’t download that!

And then we have the bigger stumbling block: console manufacturer’s and publishers. Sony and Microsoft run XBL and PSN (now SEN), and as we have seen multiple times, they don’t want lower game prices. Xbox Live Games on Demand had customers in Australia paying obscene prices for games due to the “convenience” of downloading the title rather than getting off your ass and buying it. Sony is the same company that’s charging you money for games you already own on the PSP if you want them transfered to the PS Vita. Lastly, Nintendo doesn’t have any sort of digital distribution network outside the Virtual Console, which is not applicable to new retail releases.

Bandwidth issues and hard drive space for consoles are both additional concerns as console manufactures just love shoving propriety hardware, forced installations, and several firmware updates on the user. Not even the PC is safe from this (even though it is by far the most viable platform for this). As a user with a New Zealand IP, I have to pay New Zealand prices for games. What does that mean? When Call of Duty: Black Ops was released on Steam, it was listed at $99.99 USD; and at the time of this writing (Feb. 27, 2012, months after the release of MW3), it’s still at $89.99 even though transportation costs, the usual excuse for increased prices in Australia and New Zealand, don’t factor in. Publishers don’t want to lower prices, and Valve can do nothing to convince them to lower their prices to anything approaching reasonable levels. With publishers also launching their own digital distribution platforms like Origin, the future doesn’t look pretty.

In addition, people like owning stuff. We’re compulsive hoarders by nature, so holding a game in our hands is a pretty effective incentive to go to a brick-and-mortar store. A physical copy is something you own forever whether taken off a shelf years later or even resold. You just can’t do that with digital copies.

So I predict in ten years, GameStop and other retailers will still be around.

Brandon Mietzner: Many factors will lead to the dominance of online distribution, but there’s one obstacle I think that Gerhard might not have taken it into consideration: Internet Service Providers (ISPs). They’ve begun to issue download and upload caps from month to month, such as AT&T with their DSL subscribers last year. This was mainly in response to customers’ uptake on streaming video services such as Netflix. This will further burden their monthly usage caps, and that’ll stifle the movement to online distributors only. This is just for the U.S. though; in the UK, there are already several ISPs that currently put a cap on the majority of their customer base, again stifling the move to online distribution only.

The DSL users at AT&T currently have a cap of 150 GB download. When we start, we look at games that currently use anywhere from 8 GB to 25 GB in size; we’re not even talking about updates or consoles’ required updates. This low amount of bandwidth is going to disappear very quickly for just one person who uses the Internet on a daily basis. Let’s say you have roommates or children that do their school projects online, upload and watch videos, etc. Put all together, they’re going to go over their limit in no time at all.

The need for store based services are always going to exist unless a law passes saying ISPs can’t limit download or upload amounts, which doesn’t seem too likely. I think retailers will be less frequently used, but I highly doubt they’ll go away within ten years. There’s just too much doubt in my mind about our having unlimited data by that time, or if we do, prices will skyrocket for Internet services and the brick-and-mortar stores might have these games and other goods at lower cost.

Does anyone else remember about eight to ten years ago, when we were being told that groceries would be delivered to us and we wouldn’t need to go to the store anymore? This is what I initially thought of when I read this, and I think this idea is going to follow suit. There’s always going to be a need for those to look at things firsthand and for them to keep their costs low, and anything that goes totally online will never happen. This is why Amazon is looking at opening brick-and-mortar stores. When the time comes that we can interact with these things virtually with a true tactile response and demonstration, then I’ll consider the end of stores as we know them. Just not until then.

Nathan Wood: Although I’m the youngest on the team, I’ve seen my fair share of, “Oh this new media is the future! Death to the old ways!” However, time and time again, it appears that while the newest and most convenient media becomes the norm, the old ways still stick around. Newspapers, CDs, videocassettes; and heck, my friend still goes out and purchases vinyls to this very day. I simply don’t see traditional retail going anywhere any time soon.

What cements this even more in my mind, though, is that people have been conditioned to want to own a physical copy of something. Fans of particular music, movies, memorabilia, or what have you generally can be seen buying something they love that’s in a physical format. It’s not only for their own enjoyment, but also as a way to identify themselves in the world and a way for humans to simply say, “I like this and it’s a part of who I am!” Simply put, there’s just always going to be a decently sized demand for physical goods of all sorts, and I don’t see this changing for a very long time.

