The analysts speak; online services, digital distribution and consumer friendliness

15 mins read
Two weeks ago, we spoke with representatives of three different analysis firms who specialised in the video-games industry, gathering their forecasts and perspectives on various matters concerning the industry at present. The topics of interest included the controversy on used games, concerns towards games pricing and AAA development costs, as well as predictions on the market performance for all three next-gen consoles.

If you haven’t read it yet, check out Part 1 of the two-part feature here.

Of course, these alone are but a few of matters surrounding us right now. Still speaking to David Cole of DFC Intelligence, Michael Pachter of Wedbush Securities and Liam Callahan of The NPD Group, we continued the discussion to see what more they had to say on other areas of the industry’s current evolution.

Going digital; is it all good?

Digital offerings on consoles have begun to gain a significant amount of traction, what with the now crucial availability of retail titles via download, as well as extra incentives such as downloadable content. The increasing prevalence of indie games has also been a reputable contribution in this area.

The rapid growth of digital consumerism is quite apparent. As of March this year, it has been revealed that digital game and downloadable content sales are growing at a consecutive rate of 33 per cent each year in the US and Europe. In the US alone, digital content constituted to 40 per cent of overall video-game sales in 2012 – 12 per cent more than it was in 2011.

The transition to digital media on consoles is clearly building momentum. With that said there is still a considerably long way to go before they begin to compete with other platforms like PC and tablets in this respect. “I believe sales via digital channel will continue to grow and within five years sales on console systems are likely to be close to 50 per cent of total revenue. However, this is much less than PC and mobile platforms that are almost all digital,” said DFC Intelligence’s Cole.

Moreover, the convenience of digital distribution is something that has grown in consideration among gamers. Instant access, quicker loading times, no angst over damaged or lost discs/cartridges – essentially, the reduced issues of storage and accessibility is what makes for much of the enticement of digital patronage for consumers.

However, those proposed benefits of going digital on consoles are still seen to be far and few between within some circles when compared to the negatives. Existing limitations such as download size, speed rate and storage capacity still lie among the reasons a number of people are typically reticent to adopt this method of consumption. Furthermore, it would seem the opinion still stands that digital methods of distribution haven’t evolved far enough to replace the exemption of physical retail for video-game consumers.

“The benefits of digital downloads are actually pretty small: fewer trips to the store, no concerns about losing the disc or scratching it, instant access. I don’t think most of those things mean much to people, but digital downloads are more convenient,” Wedbush Securities’ Pachter said.

“However, digital downloads can’t be traded in, and it is far more difficult to “lend” to a friend or “take” the game to the friend’s house, so I think that downloads will have limited appeal to a significant minority (less than 40 per cent),” he added.

Industry vs. Gamers; are they going to give “us” what “we” want?

Despite all the current limitations to digital distribution, recent ongoing trends seemingly continue to indicate that dependence on digital platforms and services as the primary method of distribution are a supposed inevitability for video-games in future. In fact, a number of industry voices have also stepped forth to suggest that the complete transition to digital media on consoles is now only a mere matter of time, including former Gears of War developer Cliff Bleszinski and EA COO Peter Moore.

More powers within the industry are falling in with this expected adjustment, as well as of the significant benefits that online methods of distribution and service are able to present. As this continues to become apparent, further changes are being put into place by businesses (particularly platform holders) to provide a better and more convenient digital infrastructure for consumers to adapt.

“Future growth in this area requires constant ongoing investment in back-end technology. There probably aren’t too many disadvantages, assuming that the money invested results in forward progress,” Cole said.

NPD Group’s Callahan offered some insight into these improvements. “Unlike other smaller media, like music, file sizes for blockbuster games are large enough to make downloading inconvenient. The new technology in the upcoming consoles that allows for games to be played as soon as they start downloading will hasten the transition to digital media, as many consumers cite the wait time for downloads as a reason for choosing physical games.”

One of the most significant investments pertaining to the current digital movement is cloud services. With Sony’s acquisition of cloud gaming service Gaikai for $380 million last year, as well as Microsoft’s investment into a 300,000 server cloud for the Xbox One, it’s clear that Cloud services and their associated offerings have a prominent role to play on consoles during the next generation. Nonetheless, a meaningful amount of confusion still remains as to how exactly this will be conveyed to gamers.

Callahan gave his projections as to how Cloud services could become of use to us on next-gen consoles. “I think Cloud services could enable more ‘persistent worlds’ for online games, but the benefit the Cloud offers needs to be clearly stated to gamers or they won’t care. The Cloud as a use for streaming games directly may be a possibility for rentals, or demos.”

