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Analysis: Is the Video Game Industry Really Declining? (http://www.gamasutra.com/view/news/35923/Analysis_Is_The_US_Video_Game_Industry_Really_Declining.php)

For those without the patience, here's a quick summary of the article I linked to above. The retail video game industry is eroding, while alternative sources of video game sales/distribution are steadily rising in value.

Now, I know there are some people on these boards who feel very strongly that the traditional retail system is broken, and should be replaced. This article should be some comfort to them, as it seems to verify their beliefs. The traditional retail model for video game sales is declining year over year, and a fair number of investors are beginning to get nervous.

The silver lining is that the systems outside of the retail chain are doing a great job of picking up the slack, and that overall the video game industry is growing financially. Just don't expect the majority of dollars from video games to be coming from brick-and-mortar stores in the future.

Could this continuing trend eventually lead to an industry more open to independent development? A lot of the "other" sources of revenue that this article tracks include solutions that are more open and accepting of indie development. (such as the internet, facebook, Android, and the iOS) If more and more consumers begin migrating to these other platforms, it will make indie development more viable as a profession as opposed to a pastime.

Well, personally I've mostly lost all interest in Retail.
 
Reason being:
They stopped making proper boxes. The shift to DVD Boxes led to a 100% decline in printed manuals. It's all PDF files in some obscure place on the DVD. Want a printed manual, well better go and print it yourself fucker.
Worse still, printed manuals are now considered "collector's editions" and if they bothered with an artbook, they make yet another edition calling it "premium collector's edition". All that for something that used to be the standard for boxes. Damn, I still occasionally read through the story pamphlets from games like Bioforge. They used to set the mood, it was fun unwrapping a box and seeing what kind of things are in there.
Now? It's a DVD. Some "go register, silly little gamer drone" card and a CD Key. That's it. Helped in realizing that there's absolutely no difference in quality between a digital release and a retail release.

Print yourself manuals? Check.
Zero bonus material (with some rare notable exceptions like Darksiders)? Check.
Requiring an internet connection to install/play? Check.
Binding games to accounts, so you can't resell? Check.

Retail can go and dry out in my opinion.

As for Indie Games, a rise in acceptance for digital distributions will certainly help. Although I feel that Indie Games really need some standard way for transactions. The whole everyone picks some obscure payment system mess we have today, is kinda annoying and quite the barrier to newcomers. I've dropped games I was interested in, simply because they had me jump through hoops the size of buildings, just to pay them their money. Paypal is some semi standard, but also a messy one at that, that regularly screws over both sides.

Out of curiosity, what sort of hoops?

The two payment problems that have blocked me from buying games I was interested in have been being hugely overcharged because of my IP location and having my payments blocked or delayed because of overly-zealous security checks. My 'fault' for regularly traveling between countries, of course...

It will definitely help, as it is nearly impossible for an indie game to get on the shelves of, say, Walmart. But there is still the risk of more gatekeepers that don't have developers' best interests in mind popping up in the digital realm. I think it would do us all well to standardize a non-profit entity for publishing indie games online, as well as standardizing payment methods.  :wizard:

Yeah retail is dying, the real question is: are there people who still ignore it?
There is at least one article perr week on gamasutra about the death of retail, Gamestop bought kong and impulse and are starting to diversify their activities in anticipation of the death of retail, I think I even read something about it in the mainstream press. The future is "appstores" and things like that, but how is it news?
It's just a logical evolution:
man creates internet, internet kills god, gabe newell eats man.

i think it'll decline, but not to 0, and not as fast as everyone thinks it will. we'll still be buying games in stores and even going to specific 'game stores' in 2030, even if most people don't do that anymore at that time

perhaps in the future, physical games will be the new indie, with AAA games being digitally exclusive, and only indies bothering to create nice packaging materials anymore

I remember my parents telling me how much the idea of cable TV was freaking out the film industry.  People were actually handing out flyers at movie theaters talking about how the convenience of seeing a movie on your own TV would mean that nobody would be willing to shlep to the theater to see a movie they could see in a few months on their TV.  I guess this was a very primitive version of digital distribution, eh?  Eh?  No, not really.  Well, as the story goes, we still have plenty of movie theaters and people still enjoy seeing their AAA-movies in theater.