I do believe digital distribution will become big—very big, in fact—but I don’t see it happening until much more of the world has access to high-speed Internet and the price of hard drive space coming down by a sizable amount. This, of course, comes with a whole set of problems with hackers, piracy, and all that, but people get robbed of their physical possessions at times as well. I would presume that the security for these products will improve over time to stop these things from happening.

So to answer the question, I agree that in ten years or even less that digital distribution will be the main driver of the games industry, but will we be without physical retailers completely? I don’t think so.

Aileen Coe: I have no doubt that digital distribution will become even more widespread in ten years. It’s cheaper for publishers and developers, convenient for consumers (those with the space and Internet speeds, anyway), and provides indie developers with a more accessible point of entry. It can also be cheaper for consumers as well with sales like the ones Steam has. However, I don’t think physical media will disappear entirely. Some games are massive in size and would be onerous to obtain through digital means, particularly for those out in rural areas. In addition, some people prefer getting limited editions of games, something that can’t be fully replicated through a digital medium. Even Amazon is looking into opening brick-and-mortar locations, so there’s still value in having locations where you can walk in and out with what you’re looking for without waiting for shipping. So while digital distribution will likely continue to spread, it probably won’t cause physical media distribution to become extinct altogther.

Christopher Bowen: You know what’s making a comeback now in 2012? Vinyl records.

Okay, for 90% of our readers, and my entire staff save Brandon, let me explain what vinyl records were: they were like CDs except vinyl and completely analogue. Instead of reading them with a laser, you stuck a needle into grooves while the record spun, which is how the music played. If you think CDs are easy to scratch, you’ve never dealt with a 33, which had the added bonus of smushing all of the sounds together, making them decidedly inferior to anything that’s come about in the past twenty years.

Of course, they’re coming back now because hipsters think smushing their music together like a fourteen-year-old handling his first set of breasts makes it sound better. But the core point is that technology from ages ago is making a comeback of sorts.

Under that mindset, what hope do we have of the games industry going 100% digital within ten years?

The music industry was supposed to abandon CDs altogether with the advent of digital distribution, the iTunes store, and Pandora. It hasn’t happened. Newspaper was supposed to die because of the advent of the Internet and blogs. It hasn’t happened. Television was supposed to kill off radio. It hasn’t happened, and I’d argue radio is almost as strong as it’s been in decades. Every time something is supposed to “kill” its predecessor, it almost never happens, 8-track notwithstanding. While there’s understandably contraction in each area, they don’t quite leave entirely, especially when it’s something as widespread as physical distribution of entertainment which has been the norm for over forty years.

I believe that what will happen in ten years is what’s happening now: smaller companies will resort to digital distribution in order to hit their niche audiences, while larger companies will continue to distribute physical media to reach the widest audiences possible. We see this working already: Louis C.K. made a lot of money going the digital route, while someone like Dane Cook would have to release his material on CD to get wider distribution. It’s the same with video games: Monday Night Combat is a digital release; but Call of Duty would leave money on the table, forcing everyone to purchase the game digitally. A main reason for this is that, even in 2012, not everyone has any kind of broadband Internet access in not only America but all around the world, and those who do are dealing with harsher caps on the amount of data they can download per month. Not everyone can download 10 GB at a time, and I almost got my Internet disconnected during December’s big Steam sale because I used up so much space. Companies can push for digital distribution all they want. Why wouldn’t they? You can’t trade in or even lend a file; if your friend wants to play, he has to buy his own. But ultimately, it’ll cost more money to eschew physical distribution than to go through the overhead. Therefore, it will remain.

Christopher Bowen

About Christopher Bowen

Christopher Bowen is the Editor in Chief of Gaming Bus. Before opening Gaming Bus in May of 2011, he was the News Editor at Diehard GameFAN, a lead reporter for DailyGamesNews, and a reviewer at Not A True Ending, also contributing to VIMM, SNESZone and Scotsmanality. Outside of the industry, he is a network engineer in Norwalk, CT and a veteran of Operation Iraqi Freedom.