The coming digital tidal wave

A huge change underway in how videogames are made and sold is poised to transform the entire industry. Digital distribution will not only affect how you get games, but also the types of games you experience. Buying boxes from brick-and-mortar stores will wane significantly over the coming years, while downloading titles over the Internet will continue to grow.

Consider how much things have changed in the way music is sold. Physical CDs are available for a fraction of the price they were a few years ago and retail sales have plummeted. Originally associated with illicit file sharing, digital-only music distribution went legit and came of age when Apple launched the iTunes store in 2003. Selling around 100 million songs in its first year, the store recently surpassed its five billionth download! The phenomenon of iTunes is just one manifestation of the entire music industry getting turned upside down. And while some players in the industry have been decimated by these changes, new opportunities have opened in all parts of the music business for smaller artists, promoters, distributors, and retailers.

Videogames are beginning a similar seismic shift from retail to digital distribution. The parallels with the music business are certainly not exact: downloading an album doesn’t take most of us more than 15 minutes, and games don’t enjoy the same device/data compatibility that MP3s offer (ever try putting an Xbox 360 game in your PC?). But over time, digital distribution will transform the landscape of how games are made, sold, and played.

This is not exactly late-breaking news, but the system is still in its infancy. Many online distribution sites are focused on smaller, casual games. This grew out of necessity: limits on bandwidth didn’t make it practical to distribute full-sized games. But as broadband has become more ubiquitous, it has become feasible to deliver a full DVD-sized game completely over the Internet—as our tech infrastructure grows, today’s 300MB download could transform into tomorrow’s 3GB download.

Hothead’s Penny Arcade Adventures: On the Rain-Slick Precipice of Darkness, Episode One is one indie title that was able to excel because of the limited risk involved in digital distribution

This shift has significant implications for game developers. Traditionally, game development has been funded and controlled by publishers who pay developers an advance on royalties to fund game creation. The publisher retains creative control throughout the project, and retains most of the game’s revenue after it ships. It is a very hand-to-mouth business for developers, whose dreams of making their great new original IP often endure heavy compromise or go unfulfilled as they move from one licensed title to another, shopping it around to whichever publisher agrees to pay their bills.

Digital distribution balances this equation. Services like Greenhouse or Steam allow developers to communicate directly with gamers, sell games directly to them, and retain more revenue in the process. This means the long-standing work-for-hire relationship between publishers and developers will start to fade, and more developers will retain creative independence and become mini-publishers in their own right. Suddenly, publishing games no longer requires huge scale or control over a complex retail distribution network.

More importantly, the results of this shift trickle down directly to gamers. As game development has become more and more expensive, rallying retailers to keep your product on shelves (especially an unestablished franchise) has been too risky for some publishers to do. Recent ground-breaking titles like Audiosurf, Crayon Physics, Braid, and World of Goo may not have seen the light of day without their reliance on selling over the Internet. Overall, the growing trend in digital delivery is great news for gamers and developers alike—we get to put our creativity to work and break out of the mold of making the same old licensed sequels, and you get access to the result: a range of big and small independent and established titles from the comfort of your PC.

September 29, 2008

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