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Sony: Most gamers "don't want to buy online right now"

Sony: Most gamers "don't want to buy online right now"

Mon 24 Jun 2013 2:39pm GMT / 10:39am EDT / 7:39am PDT
BusinessMarketing

Sony SVP of PlayStation brand marketing talks about Sony's E3 press event, PS Vita, the One Sony strategy, and how retail is still critically important

Sony Computer Entertainment

Sony Computer Entertainment is a Japanese videogame company specialising in a variety of areas in the...

playstation.com

GamesIndustry International sat down with Guy Longworth, Sony's senior vice president in charge of PlayStation brand marketing for Sony Computer Entertainment of America, the day after Sony's E3 press event to find out more about Sony's marketing plans for the fall. Longworth's task is to successfully launch the PlayStation 4 in the United States while boosting PlayStation 3 and PS Vita sales. It's a gigantic assignment, and Longworth is excited by the challenge. "I joined the company just under two years ago, and I'm relatively new to the gaming industry," Longworth noted. "It's just a phenomenal industry to be in. I literally go to bed every day and can't believe how lucky I am to do what I do."

Longworth was understandably pleased with the reception Sony received from its press event at E3. "We knew that it was a very important moment for our company, so we spent a huge amount of time preparing for it, as you can imagine," he said. "The team who actually executed and put on the production I just think are the best in the business. I've never seen anything like it in my career."

Parts of Sony's presentation were obviously put together after Microsoft posted its Xbox One policies prior to E3. Some of SCEA CEO Jack Tretton's remarks were very pointed, aimed at showing the differences (since minimized after Microsoft's policy change) between the Xbox One and the PlayStation 4 policies. "Our strategy has been set for some time," Longworth explained. "It's not our job to talk about the competition, we're here to tell you what we stand for. And Jack [Tretton] very clearly told you what we stand for. We think that's the right thing for gamers, we think that's the right thing for our platform, and we're very happy to tell people about it."

1

Sony's struggle for market share against Microsoft's Xbox One is made more difficult in some ways by the similarity of the two consoles. If you just look at the fundamental architecture, the Xbox One and the PlayStation 4 are more similar than any two competitive consoles have ever been in the past. This implies that the services and the games and how the consoles are marketed becomes even more important. "Yes, I think so, to some extent," Longworth agreed. "The reality is that every time a generation changes the playing field is leveled. We actually think that we're going to have superior graphic fidelity, but the whole value proposition has to be right. It's not just about graphic fidelity. What are our policies? What are our principles? What do we stand for, and how do we communicate it?"

The PS Vita was the the first thing Sony talked about in its E3 press event, and the handheld console also received equal billing in Sony's E3 booth. The PS3 was also featured at the press event with an equal representation in the booth. Sony seems to be trying to push all three platforms equally as part of the PlayStation family rather than focusing all the attention on the PS4. "There's the PlayStation ecosystem; we're incredibly fortunate to have the PS3 that's seven years old and better than ever," Longworth said. "The Last of Us is an incredible game, one of the three top-rated games of all time. We've got Beyond: Two Souls coming, we've got Gran Turismo 6, it's a slate of great content still to come on PS 3."

"It's clear that the vast majority of the people want to go down to GameStop or Best Buy, they don't want to buy it online right now"

Guy Longworth

Longworth is also bullish on the PS Vita. "With Vita, we're only 15 months in to launch and now we think that with PlayStation 4 the opportunity for Vita is to be the absolutely perfect companion to the PS4," he noted. "What we're seeing is that once people get it in their hands and buy it, they're buying games and they love it. Now, it's not had as fast a start as we would like, that's common knowledge. But we do really believe in that platform and think that is has a significant opportunity. We think there's a number of things that we can do in the coming months and years that will make it a long-term sustainable business."

Is a price cut for the PS Vita one of those things? After all, Sony did cut the price of the handheld in Japan a few months ago. "You wouldn't expect me to come into pricing discussions unless we announce them at E3," returned Longworth. No, but pricing is a marketing tool, isn't it? "We're about value, we're trying to offer value," Longworth said. "You saw last night we were in a position we felt the value of the PS4 was very good at $399. With PS Vita we feel that $250 is the right price, and I'm not going to comment on where we might go in the future."

The fact that Michael Lynton, CEO of Sony Entertainment played a role in Sony's press event seemed like a recognition that it is important to get all parts of Sony working together now, that selling movies and TV and music is an important part of the PS4's mandate. "Absolutely," said Longworth. "It's Kaz Hirai's strategy. He's been CEO now for a year, he comes from a a gaming background and he's an incredibly smart guy. His strategy is One Sony, and you can't get any more compelling proposition than Andy House [group CEO of Sony Computer Entertainment] reporting straight in to Kaz and Michael Lynton, the two of them on stage together saying we are going to do this."

"We are wildly excited about this because we think that's a big differentiator for us," Longworth continued. "We don't have to go out and buy studios and content. We have them already; we have the biggest movie business in the world. We have a huge TV business and a big music business."

Digital distribution is going to be an issue for next-gen consoles, as Microsoft has already announced that new titles will be available digitally at the same time as they are available in stores. Certainly discs are an efficient way to distribute content, but how will Sony balance the needs of retailers with what's good for the gamers? "I think the reality is this: Our digital business is growing fast, and we have incredibly strong partnerships with our key retail partners as well," said Longworth. "What we try to do is offer a relatively level playing field and let the gamers decide. We're not trying to advantage them, we believe in consumer choice. It's clear that the vast majority of the people want to go down to GameStop or Best Buy, they don't want to buy it online right now. How that might change in the future is kind of hard to predict. People might be quite surprised, I think physical games will be around a lot longer than some people think."

Read more about Sony's marketing strategy for the PS4, the evolution of PlayStation Plus and Longworth's thoughts on Sony support for indie developers on the [a]list daily.

64 Comments

Gary Jacob
Localisation Project Manager

12 12 1.0
Popular Comment
I would certainly buy more online if the price points were closer to physical store prices, the only thing deterring me and I suspect most people is publisher price points. Steam sales in where I spend the most money actually...
If they would just retail digi games at a really attractive price, they would destroy 2nd market, it's not like they have the same overheads as box and disc versions so why not?!

