Develop 09: Is Digital Distribution The PC Saviour?

Yes! Next panel.

It was a panel whose title ("Is Digital Distribution The Saviour Of The PC Game?" non-shortened version fans) didn't exactly promise much which anyone who hadn't been following the PC recently didn't already know - but in actual fact, it proved to be the most relevant and interesting session of the entire of Develop for me. High information bandwidth, basically, with Charlie Barrett (Kalypso Media), Dorian Bloch (Chart Track), Richard Keen (Direct2Drive), Mark Morris (Introversion) and David Nottingham (Lucasarts) chewing over the issues and revealing a lot of sexy speculation, anecdotes and numbers.

It was Dorian Bloch who provided the majority of the latter in an opening ten minutes where Chart Track voluminous selection of sexy graphs were thrown in all direction. Getting the Chart Track numbers is a real joy. People inside the industry get them, and pay for them. Even a non-statistician's glance down their end of year numbers gives enough information to add real weight to a half-dozen articles.

The position is that Chart Track basically want to bring as much digital distribution information into the actual charts as possible. They already do it with music, so this is logical - and, for the PC, probably necessary to give an idea of what the real information is. The majority of what Dorian showed was their best analysis of what they think markets are - so, yes, these aren't hard and sure. But these are people who are good at this, and I think it's worth rolling with them.

We started by looking at European sales figures, between 2005 and 2008, where the total videogame software market moved from 5.5 to 8.6 billion euros. And - Christ - seeing the rise and fall fascinates

(PS2 going from 2.522 to 0.885 billion, for example. As is how actual rise of new consoles. Later on, we see the rise and fall of new consoles arriving and old ones leaving - and from the 90s onwards, there's always a year in the UK sales where PC is comfortably higher than either the departing system or the new comers... which makes the actual tactical decision of when to launch a next gen console game - or abandon an older one - all the more interesting. Also, apply that to making a PC-version alongside it to mitigate the chance that new console market hasn't developed enough yet... but I'm really wandering)

The PC market across the years went from 1.262 to 1.265 to 1.326 to 1.125 - which is a fifteen percent decline from its 2006. That's enormously held up by the German market, which now makes up 41.3% of all PC sales, and has declined by 5%. While UK is second and France is third, it's actually clear that in terms of retail, Germany is singlehandedly holding up the PC market. It's the last year which has seen the biggest decline, which is where Bloch argues Digital Distribution really kicked off.

We take a step to the world stage. 13 Billion dollars is the entire PC games market in 2008. In terms of the split, Chart Track believes 24% is retail, 46% online revenue services (i.e. Subscriptions, micro-transactins), 22% is digital distribution and 8% is ad-revenue. Of course, this is world-wide, and individual territories tell a different story. Asia, for example, where only 4% of the revenue is from boxed sales. All this compares to 32 billion dollars from all console sales.

Chart Track believes there's 250 million PCs which are "gaming PCs" - which leads to the question what an actual gaming PC is anyway - which is about equal to the total generation of consoles. And, in a real way, with digital distribution, broadband penetration equals the market. In which case, 450million broadband accounts is hefty. The market is being powered by three things - the growth of digital distribution clients (i.e. Steam and friends), the growth of virtual item games (i.e.Battlefield Heroes, Travian, any of the free to play stuff) and - the one of the three which I suspect most people reading this site overlooks - the growth of game-cards sold in non-game retailers. This is primarily kids without credit-cards.

How big is digital distribution? In terms of the core-market - that is, gamers like us buying on clients like Steam -they estimate 600 million dollars for the NA market. They believe it'll break the billion - 1068 - in this year. The real question is why aren't these in the charts. The problem is that while some retailers are interested in it - especially certain individual companies - others are more reticent. Since most of the individual publishers have their own direct download solution, you need more than a few token ones to avoid skewing the chart. I approach Bloch after the panel to ask when he thinks people will move this way - Valve's reluctance to release actual hard data is something that regularly frustrates me - he believes it'll work similarly to how digital sales worked in the music industry. That is, a gradual uptake, with a give and take of information - a little at first, and when nothing terrible happens - a little more. Soon we'll reach the point where it becomes clear that not giving up numbers leads to less publicity compared to those that do. In other words, it's a slow natural process and we have to wait for it to work out.

Then we went into the panel generally, where opinions came thick and fast. Monkey Island deluxe being a debut game for Lucasarts was - in David Nottingham's words - a no brainer. Perhaps generally speaking, the most characteristic comment was from long term industry veteran Charlie Barrett who stated simply: "I wouldn't do it if it wasn't a viable business"

Mark Morris, the indie-man-out on the panel, had a selection of classic Introversion stories. You've heard the one about them deliberately padding the Uplink file size with an enormous file of Chris Delay playing Guitar. Back in the pre-broadband days? Making it take a couple of hours to download was their only copyright protection. Chris was also somewhat wry over their initial worry about taking Darwinia to Steam. Since they received the full price from their website, and less after Valve's fees were taken from Steam, they were worried they were going to canalise their sales. "Thank fuck we didn't make that decision", he says bluntly, after they sold more Darwinia in the launch weekend than they had in all the time up to that point.

Perhaps a key point was the difference between just selling off your own site and selling off a portal. What you're actually giving up for that slice of the profit is an actual footfall and visibility. When people go to Introversion's site, they're not actually looking to buy the game - they're looking to find out about it. Rich Keen thinks this is key. People come to sites with purposes in mind. If you're at Direct2Drive, you're there to buy. It's a sales environment. Shops get people browsing, and create a synergy between products. Since all users sales are tracked, Direct2Drive know they've sold 1000s of units to people who have never bought an indie game before. A portal is about presenting a game to a new audience which may have not previously considered it before.

Particularly interesting is Rich's talk about directed mail-out to gamers. There's a weekly ebb and flow of sales, which a mail-outcan play to. As the weekend approach, people start to think "I'm going to game" and an e-mail with an exciting sounding option has a great effect. With a bank holiday, it's even more pronounced. Keen also notes that while there's much in Digital Download which is similar to trad retail - placement, etc - there's also other opportunities. For example, pre-ordering in shops normally means putting down a fiver. In games, it's often paying the whole price, which gives you Beta Access or similar. This can lead to enormous first week sales.

How digital distribution helps retail - as in, they're not actually environments which entirely replace one another - is another key point. Barrett talks about how Bejewelled was the casual-game king, and such a digital distribution champion that you wouldn't think they'd be a market. However when focus took it and marketed it at retail at a fiver a shot, they cleared up. He also noted that the online discounting feeds retail sales. When Steam does a 50% sale, retail goes up. Fundamentally, gamers talk to each other. When they find something good, other people will know - and buy at a venue they feel comfortable with.

There's also the simple fact that people just want the box. In introversion's case, twenty-five percent of the people who buy want it. It costs a lot to do it, but they'd still want that. There's also places for direct sales with a hardcore fanbase to make some unusual merchandise money. Introversion have these foam Darwinians they use to throw into crowds. They started selling it from shops. Eventually, since there were three colours, people started asking if they could buy a specific colour. With an evil cackle, Mark said no. The biggest problem with Direct sales for a retailer, however, is actual basic credit-card fraudsters. This isn't a sign that they're big gaming fans - it's that they use sites to check whether a card is still active. And it's the developers who suffer - they have to refund the money and actually pay a fine. Not having to do this when you go through a portal is another advantage - though Mark argues that for a relatively low amount of sales, it's worth the hassle. On that first day of sales, when the reviews all hit, getting all the money rather than a proportion of the money is worth all the hassle. In Introversion's case, their financial director does the retail stuff in his spare time.

One final note which stood out. Obviously, conversation turned to piracy, with talk of how members try to prevent it. Introversion's tactics - multiplayer codes being used to try and make sure the actual real buyers get a better service than the illicit ones - are well discussed, but there's a number which stood out. Introversion believe they have a 100:1 pirate versus purchased ratio, which they estimate via their number of patch downloads. Which is a number that's easy to attack, with some individuals downloading more than one patch. Conversely, it's a number you could raise for those people who simply don't download a patch. I suspect you'll have to do some serous massaging to get it even to the 9:1 ratio which is a regular sight when an indie developer makes an estimate of the amount of piracy they experience.