Digital distribution would be great if everyone could be as nice as Steam.  An example of the elephantine balls that the folks of Microsoft are forced to heft around can be glimpsed in every corner of their little bazaar.  I bought The Darkness for three dollars in a Gamestop, while it's being sold on the Marketplace for twenty.  I don't like the idea of the fat cats getting to set whatever price they feel like for their games and forcing us hard working Joes to pay whatever price they impose. 


That's-that's chaos theory.  

(http://img233.imageshack.us/img233/5180/unled2zo.jpg) (http://imageshack.us/photo/my-images/233/unled2zo.jpg/)

One reason movie theaters still survive today is probably because most people lack the sound systems and big screens movie theaters offer. Unless game retailers offer something that digital distribution can't (such as nice colorful printed material), people will tend to go for (the typically more convenient) digital distribution.

they offer the ability to buy games with cash. not everyone has a credit card, especially kids.

Most services(such as XBLA) let you buy point cards. For everything else you could buy prepaid paypal or visa cards or whatever. I see kids doing it all the time.

you'd still need a retail store to sell those cards, though

and the consoles, controllers, and other physical equipment

I'm not a particular fan of point cards though, as they obfuscate the real price.

Also Prepaid Cards seem to be quite abused at the moment, Steam for example has problems with people using proxies from UK to benefit from the cheaper games there. German gamers are using a similar approach to bypass their strict games censorship laws too. And ever since I moved to Switzerland and saw the prices they ask for games (seriously, you pay roughly 25-50% more for the same game), I happily abuse the lack of a CHF Currency option in online distributions as well.
It's not that much of a problem for Indie Titles. I somewhat doubt those options will be around for that much longer though, simply because both, company interests and national interests, aren't met. It's a bit like Bitcoins, great in theory but quickly abused and scorning the rage of people in power.

I prefer prepaid cards. I'm very cautious about giving out my credit card info online especially after the recent hacking incidents.

I think Paul is right, retail will never entirely vanish. If for no other reason, physical stores simply provide a shopping experience that can't be had on-line. At the same time, it would not surprise me to see their importance to the industry continue to decline over the next decade.

This process isn't going to happen overnight. It will be a slow but steady erosion. Retail stores are no longer able to effectively compete against digital distribution services, rental services, on-demand services, and used-game stores. There are a LOT of different competitors who are actively attempting to undermine traditional gaming retail. GameFly, OnLive, Gaikai, Redbox, GameStop, Good-old-Games, and Steam are just a few of the more common examples.

I don't agree with paul eres, I think video games is one of those products where the industries will totally abandon retail in favor of digital.
I don't imagine a brick and mortar games shop in a western country in 2030, except maybe for occasions, antiques and collectables.

I hear this video game industry disease has spread to every other industry in the world. sad times.

I think the XBLA and nintendo point cards are stupid with their own sort of currency but PSN uses actual dollars, so if you buy a card for $20 you actually get $20 on your account. I also don't think that retail stores will die until consoles die because retail stores are almost the only place to get physical equipment, aside from having it shipped to your house or something.

Well, the issue there is with the current console sales model. Microsoft and Sony sell their hardware at a loss, a loss that the retail stores have to share in. Retail stores sell those consoles because they know they can turn a decent profit on the software that goes with them. If retail game sales continue to decline, it is quite likely that some retailers will begin to consider dropping games from their inventories. If future consoles are designed to be download-only, retailers won't carry them unless they can sell the hardware at a profit.

So if this trend doesn't turn around, the next Microsoft and Sony platforms will have to be considerably more expensive. (so that they can be sold for a profit) This is part of the reason why I think Sony and Microsoft are going to ride their current platforms for as long as they can.

I don't really mind because I think PC Gaming is better anyway but I think losing consoles would hurt the industry unless PC game sales pick up. I think if everyone who games on consoles moves to PC's once hardware is too expensive that will be fine, then more developers will make PC games and all is well with the world.

Also what about handheld systems, I think they could be dying as a result of all the smartphone and mobile games. I would rather not have that happen because I find the the smartphone game market is in really rough shape right now. It is super saturated with garbage and a couple gems. Kind of like the Wii  :P

I don't think you can compare other industries to this because for the film industry for example you go to movies in a theatre and pay your $10 or whatever it is and that's it, gaming is an expensive hobby because if you want a game, you first need the console and then maybe some controllers and then a $60 game. With movies there isn't any hardware you need (except maybe DVD players but those are pretty common in a household anyway now), that's why digital distribution and PC and smartphone gaming might be the future. You don't need any additional hardware to play the games.