Posted:10 months ago

#1

Bruce Everiss
Marketing Consultant

1,716 598 0.3
Popular Comment
50 billion Apple App Store downloads belies this somewhat.

Posted:10 months ago

#2

Christopher Bowen
Editor in Chief

393 503 1.3
Doesn't this contradict what Sony itself has been saying regarding Day 1 Digital and the like?

Posted:10 months ago

#3

James Brightman
Editor in Chief

193 176 0.9
Popular Comment
Maybe this is just me being cynical, but I think it's also important to remember that Sony has a vested interest in retail. Blu-ray is their format, and they won that format battle a long time ago, so now Xbox One discs are sold on Blu-ray as well. Sony certainly benefits from more Blu-ray discs being sold at retail.

Posted:10 months ago

#4

Pete Thompson
Owner / Admin

147 63 0.4
I'd also buy more titles online if the prices were inline with, or better than what I pay for retail versions at the moment..
I was also looking forward to be able to share games between consoles..

I'd also like to know how many gamer's he's actually asked about their preferences of retail or digital to be able to state that "most gamers" don't want digital..

Edited 1 times. Last edit by Pete Thompson on 24th June 2013 6:09pm

Posted:10 months ago

#5

Anthony Chan

83 68 0.8
Popular Comment
These debates are sometimes awkward. Last week, we had every one under the sun singing about Xbox One's always online woes - because not everybody has access to stable internet. But now we have everybody jumping on Sony for (rightfully) downplaying the digital distribution pipeline.

Not everybody has unlimited download capacity. Unfortunately, even in the developed world where internet stability may be amazing (and that isn't even all the developed world), download capacities are capped, download bandwidth/speed is throttled, etc. So downloading full games that are 13+ GB is not very feasible. That's why I agree with Sony that for their intents and purposes, disc based games may not be ready to make the full transition to digital distribution.

Especially, if the games get larger, and start taking up a whole disc for next gen (PS4 & Xbox One), this would further push us away from digital distribution. In my opinion it's the size of these games that has already in part limited piracy on PS3, so legitmately downloading games is not going to make a difference.

EDIT: And @Bruce, not every game size is under 2GB like in the mobile gaming universe ;) If you could just get your head out of the cloud called mobile once in a while, maybe you could also see things from a whole.

Edited 1 times. Last edit by Anthony Chan on 24th June 2013 6:23pm

Posted:10 months ago

#6
yeah sure, thats why Blockbuster video stores has done so well these last few years, people just love going to the store over digital download.

(fyi-from 9000 stores to now to only 500 and shrinking)

Edited 1 times. Last edit by Todd Weidner on 24th June 2013 6:28pm

Posted:10 months ago

#7

Petter Solberg
Freelance Writer & Artist

56 30 0.5
Because of Blu-Ray I might actually buy some more phyical copies because I'll only have to deal with one disc per game (for now). That said, I'd be happy to buy digital games if the price dropped dramatically. The main reason I buy physical copies is that they are usually cheaper.

I really used to care about having a boxed version of a game, but now there's hardly any point for me because I use Steam. In any case, most physical releases are only a plastic keep case with a disc. I tend to buy more films on blu-ray as I am more likely to revisit a film than a game. Also, most of the old games that I'm nostalgic for are becoming available digitally.The games I've kept in my physical collection are mostly 2D games because they just tend to age better. The old Lucasarts adventures still have a pretty distinct art style, the biggest problem being the low pixel count.

If the price was right, I'd switch to digital in an instant, unless someone starts to release Criterion Collection-like game releases with some real value that also look good on the shelf. Most deluxe game boxes contain a couple of pointless items and a lot of air (The only one I've bought in later years is the Fallout 3 collector's edition with the beautiful Vault-Tec tin). There are some clever ideas here and there, like the optional Case File envelopes for the two first seasons of Telltale's Sam & Max. However, because everything will become available digitally, a physical copy (alt least for me) have to either enhance the game experience (physical map) or add to the backstory (novellas etc).

Edited 1 times. Last edit by Petter Solberg on 24th June 2013 6:50pm

Posted:10 months ago

#8

Rodney Smith
Developer

80 36 0.5
I don't want digital download. I like the box and fact that I can still play the game long after the digital service is closed down. How would I be able to play my dreamcast games if they were a digital download?

Posted:10 months ago

#9
There is obviously a "plan" to be rid of physical copies one day :)

Posted:10 months ago

#10

Mo Henry Bug
Writer

4 1 0.3
People can rent online or stream, so why go to blockbuster?
I like the box but I also like the look of PS4's indie slate. If the price and storage size is right.

Posted:10 months ago

#11

Christian Keichel
Journalist

420 568 1.4
@ Todd
yeah sure, thats why Blockbuster video stores has done so well these last few years, people just love going to the store over digital download.
Blockbuter rents videos and games to customers, that's something different from selling videos and games. People buy physical games, because the games are collectors items, because they can be traded, given to their best friends or still played in a couple of years. None of these characteristics of bought games (or DVDs, BluRays, CDs, Books, Comics, etc.) applies to rented media.

Posted:10 months ago

#12

David Serrano
Freelancer

281 248 0.9
"Sony's struggle for market share against Microsoft's Xbox One is made more difficult in some ways by the similarity of the two consoles. If you just look at the fundamental architecture, the Xbox One and the PlayStation 4 are more similar than any two competitive consoles have ever been in the past."

This should, in theory, give Sony the advantage. Because the 360 only won the last round because of Sony's PS3 launch mistakes and XBL. If not for these two factors, the 360 would have (and should have) crashed and burned shortly after launch, Long time Playstation owners didn't migrate to the 360 because it was the superior system. The majority migrated because the PS3's price was too high for too long. And some migrated to access XBL.

So if the two systems are now more similar than in the past and the PS4 is now the less expensive system, the shift in market share which occurred during the PS3 - 360 generation should begin to reverse itself after the new consoles are released.

Posted:10 months ago

#13
@ Christian Keichel incorrect. Blockbuster also sells movies.