“Particularly, the elimination of waiting for downloading games seems to be part of the benefit that Sony received from its Gaikai acquisition. David Perry from Gaikai explained other features of the PS4 at the reveal in February, though it was not apparent if they were enabled due to Gaikai.”

Going from all that we can gather at the moment, it would seem that Cloud services are unlikely to present themselves as a frontal benefit towards consumers, but will rather be an important background integration for further offerings on consoles. Cole agrees with this assessment. “The results are likely to be ongoing but not necessarily noticeable. Much of it involves giving consumers more access to immediate gameplay and the ability to trial games before purchase. Additional subscription services and the access to play back catalogue games are also likely to be coming soon. It will not necessarily be one service that we see, but more just a general background piece of PSN/ XBL.”

The always-on controversy; should Microsoft have reneged?

Alongside the development of the digital infrastructure of consoles, consumers are also being encouraged to embrace having their consoles actively connected to the Internet on a regular basis. As platform holders continue to increase and expand upon the online benefits of their consoles, the essence of having gamers frequently connected has become of especial importance.

Prior to reversal, Microsoft’s intentions to impose 24-hour connectivity mandates on consumers for the Xbox One resulted in an overwhelmingly negative reaction. However, its argument was that should a regular Internet connection be out of bounds, the Xbox 360 would be a more suitable device for those interested. For developers to be able to assume that players would be online, and to be able to build experiences around that expectation, seemed to be an integral part of the intended experience with the Xbox One at first.

While this may have deterred a number of potential buyers, it has been pointed out that online connectivity is a fundamental necessity to fully appreciate what consoles presently have on offer, regardless of whether or not it is enforced. Callahan argued that much of the current appreciation from gamers lies in the added benefits of a connected console.

“I think the way the policy was introduced appeared draconian, which turned gamers off. However, the reality is that most gamers are enjoying the features of a connected console, whether through online gaming, streaming movies or TV, etc,” Callahan said.

“I don’t think that it would have moved more people to a connected experience, as the likely adopter of the Xbox One would already be participating in these online activities on their current consoles,” he added.

Nonetheless, twisting the arm of consumers to adapt in this manner is a strategy that simply did not appear to be attractive. “Coercion is a bad idea, period. I think that mandatory policies are always bad business. If consumers choose to embrace the digital media and benefits planned from the Xbox One, they will do so, and they will in turn choose to connect. It doesn’t make sense to force them to do so,” Pachter said.

On the other hand, it seems Sony has been notably more consumer-oriented to start with in its approach to incite regular connectivity among PS4 adopters. With further expansion and incentives through services such as PlayStation Plus, more gamers are being naturally encouraged to accommodate the benefits of regular connectivity.

“Sony so far has been very consumer friendly with getting people online. There is a rush to get people connected into “your” service but it hasn’t worked that well (unless you are Apple). Sony has had a slow but steady build to online services that could serve it well. Microsoft seems to be upset it is taking people so long. However, it is hard to hurry consumers,” said Cole. In essence, both Microsoft’s and Sony’s objectives appear to be similar – to enable more people to participate in online benefits. However, their differing methods of execution were what principally set them apart in the beginning, Callahan said.

“I believe the Xbox One’s initial connection policies were simply an attempt to extend the positive experience that Microsoft had been cultivating on Xbox Live into a console that was built for that experience in the Xbox One. I think that most gamers realize that there is a more robust offering in an online experience (whether playing multiplayer or accessing the latest digital game or DLC), but Microsoft introduced these features in a way that felt forced, which is one of the big reasons behind gamers’ negative reactions,” Callahan said.

Pachter’s view on the matter also supported Callahan’s thoughts. “Sony is doing the same thing Microsoft has done for years: PS+ lets people choose to play online, and to play online, they must be connected. I think most people will see the benefits of being connected and will stay connected, but nobody wants to be forced to do so.”

– Farida Y.

This is the end of Part 2 of a two-part feature for the site – be sure to have a read of Part 1 if you haven’t. What are your thoughts on all that has been said above, including the increase in digital consumerism, the ongoing adjustment to digital distribution and adapting consumers to frequent online connectivity?

This is the bio under which all legacy articles are published (as in the 12,000-odd, before we moved to the new Website and platform). This is not a member of the DDNet Team. Please see the article's text for byline attribution.

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