You know, I'm really tickled by the title of this thread.  Yeah, this is great for indies!  In the same way a nuclear war is good for a guy that sells hockey pads and bladed boomerangs.  I don't even know what that means!


How about having the ability to play the game on more than one console?  I would never download a game on a console if I had the ability to own it on a disc, simply because it allows me infinitely more freedom to use it how I'd want to.  For the PC, I don't care.

What rustles my jimmies is that digital distribution isn't always cheaper.  Why the hell isn't it?  You're saved the cost of shipping and manufacturing to give me the barest of bones of what I need to play this game and somehow you think that I should still pay the same price, or MORE, for a digital copy?  If anything, I expected console digital distribution to follow in the footsteps of Steam, but I guess they realized that when they are the sole provider of digital downloads for their system, they can charge whatever the fuck they want and just watch their community squirm.


About as common as, durr I don't know, a video game console? 

I think DVD players are more common plus there isn't any competition. If you have one DVD player you can watch 99% of the movies that have come out in the last decade. If you own one console chances are you can only play 20% (maybe, just a guess) of the games that have come out recently which means there is incentive to buy more than one console which is expensive.

I do agree with your other point though that digital should be much cheaper because there isn't any packaging or shipping costs at all (with the exception of bandwidth and file hosting) but that should be a lot cheaper than physical copies.

Not only this, but there's no up-front risk except the cost of producing the game. If you make the game and it flops, you're only on the hook for the development time (and you can get some of that back if you can reuse assets or code). If you make a game on a disc, you're on the hook for whatever you manufacture. Unless you sell the whole stock, you're on the hook for manufacturing costs for goods you haven't even sold.

Perhaps there's something in there to do with the retailers - like maybe Walmart will stop stocking games if the digital downloaders become the optimal avenue for retail.

The reason why digital distribution isn't cheaper is that publishers still need retailers as a promotion tool and don't want to piss them off. Remember what happened to the PSP Go?

This made me chuckle. Mostly because it's profoundly possible!

Pricing is one thing that's really working towards the indie advantage. Specialized console-controllers and new release/popular titles @ $60 each is a bit excessively steep, especially in a time where everybody's cutting back. Not to say there aren't some titles out there that may be worth it - but damn near every game released shoots for that mark.

A large chunk of game sales happen in december as people buy them for christmas presents. You need a physical disc to wrap up; downloads do not make nice gifts.


If Indies want to increase sales, then capitalise on christmas and offer boxed games.  ;D

I got my brother Dead Space 2 off of steam for Christmas I think  :P

Long live indie games when triple A game developers/publishers like Capcom and Nintendo basically tell us to get bent, give us the middle finger, and then deny games left and right.

Maybe it would be more profitable for both of these companies to fire their PR departments and work without them.

Yeah we know about Megaman Legends but what did nintendo do to press your nerd rage button?

They didn't publish Mad Jelly: Journey of the Dark Sea in the Americas like they should have.

Yes, I personally view this as a rather healthy trend. The nature of the video game industry changed and shifted as it grew. And one of the effects of its growth was to marginalize smaller creative teams and individuals, and to place far too much emphasis on mega publishers and developers. The barrier to entry for game development was steadily increased to the point where the "little guys" were no longer allowed in.

Naturally, this never really happened on the PC, and is an issue unique to console gaming. But console gaming's rise to prominence is part of the issue.

There is no need for the traditional retail model to vanish completely. We just need it taken down a few rather large notches. For the past decade it has been the driving force of the industry. But now it's time for it to take a back seat to more open systems of distribution. Systems that indie developers can realistically take advantage of.

I expect the PR departments achieve pretty much what they're supposed to achieve, in terms of profit. It is called strategic marketing.

There is more to marketting than putting games on the shelf and advertising. For example, when you're a world leading company, you have to consider market saturation, and estimate how sales of game A will detract from sales of game B. You also need to build new franchises from time to time, and need one game to be a blockbuster, instead of six mediocre successes. Sacrifices may have to be made for the greater good.

They'll also need to consider cultures to whom their targeting their products, as getting poor reviews in one country could affect a game's reputation globally, and negate any hype surrounding a franchise.

There is a degree of risk in all strategic decisions, however, and occasionally gambles don't pay off. So you have to see the bigger picture to judge the overall effectiveness of marketing policies. :)

Quite true. At the same time, I can't help but feel that Nintendo is shooting itself in the foot.