Movies and music have shown that consumers are very willing to download their entertainment content.

If your assumption was correct, than all those retailers who sold physical copies of movies and music etc should still be thriving, they arent, they are all for the most part out of business. Brick and Mortar game places are soon to follow, as dismal physical game copies sales are predicting.

It doesnt take a crystal ball to see that digital distribution is the wave of the future in gaming, just as it was and is for movies and music.

As for that small demographic of gamers that will still want a physical copy going forward, Im sure developers will offer them some sort of special edition (with likely a premium price)

Edited 6 times. Last edit by Todd Weidner on 24th June 2013 8:32pm

Posted:10 months ago

#14

Christopher Pickford
Producer

53 58 1.1
Lots of games are sold through physical media. Lots of games are also sold through digital means. Why is it that we feel the need to try and make one better than the other? Both deliver our content to the consumer in different ways.

All this "A is better than B" is rubbish - they're both good for completely different sets of people.

Posted:10 months ago

#15

Christian Keichel
Journalist

420 568 1.4
@ Todd
Blockbuster also sells movies.
From Blockbusters SEC filing, after they went into bankruptcy:
At January 2, 2011, Blockbuster Inc. was a global provider of rental and retail movie and game entertainment, with over 5,300 stores in the United States, its territories and 15 other countries
(...)
Margins [2011 and 2010]:


Rental margin (4)
64.4 % 63.3 %

Merchandise margin (5)
23.5 % 21.1 %
Blockbuster didn't went bankrupt because of their retail sales, but because of the rental market, which was much larger.
If your assumption was correct, than all those retailers who sold physical copies of movies and music etc should still be thriving, they arent, they are all for the most part out of business.
According to the Wall Street Journal, in 2012 digital distribution of movies (rental and sales) made up only 30% of movie sales and rentals, while 70% were coming from physical sales, this means, the majority of revenues is still made with physical goods.
According to the Financial Times, in 2012 CD sales were responsible for 63% of all US album revenues.
Brick and mortar stores are facing competition from the internet, this is true, but not in the form of digital distribution, but in the form of Amazon, but Amazon is foremost a retailer of physical goods as well.
Overall physical media is still dominating the entertainment market in a big way and this will not change anytime soon (in fact, with all the disadvantages of digital distribution, I doubt it will ever change).

Sources:
http://online.wsj.com/article/SB10001424127887323706704578229911000744452.html#
http://www.ft.com/cms/s/0/93200830-55fd-11e2-9aa1-00144feab49a.html#axzz2XAEx6J8Y
http://www.faqs.org/sec-filings/110713/BLOCKBUSTER-INC_10-K/#tx205774_1

Edited 2 times. Last edit by Christian Keichel on 24th June 2013 8:55pm

Posted:10 months ago

#16

Rodney Smith
Developer

80 36 0.5
digital download services should setup an escrow service in perpetuity that will allow us to access our games even if they fold. then i'd be interested in digital download for 50 games

Edited 1 times. Last edit by Rodney Smith on 24th June 2013 8:51pm

Posted:10 months ago

#17

Adam Campbell
Associate Producer

1,120 889 0.8
Just as Gary at the top, I would buy a lot more digital on consoles if the prices and choices available were right.

They're not...

Posted:10 months ago

#18
@Christian According to the Financial Times, in 2012 CD sales were responsible for 63% of all US album revenues. not music, album, big difference, who buys entire albums anymore. Making my point yet again.

As for 30% market share already, that is huge as digital distribution of movies has really only just begun, and already they have taken a huge percentage.

Overall physical media is still dominating the entertainment market in a big way and this will not change anytime soon (in fact, with all the disadvantages of digital distribution, I doubt it will ever change).
Im curious as to how old you are, because for us oldtimers we heard the same thing many times over. With Albums, cassettes,VHS, "fill in your tech here" examples.

If there is one thing you should never doubt, it is that " things ALWAYS do change.

and the trend is apparent / Last year Digital distribution UP 16%, Physical game distribution DOWN 21%
The breakdown: In the United States, video game sales (not including hardware like consoles or accessories) totaled $14.8 billion. Of that total, $5.92 billion came from digitally distributed content, including games, DLC, in-app/game purchases and other content. That is a 16 percent jump over digital totals from 2011. Physical game sales, meanwhile, came to $8.88 billion total, a drop of 21-percent from the previous year.
http://www.digitaltrends.com/gaming/npd-group-us-game-market-total-14-8-billion-in-2012-as-digital-distribution-grows-and-physical-game-sales-fall/

Edited 6 times. Last edit by Todd Weidner on 24th June 2013 9:27pm

Posted:10 months ago

#19

Barrie Tingle
Live Producer

337 103 0.3
Digital is held back by physical retailers. While 1st party can't reduce price to compete with GameStop and GAME etc this will be a sticking point. STEAM acts like a retailer and can therefore make sales and deals where as 1st party can't have that flexibility.

While I can get a game on disc for less than I can buy it digitally (and currently on consoles the digital version comes later) then there is no real incentive to go digital. However, Microsoft (and maybe Sony) are planning day on day digital copies on next gen and I will make use of it on Xbox One at that time as long as the price matches the likes of Amazon.

Posted:10 months ago

#20

Christian Keichel
Journalist

420 568 1.4
@ Todd
not music, album, big difference, who buys entire albums anymore. Making my point yet again.
The Verge on US music sales 2012:
physical sales still account for the majority of all music sold
Believe me, I am old enough to have seen VHS and Vynil in action and I saw, why they went away, they had certain disadvantages, that their physical successors didn't had. The difference with digital distribution is, it comes with disadvantages, physical media doesn't have and for most people it brings no advantages. If somebody wants to listen to their favorite music on a MP3 player, it's no problem to rip the physical CD, this gives them the advantage of having their music were they go and having the physical medium.
With movies it's even more unconvinient to buy them digitally, either you rent them for streaming, but then you have to pay for every rewatch or you download them, which can be quite painful when you like to watch something in 1080p, those BluRay discs have a capacity of up to 50 GB and it's not unusual that the discs are full, because todays BluRay discs are crammed with bonus material.
And in the end, the digital bought content also comes with DRM, that limits your possibilities to use it much more, then with physical media. Consumers are willing to make use of new forms of media and/or distribution, if they can see how they could benefit, with digital distribution, they only see how they become more restricted of how they could use their media.
and the trend is apparent / Last year Digital distribution UP 16%, Physical game distribution DOWN 21%
So what? Do you want to tell me 21% is more then 16%? You can't put this numbers in direct correlation, because in 2012 revenues from retail games were $8.88 billion and digital sales were $5.92 billion. This means, as the article you quote states:
Physical sales are declining faster than digital sales are increasing.
You are right, there is a trend, it's the trend of an industry on the downturn, but it's digital sales can't help to change this trend.

