Digital Distribution - The New Shareware?

[Liquidize105]

JCal interviews VALVe (http://www.gamecloud.com/article.php?article_id=479) and 3Drealms (http://www.gamecloud.com/article.php?article_id=483) back to back for their takes on selling full games directly to Joe-sixpack gamers like us.

Here's the interesting bit:
Gamecloud - Of course, distributing on the Internet also frees game developers from dealing directly with publishers. Do you feel that this will also allow the freedom for games to be more creative and take risks in gameplay design and content?

Doug Lombardi - Creativity and risk are not popular in the green light room at the publishers' offices these days - ask any developer who's pitched an original game idea in the last 12 months. So yes, the ability to create a game of any size and completely of your own design is a central benefit to this alternative form of distribution. Counter-Strike is a great example of a project that would have been killed in a traditional green light meeting (no single player, extreme difficulty from the first moment of play, etc). In addition, with Steam these authors have a place where they can sell their works and pocket the majority of the revenues earned.

Scott Miller - Absolutely. Anytime you remove a publisher from the equation, you allow developers to pursue their pure vision, without being steered toward proven game styles and content. This will result in a lot of spectacular failures, but also a few revelations.
Spectacular failures, with emphasis on spectacular of course.

Spectacular q:D

[Heretic Machine]

Sooo... if Counter-Strike had gone through a board room, then it wouldn't exist today? Sounds like we need more board rooms.

[bapenguin]

My only complaint is games that use this method need to be cheaper....we get cheated out of the box and manual as well as a nice CD copy of the game. Take 10 bucks off the retail price please.

[Heretic Machine]

I'd expect more than $10 off personally... More like $20.

[Liquidize105]

Definitely 0 dollars off, but expect free extras. VALVe offered extras as the bait.

That's why the retailers will still get heaps of business.

[Goronmon]

My only complaint is games that use this method need to be cheaper....we get cheated out of the box and manual as well as a nice CD copy of the game. Take 10 bucks off the retail price please.
Well, IMO I'd rather pay full price knowing the money is going to the developer than pay full price and know much of the money is going to the publisher.

[Malovech]

Sooo... if Counter-Strike had gone through a board room, then it wouldn't exist today? Sounds like we need more board rooms.

I can understand your attitude, it makes total sense to me- but CS was revolutinary when it was first released. I remember playing the first build that was available to the public and being totally floored by how fun it was. The concept of the game, initially, was very cool and was a standout amongst the majority of games publishers would release.

[PIPBoy3000]

I don't think I understand the spectacular failures line. Does that imply that Prey (which is unreleased) will fail, or that Half-Life 2 was a failure?

[Savok]

My only complaint is games that use this method need to be cheaper....we get cheated out of the box and manual as well as a nice CD copy of the game. Take 10 bucks off the retail price please.

Pity us poor bastards who got the limited edition of HL2. Worst LE ever

PIPBoy, he's saying that some games made purely from creative vision with no limits set by the publisher can and will be disasterous, some games though, will be incredible.

For the consumer it's kinda like going through a pile of shareware floppies back in the bronze age, crap, crap, crap, crap, crap, then you come across something called Doom. Only these days we can go to forums and review sites before laying down cash.

[ackbrack]

I don't think I understand the spectacular failures line. Does that imply that Prey (which is unreleased) will fail, or that Half-Life 2 was a failure?

I don't think he's implying either of those.

I think what he means is that just because developers would, in not having to seek the approval and financial backing of publishers, be able to take more creative risks, it doesn't mean that all of those risks would result in better games. For example, if you've ever watched the shows on a public access channel on TV, it's clear that there are some shows that are really great and others that are bad, even spectacularly bad. I think that's all he's trying to say.

[PIPBoy3000]

Ah - thanks to all for the clarification. It makes much more sense in that light.

[PacerDawn]

I find it interesting that Scott Miller is on board the anti-publisher bandwagon, seeing as how the only income 3D Realms sees these days is from... publishing. If this distribution method happens and publishers go away, they will actually have to release a game.

[Demize99]

The economics of why Digitial Distribution won't (and shouldn't) lower prices:
1) Currently, publishers give developer's money in exchange for blood, sweat, tears. This money means they have leverage over the end product and the developer has to give up some degree creative control. The publisher also offers services such as retailing and advertising.
2) That money the publishers give the developers comes from the cut they get from the retail sales of the game.
3) DD eliminates the publisher from the "retail" picture, however the original capital required to make the game in the first place is still needed by the Developer.
4) If the Developer makes a successful game through DD, he recovers his expenses of developing the game, and pockets the profits that the Publisher would have made.
5) The Developer, who we assume loves making games, uses that profit to fund bigger and better games and makes more games.
6) There is no retail package, manual, CD etc. But the material costs of those are so minor and negliable that they will essentially not significantly reduce costs.

[eEK!]

The economics of why Digitial Distribution won't (and shouldn't) lower prices:

Your forgetting the retailers 50% cut.

[ChumLord]

While I'm in favor of developers ditching publishers (artists ditching the record industry, and authors ditching the mainstream publishers also) I have to wonder if doing so would realistically result in much cost savings at all for the comsumer. The more money that the developer sees, the happier I am. Yet all of the misc stuff would probably add up for the developer pretty quick I'd imagine. Things like advertising, bandwidth for distribution, piracy protection, etc... Not to mention the development team would have to hire extra people or waste their own man hours doing that shit instead of developing and supporting the product.

I still think it would be the way to go for them but, what I'm trying to say is, it wouldn't be as easy as some think IMHO and probably wouldn't generate a big cost savings for the consumer.

