On Digital Distribution For Games - Does It Work?

Thanks to The Hollywood Reporter for its article discussing whether digital distribution can really work for videogames. The piece focuses on NP Cube, developers of PC MMO Dark And Light, who are based on the tiny Reunion Island, east of Madagascar, and intend to distribute free versions via "a peer-to-peer site", before charging a monthly fee later. Co-founder Laurent Paret argues of online distribution: "It's so much more cost-effective than signing a contract with a publisher... One peer-to-peer company wants to charge us $300 a month to distribute 'Dark And Light.' I have no idea how they can charge so little and I'm not asking." However, Mark Jacobs of Mythic Entertainment disagrees with the approach, suggesting: "I know they think they can make up some of their development costs earlier if they distribute online [thus getting higher profit margins]... But they're sacrificing long-term profits for short-term gains."

Comments

MMO

[crackshoe]

I think digital distribution is perfect for MMO pay per foo, but thats mostly because i find the concept of paying for paying for a game, and then paying to actually using it, insane. but thats just me.

Re:MMO

[Pluvius]

If the client could run multiple products without much consumer inconvenience (like a VCR or a console) then this viewpoint might be understandable, but I don't think I've seen an MMORPG developer do this yet. Selling a game separate from the entirety of its gameplay is like selling a car without an engine or an OEM computer without a CPU.

Just because you can justify this sort of thing doesn't mean that you should do it.

Rob

Re:MMO

[Pluvius]

When you buy a car, do you get free gasoline for life? When you buy a console, do you get free games for life? When you buy a VCR do you get free movies for life?

The pricing systems of MMORPGs are hardly similar to any of those situations. You can separate a car from its gasoline, or a console from its games, but you can't separate a game from itself.

Rob

It wont really work yet

[Datasage]

It could work, but we are not yet at the point were it will work exclusivly. A dialup user wont wait days to download a game. Some people dont have internet at home and couldnt download a game anyway.

There is another problem, the consumer midset is that if i pay $50 for a game, i should get something tagible and not just a license. So if publishers want to charge full price for a digitally distrubuted game, its not going to fly. I myself would rather pay $50 for a box and cd rather than a digital file.

The only market that could go exculivly online distrubution is MMO's, but there again, you better be charging less than you would for a boxed product.

Easy.

[Anonymous Coward]

BitTorrent.

BitTorrent Makes it easy to host multi-GB files from a relatively small pipe. Considering 768kbps upload can be had for $99 a month with 6Mbps down, $300 can buy you a lot of bandwidth. Once your P2P downloads are seeded (you have your customers uploading from their machines), your bandwidth usage tails off dramatically as your only demand now is that you have to run the tracker (ie: the thing that coordinates clients among themselves).

Do both

[0x0d0a]

It doesn't even have to be via P2P -- it's quite possible to let users download an installer to their hard drive from a website that takes a payment.

But unless the publisher stipulates otherwise (and I'd imagine that there's probably a publisher that's willing to work with a developer on this), there's no reason that a game cannot be sold both through traditional channels and online channels.

Distribution costs for a gig of data are a couple of cents. That's a lot cheaper than buying a box and CD, and many people are happy to just buy the software (and don't give a damn about a pressed CD). So provide both, and pass on the distribution savings to the customer.

I suspect that some webmerchant retailers might be happy to provide both download services and physical boxe sales. I'd guess that in the Linux world, Tux Games probably would be willing to try something like that.

Benefits of online distribution:

* Small sales can be made, so budget/older titles can be available.

* Warehousing costs do not exist, so titles that are unlikely to sell well can be made available, and there is no reason for something to go "out of print" (it irritates me to no end when a book goes out of print). That oddball game title that did well in Japan but was unlikely to do well in the US can, for the cost of no more than the translation fee, be sold in the US.

* A reliable backup of your game. Ever lose a CD? It'd be easy for a retailer to verify your purchase information and provide additional downloads of the game.

* Patches included in copies as soon as they are finished. Normally, a pressed run of CDs is locked in, with all the bugs that might be found. Users must go online, locate a patch (usually on a publisher's or developer's website -- and too intimidating for many users) and apply it. If Boomstick Development comes out with a fix for their rocket launcher and releases v1.09 of Rocket Launcher Rebels, they can have their retailer automatically provide an updated release, rather than forcing users to obtain and apply the patch.

* Broader distribution area. It's easier to ship electronic copies of something than it is physical copies -- maybe you can't ship boxed software to a Mongolian plain easily or cheaply, but you can transfer it via satellite downlink.

* Speed of purchase. I generally can't get an obscure game without combing the web and ordering something FedEx. If I download a game and install it, I can have it as soon as my Internet connection brings it down.

* Risk. The more distribution that's done electronically, the lower the financial risk the publisher has to assume for deciding to committing to publish a game. That means they don't have to demand such a large chunk of money from the developer.

There are a couple of issues.