Source:
http://www.theverge.com/2013/1/4/3835120/us-music-sales-growth-in-2012

Edited 1 times. Last edit by Christian Keichel on 24th June 2013 9:45pm

Posted:10 months ago

#21

Peter Paninar
Artist

34 3 0.1
There is no buying online right now anywhere on psn as you can't resale stuff that you own. There is only renting and the prices are beyond ridiculous. I would gladly abandon physical releases alltogether if sony would offer me The last of us or other AAA titles for 20-25 MAX.. as it stands now its not worth my money for something that I do not fully own and I buy mostly physical only for 30-40 max on ps3 and if I decide to resell it for 10-15 later I got a good value in the end (but I rarely sell my games).

Journey was a great example of good pricing... for 9.99 you got the full game. Great digital price, great game. 40, 50 or even 60 is NOT all right for RENTING games.... they are either total ignorants to this or they are just plain greedy, because if they would really really be serious about going digital then ps4 could be about 90% digital, while still keeping physical as an option and for the offline gaming sake.

Edited 1 times. Last edit by Peter Paninar on 24th June 2013 9:52pm

Posted:10 months ago

#22
Christian, when talking about the future, trending data is what one looks to. Not the current snap shot. The trends are obvious.

Even in the music article you link it states US music sales managed to grow 3.1 percent on the back of strong digital music sales. Digital distribution is the growth mechanism.

You say
You are right, there is a trend, it's the trend of an industry on the downturn, but it's digital sales can't help to change this trend.
The trend is not just of a small industry downturn, its of a trend of how game content is distributed, and that is exactly the topic at hand. Again, the trending data is obvious. In 2012 Digital game distribution up 16%, Physical game copies down 21%. It doesnt get more obvious than that.

Edited 3 times. Last edit by Todd Weidner on 24th June 2013 9:56pm

Posted:10 months ago

#23

Christian Keichel
Journalist

420 568 1.4
@ Todd
The trend is not just of a small industry downturn, its of a trend of how game content is distributed, and that is exactly the topic at hand
Small industry downturn? The industry hasn't seen any growth since 2009 and every year the downward trend becomes faster. This isn't a small industry downturn, it's a crash and within this crash, the industry scares aways it's remaining customers with it's Always On, Digital Only strategy.
Christian, when talking about the future, trending data is what one looks to. Not the current snap shot. The trends are obvious.
Trends are interesting, but extending growth rates into the future to predict coming developments usually doesn't work.

Edited 1 times. Last edit by Christian Keichel on 24th June 2013 10:07pm

Posted:10 months ago

#24

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
Speaking as someone who actually lives in an area where based on my poking around and asking, the majority of console games sales are physical on consoles thanks to folks not all having decent connections, I'd love to see how game companies will deal with losing that segment of consumers because they somehow think we don't matter or add a thing to their bottom lines...

Posted:10 months ago

#25
Christian, its far from a crash. its 16 billion a year right now in game content alone. Not a crash at all.

see here http://www.statista.com/statistics/190134/us-computer-and-video-game-dollar-sales-since-2000/

It actually may end up mirroring what has happened in music
http://www.digitalmusicnews.com/permalink/2013/20130415digital
check out Exhibit C. It shows very nicely the trend I have spoken about, but it also shows the the small industry downturn as well. Again, not a crash. When its a crash, as it was in 83, we will know if for sure.

ummm Trends are interesting, but extending growth rates into the future to predict coming developments usually doesn't work. actually yes it does. In reality it ( trend line analysis) works very very well. In fact just about every industry relies on the fact that it does.

Edited 4 times. Last edit by Todd Weidner on 24th June 2013 10:23pm

Posted:10 months ago

#26

Christian Keichel
Journalist

420 568 1.4
@ Todd
Christian, its far from a crash. its 16 billion a year right now in game content alone. Not a crash at all.
According to your link it was $14.8 billion in 2012 and it was, as I said the 3rd year with a shrinking market in a row. As you can see from you Statista link, there wasn't such a long period of decline in the period covered by Statista. The video games industry was fueled on growth, rising development costs and rising marketing costs for the AAA industry (which is the majority of the video games sales) only worked, because every year the overall revenues where rising. It's obvious that this isn't working any more.
I don't think you could extend growth rates into the future (not even if they are negative growth rates, as we experience them right now), but the US numbers for the first 5 months of the year are even worse, then 2012 and the decline is much bigger then it was in the first 5 months of 2012, so my guess is 2013 will be the fourth year in decline in a row and this decline will be bigger then in 2012.

The Crash of 1983 only lasted 2 years, in 1985 with the release of the NES revenues were rising again and part of the crash in 1983 was the growing popularity of home computer games, it didn't affected the games industry in general. Arcade games and games for home computers where healthy back then. Today it's different, it's the overall market crashing, not only a segment.
actually yes it does. In reality it works very very well. In fact just about every industry relies on the fact that it does.
No industry relies on extending growth rates into the future, because this doesn't work. Simply take the chart you posted with the video game revenues from 2000-2012. if somebody would have extended the growth rates from 2005-2009 into the future, he would have come to the conclusion that video game revenues in 2013 had to be around $25 billion. Obviously this isn't the case.