[Mrbunchypants]

6) There is no retail package, manual, CD etc. But the material costs of those are so minor and negliable that they will essentially not significantly reduce costs.

your jokeing right?

even makeing say 50,000 cd at say 50cents a pop thats $25,000 add cases say 25cents, thats an other $12,500, plus box and manual. thats then you have to ship the thing to all the stores. Like walmart , EB, target, ect....
just a small drop in the bucket. when you have it sitting on some server like steam. you can copy it a million times for like a third of the cost.

If I'm off please let me know.

[Evil Avatar]

Anyone who thinks that getting rid of publishers is a good idea is an utter fool. Lets see what Valve (and 3D Realms or other developers) think of digital distribution after they spend millions of their own money developing their first flop.

Think about this... How long would Monolith have lasted under this publishing model? Not long enough to have made No One Lives Forever - and even if they had somehow lasted that long, NOLF did only average sales at the retail counter. What would the online only sales have been like???

Not enough for the company to stay in business.

What you are seeing here is a few rich fat cats saying, "Gee, we have so much money we can afford to cut out the publisher." It isn't something most developers can ever consider.

[mos]

Evil Avatar is right. Publishers are evil, but they're a necessary evil. They're there so that little companies can afford to pay for two years (or so) worth of development before the title ships.

[Draft]

Evil is totally right. Steam works for Valve because Gabe Newell is a real life Scrooge McDuck, complete with Money Bin and probably a top hat or two. Valve is so flush with income they can afford to develop a game for five years without income from a publisher. Half Life is such a strong brand it can move a million units without Activision screaming over the phone at the Best Buy guy for an extra unit of shelf space.

I want digital distribution to work, and I want it to help the independent publisher. But as of right now, it favors big companies with lots of money and sure fire hits.

[RMan]

Ok, I think it’s important to talk about what can be eliminated (or effectively reducing to a non-factor) with respects to a “Publisher”. Currently, what is commonly thought of as a Publisher is the organization that handles everything about the game except actual development. Primary jobs are Investor, Advertiser and Distributor, so digital distribution will have different effects on each part of the publisher’s job.

Investing: This is unrealistic that most devs, especially new ones, can self-fund and I think this is the part that Evil meant can’t be eliminated. Funding would have to come from somewhere.

Advertising: Awareness and market perception is crucial for a retail game, and still quite important for digital distribution. Someone has to handle this job.

Distribution: This is effectively eliminated. The bottom line is that you have to stock a few online stores for the whole world, instead of physically stocking 4000+ stores just to cover North America. This eliminates the sizable cut retailers take (although some of that will still be taken from the digital distribution venue), along with all the other physical distribution costs. Digital distribution costs are negligible compared to physical alternatives.

Digital distribution is clearly superior to physical distribution, in the same way that cell phones are superior to land lines, even if the initial technology didn’t make that clear. I challenge anyone to come up with a better argument against digital distribution other than “I’m used to CDs”.

And as unpopular as this may sound, publishers reluctance to try new things is a direct result of retail marketing and the limitations it imposes. The plain and simple fact is that there is just not much shelf space available for games, so retailers pretty much require a game to sell extremely well quickly, or they simply will not stock the product. This means that your game has to hit the ground running, or it will never get started. Retailers also stock the product based on how well it sells before they even get products (which is why so many publishers promote “presales”). The most effective ways to do this are making a sequel or an IP based product, because these will have a certain amount of awareness right off the bat. Other than that, it’s mostly about pouring money into traditional marketing channels (magazines ads, previews, trade events, etc). In short, this means that how much fun a game is has little effect on it’s initial success (which is the most important part of the life of the product) and therefore is often not a priority. The lack of creativity in games is the direct result of how the retail market works, publishers are risk averse to the extreme because that’s the best way to succeed in the retail market.

With digital distribution keeping a product “stocked” costs nothing, and therefore a game can have a slow start without being killed like it would be in retail. Awareness is still crucial, but that awareness doesn’t have to come all in a 3 month period to be effective. A product can gain awareness through reviews and word of mouth and the player can actually get the game before it’s pulled from shelves.

In the end, digital distribution will have drastic effects on the industry when it’s finally accepted. Anyone who thinks that eliminating distribution costs will not have a direct effect on the price of games lacks a fundamental understanding of competitive market economics, and is in short an idiot.

[mister_slim]

Your forgetting the retailers 50% cut.
At best, retailers get $15 bucks on a $50 game, which if not sold has to be clearanced at $10 (Circuit City's $10 clearance is coming up, btw). The wholesale on those $20 ESPN titles was $17, for example. Retailers are very dependent on maximizing sales volume and minimizing excess inventory to break even. Imagine the sales loss if Wal-Mart decides a game won't sell enough. There goes a third of the market.

[Savok]

Not in Australia Slim, I've seen the wholesale price catalogues, markup here is 40%-60%.

[RMan]

Yea, if that ESPN price is correct, it's still not even close to indicative of the market as a whole. That type of product and price can be marketed to retailers as a loss leader, but “normal” product markup is much higher than that.

[mister_slim]

I took some of that from this article (http://www.next-gen.biz/index.php?option=com_content&task=view&id=150&Itemid=35). Obviously his prices will be higher, because he's buying smaller quantities through a distributor, unlike Best Buy or Wal-Mart, but I doubt wholesale prices are 50% of retail. The ESPN number is from Take-Two's annual report, but they were probably able to push the wholesale up based on expected volume.