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Retail

Jagex: Physical games retail gone within 10 years

Mon 20 Feb 2012 11:52pm GMT / 6:52pm EST / 3:52pm PST
Retail

Experts paint grim future for ailing retailers The Game Group and HMV

Jagex CEO Mark Gerhard believes that the decline and eventual closure of high-street retailer The Game Group is now inevitable.

Speaking as part of an expert panel at the BAFTA Question Time event, sponsored by GamesIndustry.biz, Gerhard stated that the efficiency with which the internet serves the modern consumer's needs - easy access to a wide range of content at lower prices - has started a process that will eventually eradicate physical retail for games.

"I think, 10 years out from now, we'll be talking about [physical] retail nostalgically, as a museum piece," he said. "I don't think there's much there that would give it a second life."

Physical retail, Gerhard explained, is part of a system that takes "huge chunks of margin" from developers, facilitating the decline of the independent development sector.

"That all erodes the economics for developers being able to make money," he continued. "They take a chunk - say 20 or 30 per cent - the publishers take a bit, and after inflation it's no wonder that the independent games industry isn't alive and vibrant, because they're not making any money."

I think, 10 years out from now, we'll be talking about [physical] retail nostalgically, as a museum piece

Mark Gerhard, Jagex

"[Developers'] response is almost desperation. 'We're going to go straight to the customer. We're going to go online. We're going to bypass the sequence that's taking so much from us...' I recognise that it's sad, but I think it's a fait accompli."

"It's sad to see an institution decline, but the writing has been on the wall for quite some time - the internet didn't happen yesterday... People are still playing games. They're still doing business; they're just doing it in a different place... If you don't adapt you die. It's as simple as that."

Jason Kingsley, owner of the UK studio Rebellion, compared watching the rapid decline of companies like HMV and Game to studying a mass extinction on the fossil record. He admitted to always being puzzled that the games industry sold data, "on bits of plastic wrapped in cardboard and the cellophane and put on the back of lorries."

"I always thought data should go down wires and fibre optic cables," he said. "It's a reforming of an industry, and a refocusing away from selling data - which is more easily distributed in other ways - to offer a very different kind of service."

UKIE's Jo Twist warned the other panelists not to "undersell" the importance of a one-to-one retail experience with engaged sales staff. To those unfamiliar with gaming or shopping for somebody else it can be the only way to make an informed purchase.

However, Kingsley disagreed, arguing that personal recommendations through social networks already provide the same service in a more meaningful way.

Frontier Developments' David Braben went further, saying that major chains like Game and HMV never offered the level of service Twist described, and were instrumental in the decline of the independent retailers that once did.

"In a sense, they're just getting a taste of that medicine," he said. However, Braben also added that internet speeds in the UK weren't yet capable of supporting a full scale shift to digital retail for "the next year or two."

This will give physical retailers some time to find an effective way of serving the needs of consumers, and potentially allow a more passionate independent retail sector to regain some of the market.

Nevertheless, Braben echoed Gerhard's belief that, in 10 year's time, it would be "hard to imagine" any games being sold in "shrink-wrapped retail."

"Whilst I am tremendously sympathetic to all of those that work in the shops, the fundamental problem is that they've got to look at their business to reposition it anyway - that's irrespective of whether it's a good or bad thing."

39 Comments

Ray Kirkland
Audio designer / Composer

12 0 0.0
Seems like more retail bashing to me, I do agree that because of how the industry works that in 10 years it will be all done online but I hope a few things will live on from retail such as the real life social interaction, the feeling that you have actually purchased something that someone can't decide to govern or delete or hack, having a collection of hardware and software and most of all trading in games to dull the blow of the price of the next one. I still feel retailers get a lot of criticism that isn't due, and that when they are gone alot of people will miss them.

Posted:2 years ago

#1

Jonah Falcon
Writer

25 15 0.6
Note to Mr. Gerhard: Let me know when console manufacturers want to sell the consoles themselves, because those retailers don't get any profit from selling consoles.

I remember when print was dead 50 years ago because of TV.... so... yeah.

Posted:2 years ago

#2

Josh Meier

41 15 0.4
Except for the part where not everyone has an internet connection (or one that's fast enough) to facilitate having a download only gaming console. I don't know if this would be resolved in 10 years either.

I also know a lot of people who like having a physical copy of their game.

Posted:2 years ago

#3

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
+10 Josh, ESPECIALLY with all the capping of bandwidth that's going on plus crappy service that's not getting better in many spots in the US. The internet isn't "infinite" and given the penchant for service providers to ask for MORE money instead of less as time goes on for the "privilege" of using whatever program they're offering, more people will be priced OUT of decent service or worse, won't be able to afford the premium cost of what's going to be the "gamer" internet packages I can see coming sooner than we all think

Posted:2 years ago

#4

Bruce Everiss
Marketing Consultant

1,716 598 0.3
Mark is right.
10 years is a very long time in the game industry.

The Apple app store model has been totally disruptive. It will become the predominant route to market for gaming IP. Apple TV and smart TVs are the next step along this road.

Using cardboard and plastic to ship 0s and 1s around the world is just plain stupid and even with the current vested interests and inertia this stupidity will lead to its demise.

As for bandwidth, I suggest that people take a look at Nielsen's law and think about its implications.

Posted:2 years ago

#5

Tameem Antoniades
Creative Director & Co-founder

197 164 0.8
"people still like physical discs" seems to be a pervasive but increasingly desperate argument.

People still collect vynil.

Posted:2 years ago

#6

Doug Paras

117 61 0.5
Untill Storage gets big enough that I can safly house the games I download and update and internet where I live gets 100 times faster, I won't stop buying discs.

Posted:2 years ago

#7

Richard Westmoreland
Game Desginer

140 90 0.6
I'm really hoping with the next generation we get a two tier system. Those who want digital distribution can get ALL their games by download (hopefully for a reduced fee) and those who may not be ready for digital distribution can still buy a disk.

What I don't want to happen is what I sometimes do with Valve games: I buy from Amazon at a cheaper price than it is on steam, enter the code on steam and throw away the disk.

Posted:2 years ago

#8

Bruce Everiss
Marketing Consultant

1,716 598 0.3
I have over 1,000 music CDs because I come from an age when cardboard and plastic were the main distribution medium.
It would be interesting to know what percentage of recorded music these days is distributed online (legitimate and (mostly) stolen) and what percentage is on physical media.

The game industry is heading in that direction rapidly because great swathes of our output are already not available on physical media. In fact it is mainly boxed console product that is holding us back in the transition. And the next generation of consoles will not be so reliant on physical media so we will not be held back so much. Also consoles are currently rapidly losing gaming market share to games that are distributed digitally.

Posted:2 years ago

#9

Christopher Cherry
DRM Account Manager

12 0 0.0
I'm sorry, did I miss something? Do people still buy clothes in the shops even though you can buy clothes online? I hate the fact I cannot buy BluRay or DVD's in the shop any more now they have been available online for year.. oh wait.. that's right, I still can.

Whilst the digital industry will have an impact on the physical market, anybody that truly believes that physical retail for games and movies will be dead in 10 years completely fails to appreciate the power of retail. Think impulse buys, consumer choice and the fact that shopping is a social experience - all factors that are on the side of physical retail. People will still go out shopping in 10 years time, we won't all be sat behind a PC buying polo shirts online from Next.

Posted:2 years ago

#10

Seb Downie
Producer

24 21 0.9
It will be gradual and largely unnoticed, but think about how many CDs you bought 5 years ago each year, then 4, then 3, ... I think I am down about 90%. DVDs are similar numbers. Books will come next.
Be it downloads or streaming, people will move to the service that provides content quickest, easiest and cheapest. This:
http://theoatmeal.com/comics/game_of_thr... (contains swearing) sums up what the industry must avoid.

Posted:2 years ago

#11

Peter Dwyer
Games Designer/Developer

458 254 0.6
You know. I had all the stuff I wanted to say ready to go then I read through everyone elses posts (as I do before commenting) and it's all been said really. So the only thing of meaning that I can add is "Everything goes to dust eventually"

If things didn't change I guess I'd be riding a horse and saying "guv,nor a lot"

Posted:2 years ago

#12
You buy clothes in stores because you need to try them on.

I see no reason for games to be sold in stores. Sure, people still collect vinyl - but that's it. They COLLECT it. The vast majority of music isn't bought or sold on vinyl anymore.

"Think impulse buys"

It's much easier to impulse buy on a digital store - you can impulse buy while still lying in bed, or in the bath, or, well, anywhere.

I was in HMV last night and it dawned on me - I can't ever see myself buying a DVD again. I rarely watch movies more than once, and for me it makes more sense to rent them for £3/4, or to subscribe to the likes of Netflix. Whilst I accept not everyone shares this view, I'm also confident I'm not alone.

Posted:2 years ago

#13

Terence Gage
Freelance writer

1,288 120 0.1
I think Mark Gerhard is right to a degree and obviously the importance of physical videogames media will continue to decline, although I don't think it's going to be this clean sweep with physical discs wiped out and the internet reigning supreme for all.

I think a very important factor in this will be Nintendo's online efforts with the Wii U. Will they sell full games digitally? Will they embrace DLC? I really can't imagine that, for instance, Wii Fit would have sold 20+ million copies had it only been available to download, as you're talking about two completely different audiences between your average Steam user and many of the folk who bought Wii Fit. I'm certain the PS4, Wii U and Xbox '720' will still ship with physical disc drives, although who knows where we'll be in 8 years or so when the next-next generation is ramping up.

Speaking purely as a consumer, I do like having physical copies of games, although I have also warmed to having a library on my HDD much more than I had expected to -- although on the other hand, my hard drive has corrupted a couple of times and been reformatted, meaning I had hundreds of GB of data to re-download and lost a lot of save progress. I also enjoy owning special editions of games I really like, such as Enslaved, Demon's Souls and Dark Souls. It would be a shame if this were to be completely gone. I also think if and when GAME disappear, the supermarkets will pick up the slack and become the primary destination for shoppers of physical games media.

Edited 1 times. Last edit by Terence Gage on 21st February 2012 1:37pm

Posted:2 years ago

#14

David Rodríguez
Game Engineer

3 1 0.3
I think it will really depend on something as simple as Price, which depending on the country is almost slightly favourable or completely favourable to "Digital Distributuion" (In Spain Steam is 20% cheaper on average, not taking into account the special offers).

The last game I bough was Skyrim, and I bought it in Amazon because it was cheaper than Steam (Fact that I'm still trying to understand)... Then, I added the game to my Steam account so if I loss the disc, I still have the game.

Of course, Amazon is not exactly "Retail" nor it is "Digital Distribution" but still got a customer for a Steam-Oriented game (Skyrim REQUIRES Steam), just because the Price.

So, if in the 10 next years, Retail maintains the high prices while Digital maintains the lower ones... Mark will be right and I will miss the cardboard and plastic too.

Posted:2 years ago

#15

Rick Lopez
Illustrator, Graphic Designer

1,203 816 0.7
um... I still collect vinyl...

Posted:2 years ago

#16

Adam Campbell
Associate Producer

1,118 888 0.8
I enjoyed the QT event. The moment MG made that point I agreed. I must say, personally I don't feel them same 'romance' towards old systems many people do. The world is moving on from books, moving on from CDs, and physical storage for games is another thing. Its really an evolve or die situation and for the most part I think the changes and direction of the industry are a lot better for all of us.

High street retail has a lot of downsides. A rather slow route to getting data to consumers, the nature of development for a box product leading to expectations for a perfect, finished product with all the content there from the outset (after a 3-5 year development cycle), insane pricing and dividing of profits. Its a dinosaur and I do expect it to fizzle out and to be honest, I won't be crying over it. The companies that are responsible to stocking games on shelves and selling them should adapt to new business models that make more sense in our age.

~AC

Posted:2 years ago

#17

Terence Gage
Freelance writer

1,288 120 0.1
Of course, pricing is the other major issue, as David Rodríguez notes. All too often when games launch at retail they also come out on Live and PSN for £50-odd, which is just farcical. If we ever make the transition to mostly or wholly digital then I would expect publishers to price their games accordingly and knock a significant percentage off the digital copy - after all, the consumers are getting far less for their money and there's no second-hand market to worry about, so prices should reflect this and become more realistic. That's a problem with closed systems like PSN and Live compared to digital distribution platforms on the PC.

Posted:2 years ago

#18

Mark Hughes
Freelance programmer

14 29 2.1
In the early 80's I used to hang out in a local computer game specialist shop with my friends of a weekend. In the late 80's I then hung out in specialist music shops of a weekend. Surely there's always going to be a demand for places like this for people to meet with their friends and listen to or play the latest version of whatever media is popular at the time. Chances are they may only be selling codes instead of physical media, but I'd hate to see all forms of these stores disappear, and I'm sure there'll always be some sort of demand for them, even if it isn't the huge mass market business it is right now.

Mark

Posted:2 years ago

#19
I just hope they're wrong....Because when we can finally do EVERYTHING without leaving our homes....what a horrible , dull, anti-social world we'll live in. I used to love going to my local indie games store and trying out a few games, seeing new platforms I could save for or get for Xmas! Interacting with other "gamers/kids". Was all part of the experience. And then getting home and battering people on Target Renegade...ah the nostalgia...

Posted:2 years ago

#20

Michael Bennett
Senior Designer

40 12 0.3
Merchandising and collectors editions might survive anything, but what's the point in a physical copy in a world where digital editions are not only more convenient (less friction/inconvenience for the player = more sales), but also completely eliminate the second hand market and allow for (compared with brick and mortar retail) perfectly targeted promotions and discounts? Steam is a massive success for a reason. Infrastructure is good enough now and only getting better. I think the real question is how well streaming game services like Gaikai will be accepted in the coming decade. That will be even more convenient (instant gratification) than downloading the game client and requires no expensive gaming computer, but may potentially come at the cost of in-game experience if things aren't done right.

Anyway, it's much better for the environment to get rid of brick and mortar retail as soon as possible :)

Posted:2 years ago

#21

Richard Pygott
Level Designer

39 13 0.3
Physical media sales will only decline when there is the network infrastructure in place to no longer warrant physical sales.

10 years in any industry is a long time, but broadband speeds have somewhat stalled I believe and so has the progression of laying down new cables.

It is the speed of the implementation of the internet infrastructure that we should be watching to give any signs towards dropping phsyical games, not neccesairly just the games industry.

Posted:2 years ago

#22

Neil Alphonso
Lead Designer

50 17 0.3
Online developer makes statement about the irrelevancy of retail. When ActiBlizz starts saying this, I'll maybe be surprised.

Posted:2 years ago

#23

Tony Johns

520 12 0.0
Goodbye retail = goodbye most of the mum and dad audience.

Goodbye the casual audience

and goodbye the grandpas and grandmas thinking of getting a future Wii console if they can't find it in stores because retailers don't sell and they don't know how to use the internet to shop for consoles.

I see a really bad future if gaming business goes down this path.

Posted:2 years ago

#24

Marcus Feital
Graphic Designer / 3D Artist

7 1 0.1
I do agree with the above comments, the "function" of these stores that must live on is the social one, where you interact with people with shared interests. Sell the "experience", not a product, might be a way out. In the past, I also hung out in a local small music shop to see the owners playing some guitar, or to listen to something new that I did not know. That kind of thing is much more appealing to me. Now, even my physical media is bought online, so do not see a reason for a specialized mortar megastore just for that.

Posted:2 years ago

#25

Kieren Bloomfield
Software Engineer

88 71 0.8
@Tony Johns
"Goodbye retail = goodbye most of the mum and dad audience.

Goodbye the casual audience "

Agreed and goodbye gift sales. Which would be suicidal given how much we depend on the Christmas gifting season. Have you ever tried to gift someone music on iTunes? Let's just say that it isn't as enjoyable as giving a wrapped CD.

Anyway, 10 years is way too far away. Aren't we supposed to be controlling games with just our brain waves but then anyway..?

Posted:2 years ago

#26

Dave Herod
Senior Programmer

517 731 1.4
It's also hard to predict where the global economy is going to be in ten years time, too. A lot of predictions getting thrown around recently seem to assume the economy isn't ever going to pick up in years to come. I'm no expert on global economy so I won't make any predictions, but a lot of the doom and gloom has coincided when there's a lot of people out of work and spending habits are changing based on how much spare cash the average Joe thinks he has to splurge on a single item. That doesn't necessarily correlate to how much total cash they *actually* spend, since a lot of people are terrible with their finances and while they might think "I'm poor, I don't have £30-40 to spend on games!" and then rack up huge bills on so-called free-to-play games. Predictions are all well and good, but anyone sensible is prepared for anything rather than just sticking their eggs in one basket.

Posted:2 years ago

#27

Green Bean
Gaming AntiCheat Organization

9 0 0.0
they have to go the way the Apple stores go... BIG.

Posted:2 years ago

#28

Gareth Donaghey
Customer Support Agent

31 32 1.0
@ Andre

But how big will next gen games be? 20-30gb?
It took 5-6 hours to download a 9gb game from Steam on my connection last night. And I live in a city with one of best connections you can get here.

If the norm is to have to leave your computer or console on for 15 hours at a time to get a game, people will do it less often. Hence less games bought.

Posted:2 years ago

#29

Feargus Carroll
Producer

23 18 0.8
As the parent of 3 teenagers (15, 14, 14), one of whom is a big gamer and the other two (girls) are well into their music, I'm afraid all of this talk of 'the shopping experience', the 'social interaction', 'something about having the box in your hands' is just showing your age.

When we have bought the girls a CD, they instantly stick in on their iPod and then discard it. They'd much rather have an iTunes voucher than the disc, so they can then choose (the mindless rubbish) that they prefer :). The boy still gets boxed console games, but isn't the slightest bit bothered about the box, he just wants the game (and he too only uses iTunes). If his HD was big enough, he's download it. And for movies we download them via Shaw on Demand (Canada) and would never buy a DVD again.

In ten years time they'll be the next gen of cashed up young professionals, reading about 'game stores' in the 'Fancy That!' section of the Sunday papers. Sure, some people collect vinyl; some people collect pre-war tractors. It's a niche hobby at best.

I know all the Luddites are fearful of the cloud *looks at Greg Wilcox* but like it or not, it's coming.

Posted:2 years ago

#30

Brian Smith
Artist

193 77 0.4
I expect that the article is on point to some degree. The 10 year marker is a bit of a wild guess but I suppose it could be in the right ballpark. What I wonder is whether we'll see a change in the licensing conditions we're used to with games products.

There's always been that 'issue' that you don't really own anything other than a license to play a particular game. As we transfer to fully digital delivery how will the consumers react to having collections of media with no guarantee of lifelong support. Everyone that buys physical games has the possibility of dragging them out in 10-20 years time to have a look at what they used to play.

Will we be entering a time when games just expire and collections digitally disappear. How will consumers see this market when the facade of the owned product totally vanishes and you have nothing other than an expiry date.

Posted:2 years ago

#31

Dave Herod
Senior Programmer

517 731 1.4
Since games make their money around the time they launch, it'd make sense to do what Epic/Id used to do and remove all copy protection a couple of years after launch and make them available to everyone for free. Past the point where they're actually generating any income, I'd be happy someone was still wanting to play my game. It'd just make people more interested in your brand and maybe want to buy your future games.

Posted:2 years ago

#32
I don't think it's just games stores that will disappear, the whole high street is under threat. In the near future I wouldn't be surprise if all we were left with was clothes shops, restaurants, hairdressers, chemists, newsagents and a few specialist shops (walking down my local high street shows we well on our way in that direction). If the goods you are selling can be downloaded cheaper online your business is under threat imho.

Posted:2 years ago

#33
@Josh

"Except for the part where not everyone has an internet connection (or one that's fast enough) to facilitate having a download only gaming console."

From a business perspective, it doesn't really matter if everyone has a decent internet connection though, only that enough people do for it to be profitable. It wasn't so long ago that not everyone had an HDTV, now most people do. Shrewd broadcasters jumped on board early with HD services and now its their main audience.

The same will be true of digital distribution. It won't be a sudden switchover but a gradual change, eroding the old as it goes. The customer base will adapt in kind. In fact, I'd say it already has. The casual audience already buys most of its games digitally via the App Store, or plays online through Facebook. Mums and Dads are not as backward as people think. Even the "what will people buy as gifts?" argument doesn't hold water - kids have been getting vouchers from Grandma for decades, only now the voucher will be for a download service instead of a bricks and mortar shop. Go in any Clintons or other chain card shop - they already have racks of scratchcards for iTunes. How long before they have ones for Steam, PSN or XBLA?

If it's convenient and cheap, the masses will come. In many ways, it's the supposed "hardcore" who are behind the times, championing a physical retail model that hasn't really changed in over three decades, and justifying it on the basis that it's good for all those casuals who don't know any better. In fact, it's quite interesting to note how many staunch defenders of high street games shopping don't actually shop there.

Edited 1 times. Last edit by Dan Whitehead on 22nd February 2012 9:32am

Posted:2 years ago

#34

Bruce Everiss
Marketing Consultant

1,716 598 0.3
@Dave Herod

"Since games make their money around the time they launch"

Patently untrue. Look at Angry Birds or World of Warcraft.
Games as a service are rapidly replacing games as a product.

Posted:2 years ago

#35

Benjamin Royce
Consultant

14 0 0.0
Jagex could well have a point that physical retail could well be gone within 10 years the only real thing I could see holding this back is ISP not so much for the speeds as we are seeing vastly improving speeds and before long those connections that cannot keep up will be gone. The main problem is the usage limits the fact that the basic package from the UKs biggest ISP only offers 10gb which is basically a game and a movie these will need to be increased dramatically to allow this change to happen

Posted:2 years ago

#36

Dave Herod
Senior Programmer

517 731 1.4
@Bruce - I probably should have made it more obvious I was responding to Brian Smith above me and talking about the physical standalone games he worries he won't be able to play in 20 years time if they make them download only. You can still back them up by burning to optical disks if you want to keep them for the future, the only thing preventing you to play them would be the copy protection, i.e. needing to sign into Steam to verify you actually own it before it lets you play. What happens if Steam doesn't exist in 20 years? Removing the copy protection on a game that's no longer generating revenue would remove this obstacle, and probably gain a few new fans.

Posted:2 years ago

#37

Christopher Cherry
DRM Account Manager

12 0 0.0
Fran - you have wildly missed my point. Not surprising for a recruiter!

Posted:2 years ago

#38

Tim Hull
Co-Founder

25 2 0.1
I remember vividly when I met with advertisement agencies that chortled and mocked:

"you think people are going to buy things on the internet !?"

Not only did people start buying on the internet, they started watching advertisements via the internet, that had me laughing back at those old dinosaurs in the agencies who didn't move with the times.

@Bruce I completely agree, playing with GAS (games as service) is the future.

People who like to own and collect objects, may perhaps invest in a media printer that burns and prints to a physical form when their local retailer dries up.

It's just a matter of time, perhaps 10 years +/-

As connectivity speeds increase and latency times decrease, the cloud will deliver all to the dumb device, box or console just as the mainframe did to it's user terminals.

Some people have been predicting that change in habits since over a decade ago. Every year we get a bit closer.

Posted:2 years ago

#39

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