Edited 1 times. Last edit by Christian Keichel on 24th June 2013 10:32pm

Posted:10 months ago

#27
sorry you dont get to just make facts up.
Fact Revenues that had peaked at around $3.2 billion in 1983,[1] fell to around $100 million by 1985 (a drop of almost 97 percent). that my friend is a crash. Not going from 16.2 billion to 14.8 billion

Yous state No industry relies on extending growth rates into the future, because this doesn't work. again,around the world industries do rely on trend line analysis. It is quite common and usually quite successful. Billions and trillions are gambled on that fact. Do you think people sit around board rooms and shrug and throw darts when speaking about sales projection? Billion dollar budgets, capital expenditures, sales goals, etc etc rely on trend analysis.

and again, if somebody would have extended the growth rates from 2005-2009 into the future, he would have come to the conclusion that video game revenues in 2013 had to be around $25 billion. Obviously this isn't the case. trend line would not predict 25 million for 2013 based on that graph, but I wouldnt expect you to know trend line analysis since you have stated you dont even believe trend line analysis works.

Well anyway, as with all predictions, I guess we will agree to disagree, and see how things turn out in the next few years.
Thanks for the conversation.

Edited 3 times. Last edit by Todd Weidner on 24th June 2013 11:00pm

Posted:10 months ago

#28

Christian Keichel
Journalist

420 568 1.4
trend line would not predict 25 million for 2013 based on that graph, but I wouldnt expect you to know trend line analysis since you have stated you dont even believe trend line analysis works.
You are right, $25 billion for 2013 would have been an extremely conservative prediction, when you extending the growth rates from 2005-2009 into the near future. But I see, that you don't understand where the difference between watching trends and extending growth rates is. You aren't doing any trend line analysis, you take growth rates (in this example of ONE year) for digital and physical distribution and state there is a trend. You can't be farther away from trend line analysis, because you should be aware of the fact, that you need at least 2 points of data on the every axis to identify a trend, but you only have one.

Edited 2 times. Last edit by Christian Keichel on 24th June 2013 11:04pm

Posted:10 months ago

#29
as a former stock broker on wall street I can assure you I understand Trend line analysis just a bit :)

Posted:10 months ago

#30

Christian Keichel
Journalist

420 568 1.4
One last thing:
Fact Revenues that had peaked at around $3.2 billion in 1983,[1] fell to around $100 million by 1985 (a drop of almost 97 percent). that my friend is a crash. Not going from 16.2 billion to 14.8 billion
What you try to sell me as a fact is a quote from a Wikipedia article that uses numbers from an article "The Famicom rules the world! - (1983 -89)" that itself gives no reliable source for it's revenue numbers.

Edited 1 times. Last edit by Christian Keichel on 24th June 2013 11:19pm

Posted:10 months ago

#31
darn browser keeps messing up, anyway, yeah it hard to get exact numbers from that year, but Im guessing that arent that far off if they are off.

The industry itself dates back to 1979, when the first games were introduced. But its heyday came when industry sales skyrocketed from practically nothing to $3 billion in 1982. A bust followed the boom, and industry sales sank to $100 million by 1985
from the NY Times
http://www.nytimes.com/1988/12/04/business/nintendo-scores-big.html?pagewanted=2&src=pm

anyway, thanks again for the conversation.

Edited 3 times. Last edit by Todd Weidner on 24th June 2013 11:41pm

Posted:10 months ago

#32

Ashley Gutierrez
Animator

21 13 0.6
"It's clear that the vast majority of the people want to go down to GameStop or Best Buy, they don't want to buy it online right now"

Biggest lie ever.
Game Stop is absolutely INFAMOUS for buying back used games for pennies of what you paid for them, and then turning around and selling them at standard price WHILE pocketing all profits. Not a penny of that money they make off a used game goes to the developers!
If that's not corruption, I don't know what is.

And if you just take a look at the Steam store and how many people buy EXCLUSIVELY online with them, you'll find his whole argument a load of crap. Online is more convenient because it's cloud saved now, and you don't have to step out of your house to shop. It's instant, it doesn't take up any physical space on your shelf, and you can uninstall and reinstall without any codes or discs.

Not to mention the insanely cheap prices you can find for online games.
There's almost always games you can play on Steam that are free-to-play. Or big name games that go on sale for $5-10 only a year after it's come out. I haven't yet seen that happen in any retail store, unless they're in the $10 dollar bin when they're phasing out a decade year old console, with discs that are so scratched up, they're hardly playable.

I'm sorry, but physical discs are almost a thing of the past. They're getting phased out, whether they like it or not.
Digital content is more reliable, longer lasting and much more convenient.

Posted:10 months ago

#33

Paul Jace
Merchandiser

770 1,005 1.3
It's always nice to be given a chose of rather to download a title or buy the physical copy. But unless that digital copy is super cheap I will choice the physical version every time.

Posted:10 months ago

#34

Isaac Kirby
Studying Computer Games Development

39 37 0.9
I think there is a slight fallacy to the "of course digital is cheaper" argument.
I currently work at Fujitsu in Server development, so i can make rough estimates at he costs.
A single server uses in one day the amount of energy a 3 bedroom house uses in one year.
A server still needs administrators, a building to live in, cooling (more energy costs).
An online store needs developers to update it, add new content, hunt bugs, keep it in good shape.
You still need bricks and mortars, its just the Bricks and Mortar contain servers and their associated teams instead of shop floors, stock rooms, and flashy displays.
The overheads previously covered by Retail companies are now covered by the platform holders. So do not expect such drastic price reductions, at least not until the server operations are big enough to get better overall margins.
This is why Microsofts bragging of its server capabilities was exciting to me, it was saying "we have enough servers and run them well aenough to make things cheaper than Sony" (though it failed to hammer this point home).
As for the physical disc, this is a very small expense, along with shipping in the chain of how much a game costs in the store. Do some people really think that loading code onto a Blu-Ray disc and shipping it costs 10 and that this saving is thiers by consumer right?
Digital content is not a magic "box of content in the cloud" that means it should be cheaper.

Posted:9 months ago

#35

Sandy Lobban
Founder and Creative Director

319 178 0.6
Playstation Plus anyone?

I must be in the minority then, as I only buy digital, mostly on Steam. Who needs dust collectors. I have a playstation plus account as well actually, but this sounds like that wont be the focus going forward, so I'll probably give that up in future. Seems like an odd thing to say to me. You should welcome all revenue streams when you are selling digital entertainment. With the proliferation of gaming across technology, most game franchises will only survive or indeed reach their potential by going cross platform in future.

