Left Behind Games (fka LFBG)

[PNKBULLSHT]

Online sales to surpass “brick and mortar” retail by 2013

My usual reactions to stuff market research organization put out are stifled yawns or blank stares of befuddlement. Market research is one of those inscrutable arts we’re all told is super-important, like banking, yet seems little more than a slicker, more business-oriented form of fortune-telling to uninitiated outsiders like us who haven’t been inducted into its Hermetic mysteries. Sometimes though market research organisations put out press releases a layman can interpret, and the latest from market research coven DFC Intelligence concerns a subject uninitiated gamers can wrap their sugar-addled brains around: the increasing importance of online sales over retail outlet ones.

According to DFC Intelligence analyst David Cole, global retail delivery of physical software peaked around 2008 and we should expect a “slow, steady decline” in sales through traditional brick and mortar retail outlets. Meanwhile online digital delivery of games and all the associated business gubbins, such as subscription-based models and virtual item sales, will see a steady increase. This covers a diverse range of stuff like your monthly MMO subscriptions, all those hats you’ve bought for TF2, the Smurfberries that cost a young girl’s parents $1400, and all those iPhone and Android apps you download for 99p a pop. Like an incense-choked Greek oracle in a business suit peering into the prophetic mists, David Cole further predicts that online sales and their associated business models will surpass traditional physical retail sales from 2013 onwards. PC games and games for smartphones and tablets are mentioned as the key drivers of this growth.

Put into simple non-marketing speak English, we’re going to be getting more of our gaming goodies online from now on. “But Matt!” I hear some of you yell, in my head, “I’m a PC gamer so I knew this already! I get all my games from Steam/ Direct2Drive/GamersGate nowadays. Why is this important?”

Well hypothetical commenter, it’s important because this is good news for gamers of all stripes. The recent kerfuffle over Relic’s Warhammer 40,000: Space Marine aptly demonstrated that brick and mortar retailers, like GAME and Gamestation, still have an undue, unfair, uncompetitive influence over game publishers. Publishers at the moment don’t risk pissing these retail chains off because a lot of people still buy their games from their local physical retailers, and these chains have an all-pervading presence in high streets and shopping precincts all across our green and pleasant land. If a particular publisher doesn’t bend over and take it like a good little bitch when a retailer tells them to, said retailer can refuse to stock their latest title. That’s a lot of potential customers denied to a publisher in an instant, possibly turning what could have been a huge commercial success into a flop that destroys an entire development studio.

Here in the UK we’re actually quite lucky in that we have a veritable smorgasbord of choice in where we buy our games from. A Konami rep recently voiced their dismay over how the UK games retail industry is one of the most competitive in the world for prices, so they made less money. Despite this however publishers still feel they have to kowtow to protectionist physical retailers desperate to maintain their outdated business model. A report like this opens publisher’s eyes and ears to the growing truth that brick and mortar chains like GAME and Gamestation aren’t as important as they claim, and are in fact just wilting paper tigers with no real bite to back up their threats. It also hammers home the point that PC gaming isn’t dead and not all PC gamers are thieving pirates. PC games haven’t been as commercially successful in physical retail as console games not because people don’t want them, but because retail stores have for years treated PC games like a freakishly deformed child. Something to be tucked away in a dark dusty corner, away from the eyes of good, decent normal people with money to spend on plush Pokemon toys, unnecessary strategy guides and shitty peripherals.

Speaking of consoles, this is good news for console owners too. As PCs and tablet devices push the viability and profitability of online game distribution you can expect Sony and Microsoft to pay pretty bloody close attention. DFC’s report states global online gaming sales were $19.3 billion in 2010 and they predict that figure will rise to a whopping $37.9 billion by 2016. This isn’t just PC and smartphone games either: they specifically mention “console online games” as being another significant factor in this growth. All that DLC and those games on demand you buy will not fail to escape the notice of the big console players, and if there’s gold to be made in them there hills you can bet your last nugget they’ll want to capitalise on that. There’re a lot of brownie points to be earned by saying your console has the bigger library of cheaper games even if that means undercutting retailers, and console manufacturers won’t be as easily intimidated by retail chains as games publishers. A brick and mortar retailer can hardly threaten to not stock one of the things their business relies on, and there’s only so much cash you can make flogging pre-owned consoles for a stupid price.

The report also predicts the growing appeal of stuff like Facebook and mobile gaming is going to grow the audience for gaming without taking away from existing business, which is good news for the industry as that means more people getting into gaming who otherwise wouldn’t. It’s easy to scoff at stuff like Farmville and Smurfberry Spendfest X000, but these are important “gateway drugs” for people to get into the wider arena of gaming. DFC expect both the PS3 and Xbox 360 to actually grow their user base over the next few years and that we won’t see a next gen for a few more years yet, so potential gamers that are late to the party can buy a console without the fear of it being obsolete in 6 months. DFC also estimate the Nintendo Wii, the favourite of stay-at-home mothers everywhere, “is the only system that has peaked in terms of usage.” Most probably due to Nintendo’s absolute cluelessness about doing anything online (vis-a-vis the cock-up they made with the 3DS eShop on launch).

For all their arcane Hermetic ways and Eleusinian mysteries that mean sod-all to us average plebs on the streets, market research firms like DFC have the ear of the industry the way a wily vizier has the ear of a Caliphate sultan in an Arabian Nights story. If they say online distribution is where there’s real money to be made then the industry, if it considers itself to possess a shred of sense, will to listen to that and try to capitalise on it. Online distribution catering to a broad growing audience of gamers with various tastes and sensibilities is a healthy, positive thing for the future of gaming. It means greater freedom of choice in how we buy our games, a more competitive market, more people to play games with and, hopefully, more interesting and unique games to experience. This doesn’t mean till jockeys at your local game shop should start queuing up their local job centre either. Good brick and mortar retailers, particularly small independent ones, will adapt to these changes by offering things online distribution cannot such as personal service, a friendly face and a physical place for gamers to hang out and celebrate the joys of gaming. These businesses will adapt to the new paradigm and thrive, while the dinosaurs who’d restrict your consumer rights will wither and die as they deserve.

This is our bright future my friends, and you can’t fight the future. No matter how many shady backroom stunts some people try and pull.

http://www.v4vg.net/?p=3023