The transition away from boxed goods has taken a great leap forward - but are consumers totally on board?
When I first started writing about the games business over ten years ago, one of the persistent narratives - a story that would crop up almost every week, in fact - was the impending triumph of digital distribution. Broadband speeds were getting faster and faster, while the price of storage was plummeting. The confluence of these things was seen, even a decade ago, as ensuring that the boxed games business would eventually play second fiddle to digital.
In itself that's not exactly a dramatic prediction - anyone could see which way the wind was blowing, in a very general sense. Not only was the direction of technological change obviously favouring a move to digital distribution - so too was the direction of consumer behaviour. As odious and unpleasant as piracy may be, pirates do tend to be highly technologically literate and on the vanguard of consumer attitudes and behaviours. As the numbers willing to download multiple-gigabyte games off BitTorrent sites swelled, it became increasingly clear that downloading was something many consumers wanted - including those who'd actually be willing to pay.
Only a decade ago Valve was a developer with one immensely critically acclaimed game to its name, and a few canny moves in terms of taking successful mod developers under its wing
The problem with such predictions, though, is that they rarely sketch anything other than the roughest outlines of a market trend - and that the people most inclined to make predictions are those with a vested interest which biases their viewpoint.
Consider mobile gaming, for example - another area which was confidently predicted to be The Future around ten years ago. As it's transpired, mobile gaming is indeed an immensely important and growing part of the industry - but the shape of that transition is nothing like the shape suggested by pundits five or ten years ago.
All manner of disruptive things happened to mobile gaming on the way to supremacy. Ten years ago, nobody in that burgeoning sector would have taken you seriously if you'd told them that Apple and Google would be the leading platform holders, with Nokia and Motorola left desperately behind. You'd have been laughed out of the room for suggesting that the mobile networks themselves would find themselves relegated to mere data pipes, their dreams of turning themselves into media empires smashed by the rise of universal app stores which provide no revenue split or gatekeeping function to the carriers.
In reality, then, the only thing that everyone got right about mobile gaming was that it would be huge. We all saw the destination, but nobody saw the road that would be taken on the way there. Similarly, the path to our digital future has been full of surprises - and undoubtedly holds many more.
Consider, for example, the absolute dominance of Valve in the PC digital distribution market. It's amazing to think that only a decade ago Valve was a developer with one immensely critically acclaimed game to its name, and a few canny moves in terms of taking successful mod developers under its wing. Now it rules PC game distribution to such an extent that in EA's present efforts to challenge Steam with its own Origin service, most of the smart money seems to be on a triumph for Valve.
Other factors, too, simply weren't foreseen - or perhaps even foreseeable. Consider the immense rise in importance of subscription revenues, whose origins can be seen in the unprecedented success of World of Warcraft - prior to its launch, the global audience for MMOs was thought to be capped somewhere between 600,000 and 1 million players. The rapid appearance of social network gaming and the freemium model it brought with it, too, has disrupted any predictions made in the past.
The combination of these factors has had a cumulative effect on how the digital transition is actually happening. Ten years ago, it was expected that this would be a very gradual transition, with progress slowed down by a number of factors - not least of which would be the gradual rollout of sufficiently fast broadband, and perhaps more importantly, the powerful industrial inertia behind existing boxed product distribution. Indeed, one common theme ten years ago was the frustration felt by nascent digital distribution services (few if any of which remain in business today) at the unwillingness of publishers to risk upsetting retail partners by being seen to make a major commitment to digital.
Perhaps these slowing factors actually created a pent-up demand which is now being released all at once, because what's certain is that the digital transition is now occurring vastly more rapidly than anyone expected. What was expected to be a gradual movement has turned out to be a major upheaval - we're seeing steady, serious declines in boxed game sales in many regions, matched with a sharp uptick in the industry's digital revenues.
What we're seeing now in terms of sales declines isn't down to rough economics. It's down to a very rapid transition in consumer behaviour, one which will not be reversed by a macroeconomic recovery
Right now, there's a strong temptation for executives to try to tie that decline to the world's tough economic climate - and certainly, that's likely to have had an influence in some regards. However, I believe that it's important to note that the people blaming macroeconomics for the industry's present state tend to be those from companies who aren't benefitting significantly from the upside to this process - those who haven't made the investment or commitment necessary to reap the benefits of digital.
The state of the world's economies may have been a significant trigger factor - the final straw that made the industry lurch forward into digital revenue models. What we're seeing now in terms of sales declines, however, isn't down to rough economics. Rather, it's down to a very rapid transition in consumer behaviour, one which will not be reversed by a macroeconomic recovery. The expectation that retail sales will return to growth once the world economy sorts itself out is bound to be disappointed.
That's because, as with the move to mobile gaming, the only truly predictable thing about the digital transition is the overall direction of movement. Individual events and developments will continue to surprise us, but the overall trajectory is clear - and it's away from boxed goods, and as a corollary, away from monolithic single-payment games, which made far more sense in the old retail-driven market than they do in this new marketplace, where the player's game experiences take place in a constantly connected environment.
For many veterans of the games business, there's a bitter note to this transition. We like boxed games; they hold immense nostalgic value, of course, but even beyond that, they also provided a business model which, while flawed and problematic, was well-understood and familiar. Moving away from that model will probably happen slower than makes logical sense simply because of nostalgia and attachment to the old model - and of course, it's not just people in the industry who have that sense of attachment, as it also persists strongly in many consumers, especially older gamers.
For this reason, in spite of the startling acceleration in the uptake of digital distribution and digital revenue models, this remains a transition which needs to be handled carefully and respectfully. It's easy for people in the industry to casually dismiss the concerns and criticisms of things like digital distribution and freemium business models which are commonly raised by consumers - but some of those concerns are both well-grounded and strongly held. Failure to address them risks alienating consumers, and we must never allow ourselves to believe that "once a gamer, always a gamer". Interest in the medium can wane or even lapse - and seeing concerns over a large-scale, disruptive business transition ignored or dismissed could well cause exactly that to happen. The digital future is very exciting, and the transition is now coming about faster than most people expected - but care must be taken not to leave loyal consumers by the roadside as we speed into this new era.