Nintendo's on-line stores for the Wii and DS have been abused and neglected by large publishers and developers. A lot of this is no doubt due to Nintendo's restrictive approach to developer relations. Nintendo doesn't give any compelling reason for developers to support their download services, so everyone just floods those services with crap software that they can make a quick buck off of.

If Nintendo was willing to put even a bit more effort into promoting developer's efforts on those platforms, they would probably see much higher quality support.

And then there's the snubbing of garage developers. The indie scene, and especially small-time garage developers, represent the lowest amount of risk. Nintendo could easily be filling their download services with small-scale indie efforts for a song. Given the current state of those store's inventory, they would probably benefit hugely from having some of the indie scene's better efforts on tap.

Nintendo really should loosen the perpetual stranglehold they maintain on their platforms.

Ironically, Nintendo might rationalize their position by citing the exact bad quality software being the reason they don't support third-party more.  :facepalm:

How is the npd getting data on digital sales?  I thought steam didn't release that data ... are npd trying to extrapolate steam sales performance from smaller digital stores or something?

You are right. Digital sales aren't represented in NPD. At least not yet.


Also there are many reasons sales fluctuate. High amounts of digital sales, a dearth of large hit titles, etc... I wouldn't knock the market until the end of the year.

In addition we are at a half way mark (at least) on console life, typically this is a decline in game sales on consoles.

Actually, software sales are supposed to grow higher as a console's life cycle advances. (due to expanded install base) Most consoles get their best sales as they approach the end of their life cycles. Having a substantial retail sales slump at this point for the 360, PS3, and Wii is considerably more worrying.

Of course the real problem has little to do with profit; it's all about respect for consumers and the artform, which corporations will never give. Their insatiable greed (self-admitted when one claims to seek unbounded profits) is what causes these "needs". How much extra money does a company "need" to make to pay the PR, marketing, and CEO salaries? How much leaner could a company be if they were only developers talking honestly to fans? How much do we "need" corporations to hold our hands and wipe our chins? As much as we needed monarchs and pharoahs? The way execs are compensated, we seem to believe we need them more :(

Anyway, a game developer (indie or corporate) has only one responsibility: to bring joy to the fans of the artform. Not to satisfy stock holders or - by no means - to keep their bloated greedy infrastructure afloat for bloated greedy infrastructure's sake. If people were just trying to feed their families, I would feel for them and consider it a shame that game development had to become what it is to do so. But this is not about security, this is about profiting off an artform that one does not love.

We could do worse than lose physical retail channels.

When I, the consumer, fork my money over to a company I expect to be satisfied. I shouldn't have to beg the company to give me what I want or be "grateful" that they're providing their services to me as long as I give them the money they ask for.

I don't really give a fuck about Megaman Legends 3 (I played the first one and thought it was mediocre), but Capcom trying to guilt trip fans over its cancellation is downright perverse.

recently, I've being using brick+mortar retailers more often for console releases. The alternative is jersey (http://www.jersey.com/English/Pages/default.aspx)-based retailers but my most recent 3 preorders have arrived a week late (give or take a day or two) no matter who ships them (play.com / amazon.co.uk / thegamecollection.com).

two word: project rainfall
http://www.youtube.com/watch?v=c-_yZvmzLOQ

Okay only in US :durr:

But the gamasutra article seems to say that that "other" category includes digital sales though?  If they're not including them, that seems like it'd make the article's "other" category misleadingly way too small ...

Never heard of this. I hope it's a joke.  :facepalm:

To me as an european gamer isn't anything new. There have been times when nice games were only released in japan and US. But worst part definitely nowadays is that you can't use freeloader cds or other similar accessories because of firmware updates.

Yeah, imagine if European gamers started a "grassroots movement" every time some game doesn't get released here.

Haha, yeah. However, I wonder what has caused this phenomenon of not releasing in America. Traditionally the Europe was the last area which interested game companies where games came years later than other areas if they even came in first place.

Does America often not release games to Japan? It may be an unspoken rule. "US will focus on the US market, and Japan will focus on the Japanese market. You don't compete for business on our turf, and we won't compete for business on yours."

No, it's certainly a business decision (although one that baffles me in this case). Nintendo wouldn't be able to be nearly as successful as it is if it did not focus on western sales at all.

There's a difference: It's only competing once you're above market saturation. Below that level, X selling games in Y, and Y selling games in X is profitable to both X and Y.

Above that level, sales of one thing will always detract from sales of another thing, and both X and Y will be better off to put a cap on trading in each other's countries.