Edited 1 times. Last edit by Sandy Lobban on 25th June 2013 11:36am

Posted:9 months ago

#36
Im pretty sure its the pricing that is keeping people from buying online games from Sony> Why spend money on a digital copy that will take a long period of time to download, requires memory space which is quite limited when for the same price and you can get a disc copy which you can play the minute you get it and unless you live in a very remote region the time it takes to get to a local store buy the game and return home to play it will still beat the time it takes to download it from PSN.

Posted:9 months ago

#37

Klaus Preisinger
Freelance Writing

953 804 0.8
We always complain how Gamestop is abusing its customers by offering them "pennies on the Dollar". We are then quickly to attribute Gamestop as being greedy and its customers as being dumb.

Why aren't we looking at the product? If Gamestop's business is working, it might be due to the fact that a game actually does lose 90% of its value upon completing it once, or even just playing it for a short period without completing it.

If customers are dumb, then the gaming industry really has unrealized potential that can be reached by eliminating used sales. But if the latter is true (day 0 DLC being a strong indication), then the industry is in trouble regarding how customers look at the value of the product. Eliminating physical/tradeable copies is then not an option, but rather a matter of survival.

Posted:9 months ago

#38

Aaron Brown
BA Computer Science Student

59 22 0.4
@Bruce Everiss
50 billion Apple App Store downloads belies this somewhat.

Totally irrelevant seeing as you cannot even purchase a physical copy an I-phone Applications...

Posted:9 months ago

#39

Brian Smith
Artist

193 77 0.4
@ Isaac - If currently publishers of a new $60 game only collect around $15 from the sale then why shouldn't digital be a lot cheaper. If the rest of a retail price is attributed to manufacturing, distribution and retail then how could that be equalled by server costs. The multiplayer server costs can't be a factor as they are costs with the physical disc too. So you must be saying that just storing the digital copies for download and administrating an online store is equal to 75% of the retail cost of a single title. That just does not make any sense to me.

Posted:9 months ago

#40
Well, unless the digital copies are significantly cheaper, it makes no sense to move to online because its not convenient. Not convenient because it still takes a while to download/stream a game vs a phsyical copy that one can pick up and play. Until that day we are all connected, it still makes physical sense.

Posted:9 months ago

#41

Rich Allen
Freelance Game Author

4 8 2.0
Not at all they can walk and chew gum at the same time.

You can embrace digital and physical at the same time, unlike MS's original strategy which turned physical into digital.

Sony is pretty well experienced with Day 1 Digital already with the PS3.

Posted:9 months ago

#42

Isaac Kirby
Studying Computer Games Development

39 37 0.9
Hey Brian,
I'm not saying it is equal to 75% of the retail cost. But what i am saying is that there are more similarities in cost than people sometimes think. And that though 75% may not be the case, 50%-70% is not an unreasonable conclusion.

Servers have to live somewhere, that is buildings, and maintainance. Same as Retail.
Servers need administrators to run them. Same as retail needs Administrators to run business.
Servers have similar if not larger power costs to keep running. Same as a retail store.
Servers do not sleep. Retail is closed 50% of a stores hours.
I will concede that both business have online portals/websites with simlar design needs. So this is the same.

With an itemised bill i have tried to make i hope it is clearer, although a Server may indeed be cheaper, it cannot be by much.

Posted:9 months ago

#43

Brian Smith
Artist

193 77 0.4
@ Isaac - 50%-70% of retail cost does seem like an unreasonable conclusion to me. I'd be surprised if it was even 25% myself. I do concede though that I have no hard facts to back up my assumptions. You work in server development so I appreciate you probably know a good bit more than I do about them. I still find that extremely hard to believe though. It would be great to see some real world figures and to know for sure whether that particular argument on pricing was a justifyable or not. Until then I'm sure I'll still continue to swear at my xbox every time an ondemand title pops up for full retail price 3 months after release.

Just to add... my reasoning for thinking that your numbers seem way out there is that as a consumer, I can rent 400gb for $20 a month. In that I could store roughly 100 current day titles for 10 years at a cost of under $2.5k. Even in this little nonsense calc, the cost of hosting that would be under $25 per title, and these are the costs for me, a single consumer paying retail pricing on strorage. I'd have just thought a big organisation would do much much better than that.

Edited 1 times. Last edit by Brian Smith on 25th June 2013 3:14pm

Posted:9 months ago

#44
Issac - we arent comparing one server farm to one store. We are comparing one server farm to thousands and thousands of stores. Big Big difference. If we were comparing the cost and overhead of one server farm to one best buy, you would have a case. However we are comparing one or at most a few server farms to Tens of thousands of stores large and small. Plus the overhead and cost of cd creation, manual printing, distribution ( and the incredible amount of gas it takes to get physical copies distributed) and on and on.

I agree with Brian, the cost arent even close. I mean any indie, can sell digitally through google play etc and we indies still retain 70% of the profits. And that is just some indie with no power and still we can get 70% profit, with google taking 30%, and I would bet that within that 30% it is a HUGE profit margin for them as well.

Digital distribution wins hands down due to Economies of Scale.
http://en.wikipedia.org/wiki/Economies_of_scale

to illustrate, on the side I create small familiy games which I allow people to download for free. During christmas I get most of my "business" so during nov. and December I use a third party server to host the link to my games . One of my games last december was downloaded 5000 times or so, it cost me less than 30 dollars ( sure the game is only 50 mbs or so but still). If I were to try to physically distribute and create 5000 copies, at roughly 2 per creation and 2 per shipping, thats a cost of 20,000 bucks. 20,000 versus 30 . Thats the scaling difference we are talking about here.

Edited 6 times. Last edit by Todd Weidner on 25th June 2013 5:11pm

Posted:9 months ago

#45

Kevin Patterson
musician

181 93 0.5
The statement should have said "Most console gamers don't want to buy online right now"

PC gamers are usually less concerned with the collectable aspect of gaming, where it's very important to console games. When PC games used to have the bigger boxes, beautiful detailed manuals and other things inside, they cared about collecting. Some companies release PC collector's editions for those PC gamers that still like to collect, most do not, and PC games have become a box, a disk, and a then few sheets of a manual or advertisement, and that's it. Giving that box up and it's minimal benefits for a digital download's instant gratification was no big deal for many gamers.

Console games are different though. Console games have a nice plastic case, still could have a decent manual, and other items inside. Console games have kept the collector's aspect where PC games dropped it. PC's change operating systems often (breaking compatibility) where a console stays compatible with it's games forever until the unit itself breaks. I can still play my PS1, Saturn, 3DO, Dreamcast, and Xbox games anytime. I don't have to run a dos emulator or worry about compatibility mode, it just runs as long as the cartridge or disk is OK. Often, if I love a game on PC, I end up buying a console version as a collector item sometime later down the road.
I usually buy the console limited editions, collector's editions, and special editions over the PC versions as well.

I think MS and many others confuse their audience as being the same as PC gamers, they are not. Gamers that primary love console gaming over PC gaming have different likes and loves about their hobby, they value different things. I am not saying that digital won't eventually take over, but the death of a console physical format is greatly exaggerated.

Edited 2 times. Last edit by Kevin Patterson on 25th June 2013 6:36pm

Posted:9 months ago

#46

Christian Keichel
Journalist

420 568 1.4
One of my games last december was downloaded 5000 times or so, it cost me less than 30 dollars ( sure the game is only 50 mbs or so but still). If I were to try to physically distribute and create 5000 copies, at roughly 2 per creation and 2 per shipping, thats a cost of 20,000 bucks. 20,000 versus 30 . Thats the scaling difference we are talking about here.
Strange comparsion, your games are free downloadable games, of course it would be more expensive to manufacture them and ship them to their players, but games, that are pressed on disc and shipped to customers are games, that the customer is paying for.
I find it hard to compare the costs of a commercial product to the costs of a non profit product. This doesn't mean I think your games are not comparable to commercial products on a gameplay level, it's simply that you chose to work in a different segment of the games industry then that Sony is talking about.
It's like somebody would complain about the high costs of a Novel, because he can download lots of fiction in digital form from the various sites, where people offer the stories they write for free .

By the way, pressing 5000 CDs costs about $0.60 per CD (including a paper sleeve), not $2.

Posted:9 months ago

#47
@Christian not a strange comparison at all, what I charged for the game is totally irrelevant to the discussion. If I charged 5 bucks nothing changes, my cost stay the same. The discussion stays the same, the discussion is about distribution/production cost.

I could charge for these games, I choose not to.

By the way, pressing 5000 CDs costs about $0.60 per CD (including a paper sleeve), not $2. umm sorry, I actually know what my cost are thank you very much. Printing cost for Full color cover and back, full color directions, jewel cd case, assembly, CD, color Cd art and sticker, at 5000 pieces its roughly 2 dollars( 1.89 my last run ), and to be totally upfront my shipping cost example of 2 bucks is very conservative., its actually often much more than that.

to be quite honest :
I find it hard to compare the costs of a commercial product to the costs of a non profit product.
this makes no sense.

Edited 7 times. Last edit by Todd Weidner on 25th June 2013 7:15pm

Posted:9 months ago

#48

Caleb Hale
Journalist

144 209 1.5
While the PlayStation 3 isn't so much of an issue, Sony has always made it particularly difficult to enjoy digital downloads on their handheld devices (where the format makes most sense right now) by prohibitively costly proprietary memory storage formats. $100 for a 32 GB card? $60 for a 16 GB? If you force your customers to choose between more memory and more games, they are most likely going to go for the games. The statement by Sony execs mentioned above is something of a self-fulfilling prophecy in this case.

Posted:9 months ago

#49

Christian Keichel
Journalist

420 568 1.4
Your comparsion absolutely makes no sense:
Printing cost for Full color cover and back, full cover directions, jewel cd case, assembly, CD, Cd art and sticker, at 5000 pieces its roughly 2 dollars
Why go for Full color cover and back, full cover directions, jewel cd case, assembly, CD, CD art and sticker? Your downloadable version comes with art files for Covers, sticker, etc., why don't put them on the disc? Makes no sense. And again, Sony isn't talking about free downloadable games, they are talking about the different ways to distribute big budget video game productions. These games have development budgets of 10-100 million US$, the costs to manufacture and distribute the discs aren't a major factor in AAA productions, they are only a fraction of the total costs and the games are sold for $60.

Posted:9 months ago

#50
Makes no sense. Makes sense as some families dont have printers, cant afford color ink refills, some dont even have a few dollars to make it themselves, so we make physical copies in order to distribute to charities and so forth for the holidays so that kids and so forth may get some presents under the tree etc.

As for what the development cost is for a game, it is totally irrelevant to production and distribution cost. The only thing that may effect my digital distribution comparison is that it may cost a fraction more digitally in order to have servers downloading 1 gig games over say my lil 50 mb games. But the difference is still pennies at most.
But again ( on the physical distribution side) out of the 60 dollar retail price, distribution/production cost, wholesaler and retailer take 35 to 45 dollars of it. Leaving the developer 15 to 20 per copy. It is out of this 15 to 20 per copy that they have to cover their 100 million development cost. Understanding this, this is why game can sell 5 million copies and still lose money for the developer.

Edited 8 times. Last edit by Todd Weidner on 25th June 2013 7:39pm

Posted:9 months ago

#51

Rogier Voet
Editor / Content Manager

58 22 0.4
Why do People look like the US market as a the indicator where the market is going? Yes there is downward trend but for the big picture you need more data. So take Europa, US and Upcoming Countries together, include digital sales, mmo-subscriptions and free to play-revenue and don't forget to include mobile and tablet game sales. Only then you have a complete picture.

Biggest issues
To grow the market we need a more broader spectrum of games - so we can attract more people
But developers / Publisher have not been able to drive down the cost of making triple AAA-games so people look elsewhere for innovation (web/mobile/tablet) for new experiences
While retail is crumbling, some huge players still take a big cut out of the total revenue
Economic conditions are not favorable (not much excess income)
New upcoming platforms (Tablet and Mobile) have low costs but also low income models

Edited 1 times. Last edit by Rogier Voet on 25th June 2013 7:59pm

Posted:9 months ago

#52

Christian Keichel
Journalist

420 568 1.4
Yes there is downward trend but for the big picture you need more data. So take Europa, US and Upcoming Countries together, include digital sales, mmo-subscriptions and free to play-revenue and don't forget to include mobile and tablet game sales. Only then you have a complete picture.
Software revenues 2012 compared to 2011 (retail+digital):
Germany -7%
UK -12%
Spain -16%
Japan -1.2%

There may be countries were the software revenues are growing, but I didn't found them. The numbers you want either aren't existing or are already included, the revenues for the most popular MMORPG in the west are included in Activisions yearly revenues, it's impossible to get numbers for free-to-play revenues, but they are included in the NPD estimates and for tablet and mobile game sales, take a look at what Apple paid to developers since 2006 ($10 billion for ALL apps, not only for games) to see, that it's only a fraction of the revenues that were generated in the rest of the industry.

http://de.ign.com/news/17966/deutsche-gaming-industrie-weniger-umsatz-hoehere-stueckzahlen
http://www.joystiq.com/2013/01/02/uk-game-sales-down-17-in-2012-digital-crosses-1-billion-for-f/
http://www.adese.es/images/pdf/balanceok2013.pdf
http://www.gamesindustry.com/japans-video-game-market-grows-to-4-6-billion-in-2012/
http://techcrunch.com/2013/06/10/apples-app-store-hits-50-billion-downloads-paid-out-10-billion-to-developers/

Edited 2 times. Last edit by Christian Keichel on 25th June 2013 8:35pm

Posted:9 months ago

#53

Sandy Lobban
Founder and Creative Director

319 178 0.6
If you liken this to the music industry, the physical copy games discussion gets more like the vinyl discussion each passing day. If you look at what happened there, the people saying no got the industry taken away from them. Vinyl isn't going to be the format of choice for distributing music on mass going forward and physical copy games will go the same way in my opinion. Why wouldn't they? It's a natural progression to get things into consumers hands faster than the competition. That method is online.

Posted:9 months ago

#54

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
Sandy: what if you CANNOT GET ONLINE to get product at home? Should you just not buy at all? An MP3 player, phone or other device is DIFFERENT than a home console one has in a living room or other room, period.

Granted, a good solution is to have wifi data download transfer on devices to consoles (Vita to PS4, 3DS to Wii U, whatever MS wants you to buy to Xbox One or Xbox 360), but this seems to fly over the heads of corporate folk that only look at users who have access and not those who don't.

Posted:9 months ago

#55

James Prendergast
Research Chemist

730 410 0.6
@Klaus:

Hi mate, I think your comment is really interesting but I'd love for you to clarify one thing for me:

"But if the latter is true (day 0 DLC being a strong indication), then the industry is in trouble regarding how customers look at the value of the product.

It's not clear to me which "latter" argument or statement you're referring to from your post. Mainly because I see the first statement is "gamestop being greedy and the customers being dumb" and the second one being "a game loses 90% of the value upon the first playthrough".

So you say that if the customers are dumb (first statement) then eliminating used games will increase revenue - Why? How?** But then you say that if the latter is true - that a game loses 90% value - (second statement) then the customers are not valuing the product. You appear to prefer the second statement over the first but your conclusion is that:

Eliminating physical/tradeable copies is then not an option, but rather a matter of survival.

Which seems counter to your thesis - that instead studying the product and consumer properly will increase value to those consumers and reduce resale. Instead you appear to be advocating just cutting off the used market to triage the wound without actually addressing why the industry is bleeding...

[edit]** Forcing the market into conditions it does not like will just kill the market - it won't result in increased revenue over the short to long term. It might in the very short term but that's leading people down the wrong path.

Edited 1 times. Last edit by James Prendergast on 26th June 2013 7:00am

Posted:9 months ago

#56

Christian Keichel
Journalist

420 568 1.4
@ Sandy

The Vynil comparsion isn't fitting. Vinyl and CDs are physical media, that's more like publishers still offering all their games on CDs instead of DVDs or Blurays.regardless of it's size.
Even if you can buy music online for quite a while now and it's the media which is more convenient then any other to buy online (small file size, good online stores, everybpdy has a MP3 player), the makjority of all music sold is on CDs, this shows the clear preference of customers for physical media.

Posted:9 months ago

#57

Slade Wilson
Financial Analyst

14 11 0.8
physical is just better

Posted:9 months ago

#58

Jim Webb
Executive Editor/Community Director

2,210 2,051 0.9
Christopher Pickford said it best.

They are both a choice. They each have their pros and cons and it should ultimately be up to the consumer (or content creator) which means they prefer.

May as well be arguing whether cars are better than trucks. All a preference. A different means to the same ends.

Posted:9 months ago

#59

Mariusz Szlanta
Producer

16 13 0.8
"It's clear that the vast majority of the people want to go down to GameStop or Best Buy, they don't want to buy it online right now." - I want to think this is marketing snarl at MSFT, momentum playing rather than presentation of real ideas driving Sony strategy these days.

Posted:9 months ago

#60

Kareem Merhej
Designer

22 27 1.2
Please.

Those 50 billion games are equal in data size to 3 next gen-games. As someone who doesn't have 5 days to download giant, 30 GB HD games over my internet connection, I definitely opt to buy my games physically. I

Posted:9 months ago

#61

Sandy Lobban
Founder and Creative Director

319 178 0.6
@Christian. Sorry but I cant believe that the majority of music is still sold on CD. Why would HMV and the like be vanishing from the UK high street if physical sales were so strong, and it was still the preferred method? Retail does give games good visibility and when it comes to selling games consoles, you need that, which is probably why Sony are coming out saying this at this time. This is just not the type of item that needs to be bought on the high street or in boxes these days, especially when all the previews and demos are released online.

Edited 1 times. Last edit by Sandy Lobban on 27th June 2013 11:20am

Posted:9 months ago

#62

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