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Xbox One, PS4 mark a "watershed event" for digital

Xbox One, PS4 mark a "watershed event" for digital

Tue 19 Nov 2013 3:40pm GMT / 10:40am EST / 7:40am PST
BusinessHardwareOnline

Longbow Research discusses the acceleration of digital fueled by the new consoles; day one downloads "becoming the norm"

With the PS4 on the market now for a few days and the Xbox One about to launch, the console industry is entering a new era, one that is more and more aligned with a digital marketplace, according to Longbow Research analyst James Hardiman. In Longbow's latest note, Hardiman labeled the launches of the two new consoles a "watershed event" for digital distribution.

Hardiman made the comments in relation to leading games retailer GameStop, whose business could be strongly impacted by the digital movement over the long-term of this new console cycle. Digital availability of AAA games on day one should not be underestimated, he noted.

"Most notably, in stark contrast to the agreements made during the current generation to limit the availability of digital downloads at or near the retail launch of games, every single launch title for both the PS4 and the XB1 are also available as digital downloads immediately. Moving forward, we believe that day one digital availability will fast become the norm rather than the exception, which we believe could result in 20-25 percent of gamers opting for the digital download option to start, with this number only growing over time," Hardiman said.

He continued, "Other factors that we believe will accelerate the adoption toward digital include (1) the 'Play as you Download' option being made available for both the PS4 and the XB1, which allows gamers to start playing games within minutes rather than hours (2) the remote download functionality, allowing users to start a download while they are away from their consoles, (3) the recent creation of an Amazon digital store for Playstation, which adds comfort and competition (i.e. better pricing) to the digital download landscape, (4) increased comfort and patience on the part of consumers (according to our consumer survey) with full-game digital downloads, and (5) vastly increased broadband speeds, up 32 percent y/y and 123 percent since 4Q08."

It's not all smooth sailing for the rise of digital sales on consoles, however. Hardiman referenced that next-gen file sizes are looking to be on average more than double those of the current-gen titles, there are increasing attempts by ISPs to cap broadband usage, and he said there's "a general weariness with regard to DRM restrictions on digital content."

Right now it can still take a long time to download a huge AAA game, but as Americans' broadband speeds continue to improve in the coming years, we can expect more consumers to switch to digital, rather than purchasing a retail disk. 73 percent of consumers would be willing to download a full-sized video game if they could do so in under an hour, according to Longbow's survey.

Ultimately, for GameStop, the future is blurry. Hardiman called GME the "most controversial stock we cover" and while the next couple years are likely to be good for the retailer, longer-term Longbow recommends "shareholders stay on the sidelines until we can get a better view."

14 Comments

Steve Goldman Journalist.

81 92 1.1
everyone hates digital only. I will never own a digital only game. My opinion is shared by the majority of gamers

Posted:11 months ago

#1

Henrique Taunay Game Developer

3 5 1.7
Popular Comment
everyone hates digital only. I will never own a digital only game.
Really? So you think SteamBox will have a hard time entering the console market?
My opinion is shared by the majority of gamers
I'm sorry, but I must disagree with you. You should at least backup such a bold and generic claim with a reference.

Posted:11 months ago

#2
The way that the 'research' pushes the digital-only opportunity, it would make you think that they had a vested interest?

The public / customer has dallied with DLC and are happy from a game app standpoint, but the issues with console gaming in a wholly digital environment is that they still do not trust the publisher to secure ownership of their stuff! But as with the Apple Store the inevitable will come, and the retailers-duplicators-distributor rein of control over the market will be broken.

Though in breaking those chains impact on other aspects of console business could be impacted.

Posted:11 months ago

#3

Jaime Wojick Producer & Game Designer

5 12 2.4
I love the "instant" gratification of digital, but there are several things really standing in the way of mass adoption.

There is the bandwidth and time issues discussed in the article. While the time to download/play can be eased through play as you download and faster connection speeds, the bandwidth caps are a very real thing and completely out of the control of games industry.

The bigger issues are:
- The inability to sell/trade. Granted this could be fixed by creating transfer codes or the like, but the hw folks and pubs have little reason to do so.

- The space issue. PS4/XBO games are running into the tens of GBs which of course will quickly fill up the system drive space. Oddly enough only Nintendo currently allows for external storage of games. With players being used to have large libraries of games, the digital approach will force folks to either limit their purchases (which is bad), or to delete and re-download, which of course creates a waste of bandwidth.

- Price. Currently digital in most cases is the same or higher price than the physical product. There has to be a reason other than convenience for players to buy digital. As an example with the US launch for PS4, several stores were doing buy 2 get 1 deals. It is extremely difficult to justify a digital purchase against that.

I look forward to a digital future, but I am not sure we will see it as mainstream during this new HW generation.

Posted:11 months ago

#4

Nicholas Pantazis Senior Editor, VGChartz Ltd

1,020 1,467 1.4
Yeah, this will not be a big digital generation. The file sizes of digital games this gen is insane. PS4 games run 30-50GB apiece and the system only comes with a 500GB HDD. I assume Xbox One games will be comparable. Disc based games have to be installed as well (which makes the hard drive very shortsighted), but at least with those if you delete the data you can go back and play them almost right away since disc-based caching is nearly instant. Digital downloads on the other hand would top you from playing that game for more than an hour if you ever deleted the content to clear up space.

In short, Steam still has no competition on the digital front at all.

Posted:11 months ago

#5

Sandy Lobban Founder and Creative Director, Noise Me Up

315 208 0.7
i prefer all games to be digital. the less dust collectors the better imo

Posted:11 months ago

#6

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
Right now it can still take a long time to download a huge AAA game, but as Americans' broadband speeds continue to improve in the coming years...
Oh, bwa-ha. Not in every area in this country, that's for sure. Rate increases and bandwidth caps are still hitting some folks in areas where they SHOULD already be seeing better service and in some major cities, you get stuck with stupid bundle packages that don't even allow for say, someone who ONLY wants a connection for gaming and basic internet to have one separate from a cable and phone "deal" that's a multi-year trap with fines if you try to back out.

Posted:11 months ago

#7

Paul Jace Merchandiser

939 1,420 1.5
Oddly enough only Nintendo currently allows for external storage of games
While that is currently true Microsoft will also allow external hard drive support, it just won't be ready at launch:

http://www.wpcentral.com/xbox-one-no-external-hard-drives-launch

As long as they have it ready no later than the first quarter of next year I don't think the delay will hurt them as most people probably won't fill up their default hard drive just on launch games alone.

Edited 1 times. Last edit by Paul Jace on 20th November 2013 5:22am

Posted:11 months ago

#8

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
@Paul: They'll fill those hard drives up with other stuff AND games, I bet. And sooner than expected with mandatory installs...

Posted:11 months ago

#9

Alfonso Sexto Lead Tester, Ubisoft Germany

820 653 0.8
@Steve
everyone hates digital only. I will never own a digital only game. My opinion is shared by the majority of gamers
Have you ever heard about "Steam" by any chance? Not to mention all those digital games also available no consoles. I think both your "everyone" and "majority" are just plain wrong there.

Posted:11 months ago

#10

Klaus Preisinger Freelance Writing

1,135 1,171 1.0
What is wrong with having two ways of distribution? Why does it have to be either or, black or white? Obviously online piracy does not work at all, so why try online distribution?

Posted:11 months ago

#11

Adam Campbell Associate Producer, Miniclip Ltd

1,183 973 0.8
everyone hates digital only. I will never own a digital only game. My opinion is shared by the majority of gamers
Not true at all. I'd be happy to buy all my games digital only.

My connection is immaculate, the only other areas that need to satisfy me are systems with enough storage (something I can usually improve or change) and prices that reflect a digital product.

I'm speaking for myself and so are you. Everyone has different requirements and desires when it comes to their experience.

Posted:11 months ago

#12

Mats Holm Technical Process Analyst, EA BioWare

55 50 0.9
Having 150mb/s line, no caps and a huge dislike of physical media in any form, day and date downloads for consoles are a blessing. Now, if they step up and also allow us to pre-load and the price is the same as for a physical product, I see this eating up a huge chunk of physical sales. However, I wonder how NPD will track this, and if we will now see articles about how game sales are down across the board woe is us and all that jazz.

Posted:11 months ago

#13

Paul Jace Merchandiser

939 1,420 1.5
@Greg--It takes alot longer than a few months to fill up a 500 gb hard drive, even with mandatory installs(depending on their average size). All Microsoft has to do is roll out their extrenal hard drive support by next March or April. In the meantime, people can delete the mandatory installs to make space if by some chance they get close to filling their default hard drive in four or five months, which I don't see being very likely for most people unless they absolutely refuse to delete any of their mandatory installs and buy every new game that comes out on release.

Posted:11 months ago

#14

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