Because of the nature of game development, the cap is easiest to implement by not translating languages, not converting PAL games to NTSC etc. Region locking the hardware also helps to prevent customers circumventing the cap.

Whooof. Getting a tad off-topic with all the Megaman 3 and Project Rainfall talk.

Although I suppose that those discussions are tangentially related to the decline of retail games distribution, as they both involve Nintendo.

While Sony and Microsoft have both done a decent job of expanding their retail-circumventing on-line offerings, Nintendo continues to be a champion of the traditional retail system. (and by extension, the laziest at expanding and promoting their on-line distribution) Both Microsoft and Sony are currently offering fully downloadable current-generation games from their on-line stores. Sony even experimented with a download-only version of their handheld with the PSP Go. (an ultimately flawed, failed experiment, but a ballsy attempt) Nintendo's on-line offerings continue to be aimed at providing a nostalgia fix and little else.

Of course, Nintendo's policy of selling hardware for a profit is part of what has always made them popular with retail stores. As consoles became more and more expensive, Nintendo's insistence on cheap, affordable hardware cemented their position within brick-and-mortar locations. At the present time, Nintendo is both the most committed to the current retail model, and the most likely to survive the current decline of the retail model.

I'm guessing Nintendo's casual audience prefers retail.

There's still one major problem with the digital transition: Hard drives. Unless you've got swappable hard drives, your potential game library is limited in size. Microsoft did it with Xbox, but afaik Sony and Nintendo haven't done this with their consoles. Although, the 3DS and Vita have removable storage and were made with digital distribution in mind, so there may be some hope for the future. If it catches on heavily with the Vita the influence might affect home consoles as well. Personally, I don't see Nintendo going so far as to let people download full games off the eShop. If anyone is going to do it, I think it will be Sony.(who already has tried doing so) Retail will never die out until digital distribution hits the point where it's viable to only go to it for your games. Based on past trends, I can most readily see Sony pursuing this, if anyone.

You're only looking at the issue from the perspective of current technological limitations. Given how far technology has come over the scant history of video games as a whole, you really ought to be looking forward in order to make predictions about the future of the industry.

As high-speed internet access expands, and wireless technology continues to advance, the idea of fixed hardware platforms is also going to become an anachronism. I'm thinking of a point down the line where video game "platforms" are competing software initiatives rather than physical units. The XBox brand will eventually no longer refer to a hardware platform, but to a standardized development platform and a physical controller. (which will connect to your television wirelessly, and without any dongles) All game content will be streamed from servers, along the same lines as OnLive, only physical input will be managed locally.

This is why Nintendo is the only company likely to survive such a transition. Their stranglehold on their hardware platform is anachronistic compared to the direction the rest of the industry is heading in. But it also allows them to create and sell a hardware platform that could still be profitable in a world that has abandoned the traditional console model.

For the record, I was talking about the immediate future. As in much of the next generation of consoles, which is already emerging.

If you really wanna talk future, I see people using tablets and smartphones for everything in a decade or so, maybe even less. They're entirely portable and constantly growing in functionality. We already see Microsoft making this shift by unifying their platforms. Sony and Nintendo are even utilizing touch-screens in their consoles now.

There are still tremendous obstacles to overcome before networks will be viable for game streaming. Think about the entire world-- It will most likely be a very long time before the entire world enjoys internet of that high a caliber.(or at least, the inhabited parts of the world which enjoy the luxury of electricity and a globalized market.)

Even when that happens, I don't see the idea of local game storage going anywhere. With internet that fast you could simply download the game in an extremely short amount of time, and hard drive limitations will be much less of a worry considering how much they'll have grown in capacity. I'm not saying that services like OnLive won't grow into any kind of prominence, but I haven't seen anything yet which has led me to believe that a service like that will 'take over'.

psp, xbox360, wii and ps3 all have removable storage, ps3 even let you put in any laptop harddrive where as the 360 you would have to buy a specific ms-locked harddrive.

disk-space is dirtcheap, the problem has just been that many areas are without any proper broadband at all, or are capped, it just isn't a smooth experience trying to download a dvd-sized game over a modem-connection.
But if we talk the frozen north of scandinavia, you can easily get a connection that downloads that game in a few minutes.



Not until latency can magically be made non-existant.

We can make bandwidths go up and up forever, but it'll still take the same amount of time for that packet to travel a distance.

I wasn't aware of removable storage for the wii and ps3. Thanks for that!  :wizard: