And then point at Steam.
[Sterne Agee analyst Arvind Bhatia] noted that GameStop’s management “has been monitoring and studying the capabilities of digital downloading and its potential adoption over the last several years” and they’ve recently “conducted the most thorough study to-date on its capability.” The study provided the following key takeaways (as outlined by Bhatia):
- An addressable market (due to technology rollout) will not exist until 2014 – at that time approximately 25% of population will have access to the technology required to download full games.
- Users would still face issues of price (could cost ~$100/month) and storage capacity.
- Consumers are willing to pay ~$39 for downloadable game so publishers will be less incentivized than some in the industry think.
How could the “most thorough study to-date” on digital distribution of games conclude that there’s no market for it until 2014? There’s a market for it now. I don’t know a single PC gamer who hasn’t bought a game on Steam. Not a single one. Digital distribution is here already. Sure, the consoles are lagging behind as usual, with plenty of smaller, arcade-style titles available for download but very few AAA titles yet. To think that a majority of 360/PS3 games going digital distro is five years off, however, is just crazy. In five years, the market will cannibalize retail. If GameStop treats this change like they’re safe for the next five years, they’re toast. They’re probably toast anyway, but they’re hastening their own demise.
Only 25% of the population will have the tech required for digital distribution, in 2014, because it’s being rolled out? Broadband penetration in the U.S. is 60% today. Guess what? If you’ve got a broadband connection, you can download a full game. It’ll take a few hours, maybe, depending on the game, but you can do it, and many PC gamers do on a regular basis without finding it too much of an inconvenience. Faster connections will only make it easier and explode the market. Again, if you’re a brick-and-mortar outfit and you’re waiting for that point before you start changing your strategy, you’ve already lost.
Finally, storage capacity is definitely a concern with one console—the Xbox 360—but the PS3 is designed with a user-replaceable, standard laptop hard drive, and obviously a PC user can upgrade their hardware anytime they want. You can get a 500GB laptop hard drive for about $100, and a terabyte desktop hard drive for the same price. Storage capacity is hardly a significant roadblock.
Digital distribution is already making waves on the PC. The PSP is set to go all-download this fall. The PS3 will likely follow suit before 2014. And GameStop is going to be in serious trouble. Good riddance to them. Who ever liked going in there and getting hassled by the employees about reserving games or upselling crap like strategy guides and magazine subscriptons anyway?