* Piracy is an obvious one, but really, there aren't many more barriers to ripping and copying a physical CD than there are to transferring a file -- in general, any form of remotely effecitve protection is going to take place in the form of checking in the game software itself.

* Consumer Appeal. I'm not sure how people will react to buying something that isn't physical (though I can think of some partial solutions to th eproblem). People do certainly purchase services all the time.

Re:Do both

[Swanktastic]

But unless the publisher stipulates otherwise (and I'd imagine that there's probably a publisher that's willing to work with a developer on this), there's no reason that a game cannot be sold both through traditional channels and online channels.

I liked your post except for this argument. You learn the exact opposite in Marketing 101- channels cannot conflict with each other. No retailer is going to stock your product, give it good shelf positioning, in-store displays, anything, if you're out there hocking the product for less on your own web site. It's a big no-no in marketing to have "channel conflict" between your various distribution methods, but going direct around retailers is like sticking your thumb in their eye. Retailers (who ARE your customers after all) tend to put up with direct-to-consumer distribution only so long as it doesn't eat into their sales too much. You cannot charge less to the consumer than your retail channels!

So, If you're not hocking it for less $$$, you're providing a substandard product (no CD, box, printed manual) to your consumers for the same price, so why bother?

This is a huge problem in most industries, and the general answer is that you need to differentiate the product you sell direct and those you sell through channels, if you sell direct at all. Again, your post makes a good argument why online distro is good, but I really do not believe that you can go with a split online/retail distrubution strategy.

Re:Do both

[0x0d0a]

Not true. You still need the servers and people to maintain them, and the bandwidth to transfer them across. True, it's not as expensive as a traditional warehouse, but it's not free, not by a long shot.

There is some cost; my point is that that is effectively either constant or per-copy-sold. Warehousing is an issue with physical because you have to predict how well something will sell and then produce that many units...and then it costs you money to have a bunch of units sitting around in a warehouse. Pain in the rear end for retailers. So, maybe I think that Max Payne III is going to sell more copies than any other game in existence, and I produce and warehouse many, many units, and it flops. That costs money. With electronic distribution...I only need to pay once for the hard drive space for the game (negligable, even if you have servers scattered around the world) and for bandwidth for each copy sold.

And the headache of dealing with customers who stored their purchse information on the same (now crashed) HD that formerly held the game. And the headache of multiple users that use the same purchase code... (Not an issue for MMO's that charge a fee, or shareware which assumes honesty, but a problem for other games.)

Yeah, but realistically, if you're asking for credit card or some other information that people aren't going to want to hand around, it shouldn't be an issue. And you can always say "only N re-downloads of the software", etc. Oh, and maybe charge a small fee to cover any re-transfer costs.

Which ignores the problem of the users that downloaded the software version that contains V1.011 of Rocket Launcher Rebels. You'll always have someone who'll need to patch. (And lets face reality here, increasingly PC games automagically locate and DL pathches.)

Yeah, I suppose so -- autopatching is a good point. I still think that *partially* solving the problem is better than not solving it, though.

Re:Do both

[0x0d0a]

This is a good point, but I can think of at least some prescedent. The product *is* different in that you get a CD/box/paper manual, etc, and I think you *could* have it cost less.

The best parallel I can think of is old personal computer systems that sold in "kit" form, like the Timex Sinclair. Admittedly, you'd still get them through the same channels...but you could buy a different product that replaced the first for a lower price -- but many people still purchased preassembled systems, despite the higher price, because they wanted everything done for them.

Many Linux distributors today currently provide something similar -- a *free* set of CD images, with the only removed features being a box, pressed CDs, any paper documentation, and installation support, and they seem to have convinced many retailers to carry their products, so I believe that there are retailers that are willing to work with such a constraint. That is also why I gave the example of a web-based retailer -- I buy almost all my games from online merchants, and for an online merchant, it's just as easy to provide downloads...and they get a sale either way, but they have lower distribution costs for a download.

Re:Do both

[DerekLyons]

With electronic distribution...I only need to pay once for the hard drive space for the game (negligable, even if you have servers scattered around the world) and for bandwidth for each copy sold.

Not true. You have to pay monthly for the electricity to keep that hardrive spinning and your NIC pumping bits, and the computer clocking along that supports both. You need to pay monthly for the cooling, and either rent or property taxes on the building they are in. There's also the ongoing cost of replacement hardware, and the ongoing cost of the personnel who supervise and perform these functions. It does not matter if you do it yourself, or pay a colo to do it, but you will pay it.

Electronic storage and distribution is niether free nor a one-time cost.

Yeah, but realistically, if you're asking for credit card or some other information that people aren't going to want to hand around, it shouldn't be an issue. And you can always say "only N re-downloads of the software", etc. Oh, and maybe charge a small fee to cover any re-transfer costs.

