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GOF 2008: Is Digital Distribution The VCR Of The Game Biz?

At the GameON: Finance conference, IDEA's Sean Kauppinen and other panelists discussed whether digital distribution of games might be the "VCR of the games industry" -- a complement to retail's movie theater equivalent, or whether physical retail is outmo
With the evolving global marketplace currently going through a major downturn, many developers and publishers may be wondering about the possibilities in digital distribution and alternative revenue models. The hope is that these models, such as microtransactions and other free-to-play options, could ask for a smaller investments from larger audiences. In this panel at the GameON: Finance event in Toronto, speakers including Sean Kauppinen, founder and CEO of International Digital Entertainment Agency and Jeff Tremblay, vice president of business development at Frima Studio, debated the possibilities and pitfalls. "Traditionally, in North America we’ve not been so hot on microtransactions," opened Tremblay, before cutting right to the heart of the matter -- that in the current economic turmoil a lot of families "are going to look at their Mastercard bill and see $10.95, $14.95 or whatever each month, and cut that." Kauppinen instantly disagreed. "One thing, for example, that Americans aren’t happy to cut is their cable subscriptions. Sure, maybe they’d go down to basic cable -- but some families will value game subscriptions just as much." Warned Tremblay: "Only some, however." Microtransactions seem to come part-and-parcel with the concept of digital distribution, and the panel could not agree on its possibly disruptive impact within the games industry in future. Steve Bocksa, industry analyst & president of Pug Pharm Productions, said that in his view, digital distribution is the "VCR of the games industry." "Did the VCR end movie theaters? No, so I don’t think that retail will ever go away," he said. Kauppinen instead hypothesized that in the long term, physical retail will suffer for a variety of reasons -- including the economy and an increased interest in "going green" by removing wasteful packaging from the equation. Bocksa admitted that while there were certain products that don’t benefit from "the tactile experience of going to a store and buying it," game companies were especially good at adding value to retail offerings, like with collectors’ editions. But according to Kauppinen, Bocksa was missing the generational differences between game buyers. "You’re talking about a generation of collectors," he argued -- "there’s a new generation who are happy with all of their music being on their iPod." This rise of an "iPod generation" was something that the panel considered; Bocksa agreed that the industry has reached a point where games could become analogous to albums on iTunes, with developers able to bypass publishers and go direct to consumer via game portals. "The traditional publishing model will always exist," he said. "Companies that will help you get your product into the store and market it, but…" Interjected Kauppinen, "Games have maybe a week’s shelf life unless you have a mega hit," arguing that retail was now a much less viable method than going digital. Even with digital distribution, he warned, developers could not rely on simply creating high quality content, and would still need to perform the tasks that publishers traditionally handle, such as marketing. "Content might be king," he concluded, but "once you reach a certain level of quality, it comes down to marketing and timing."

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