Storing credit card info? A non-trival security problem, not just from the outside, but the inside as well. Better add regular reviews of your security to the costs above. What happens when the customers credit card number changes, or the card expires, or the card is stolen and the number cancelled? You expect the customer to keep a record of all his numbers and which companies they are associated with? This sounds like a recipe for customer service nightmares. Only N re-downloads? A potential customer service nightmare, particularly if the game is popular and long lived. A small fee for transfer costs? That's a *real* good way to piss off your customers.

I still think that *partially* solving the problem is better than not solving it, though.

The problem is that your scheme partially solves one problem (patches) while introducing a whole host of new ones. The issue isn't as simple as it's often painted.

Re:Do both

[0x0d0a]

Not true. You have to pay monthly for the electricity to keep that hardrive spinning and your NIC pumping bits, and the computer clocking along that supports both. You need to pay monthly for the cooling, and either rent or property taxes on the building they are in. There's also the ongoing cost of replacement hardware, and the ongoing cost of the personnel who supervise and perform these functions. It does not matter if you do it yourself, or pay a colo to do it, but you will pay it.

Okay, I did over-simplify, but the variables involved are still effectively the same. Constant cost (where the variable is the number of games being sold) for most of these, and only a small cost per-game sold. There is no cost per-game-estimated-to-be-sold. Nobody will stock copies of Curse of the Azure Bonds, because it's an ancient DOS game, and costs them in warehousing. If they keep Curse of the Azure Bonds available, though, as one of many titles they sell, they have very little storage cost. They need to keep one copy on a server, not 5,000 units in a warehouse getting dusty in case someone wants to buy one. So that small number of people who say "Gee, I'd like to play Curse of the Azure Bonds" can still be served.

Electronic storage and distribution is niether free nor a one-time cost.

But it there is no cost (well, negligable to the point of not being an issue) associated with stocking something. Any cost caused is associated with either actual sales (which are presumably priced at such a point that they are profitable), or is effectively constant per-store -- the building, the servers, the air conditioning. Adding another drive doesn't cost much more.

Storing credit card info? A non-trival security problem, not just from the outside, but the inside as well.

Yes, but that's an issue that any Web-based retailer (even for physical products) already has to pay for in the form of their sales database.

This sounds like a recipe for customer service nightmares.

[shrug] Then another private identifier (like the infamous mother's maiden name that web merchants like to use with accounts these days) plus a street address. Companies provide customer service on products all the time -- systems to deal with matching a customer to an older purchase are presumably in place. I mean, I can call up a company right now and probably impersonate someone (like call up the cable company and pretend to be someone and get their cable shut off), but in practice it isn't a really huge problem.

A small fee for transfer costs? That's a *real* good way to piss off your customers.

I don't see why -- even if a physical product failed and a web retailer will replace it, I generally have to pay shipping back. (The main point of such a fee would be allowing the requirement of current credit card data, which would make it easier to detect fraud -- if five requests from different people come in on a single purchase, something is quite wrong.)

The problem is that your scheme partially solves one problem (patches) while introducing a whole host of new ones. The issue isn't as simple as it's often painted.

[shrug] I'll buy that -- any time you try out a new scheme, you're going to run into lots of issues that you didn't expect. However, my interest is primarily in solving issues with retailers being limited in what they can stock, and in reducing distribution costs. A number of the things I listed were just nice perks of the format.

I don't think that e-distribution of software is infeasible.

It has been tried before (not just as shareware, but as retailers selling electronic copies of software). I haven't seen anyone that's done too well, but there are major changes today from earlier:

* More people have broadband Internet connections. Just three years ago, that was a huge limiting factor.

* More software can rely on people having always-on Internet connections. This changes copy pr

Maybe not for games

[Anonymous Coward]

Maybe not for original games, but sure as hell it's a good idea for expansion packs.

People already have your product and those who are willing to sacrifice the "nice box" for 10$ less in price will download it in an instant.

Tie it into an online updater with friendly "buy an expansion" interface and off you go...

Existing systems

[Rexz]

I'm familiar with two currently implemented and successful systems for the distribution of commercial games:

Sony's EverQuest allows expansion packs to be bought and downloaded with a single click using credit card details already saved server side.

EverQuest is one of the few games that is practically unpiratable because of the massive cost of running a single server - each server consists of dozens of machines - and the amount of server-side content that is completely hidden from the client.

Valve's offers Counter Strike: Condition Zero for download through its proprietary content delivery system, Steam. Steam's bandwidth is provided by Valve itself and a select group of donors, although a peer-to-peer extension is planned.

CS:CZ does not rely on a centralised component for gameplay and so can be played singleplayer or on cracked servers relatively easily.

Re:Existing systems

[RotJ]

Of course there's some controversy over user rights with Steam. Every time you play a game you bought with Steam (at least play online), you have to log in, and it can automatically patch your game and patches Steam itself without your consent. And for a while Half-Life single player mode coudn't be played without going online and logging into Steam.