Game Over: Why Some Believe Used Games & Digital Distribution Is Killing the Video Game Industry.
By: H.D. Campbell
Game is flat-line. And it doesn’t look pretty for their customers either…read this statement issued by the company (via GameSpot) and you’ll see what we mean.
“The firm has issued a statement saying that “until further notice” all Game gift cards have been frozen, along with points in GameWallet accounts and on Game Reward Cards. No new pre-orders are being taken, and no refunds can be obtained for existing pre-order deposits. Software trade-ins are still possible for those looking to accrue Game Reward points or exchanges conducted in the same purchase. Trading in software for cash and trading in hardware at all have both been indefinitely suspended. The firm is also not currently able to offer refunds or exchanges, irrespective of whether the purchases were made before or after administrators were brought in.”
Game has activated the Reward Cards at the writing of this article, but with the cashflow & profit problems, obstacles obtaining credit on good terms with suppliers, & the beef with EA that lead to the companies’ fallout were accurate roadsigns to Game’s demise.
Even so, could the instances mentioned before be the major culprits? Could digital distribution be the major suspect? According to Minecraft creator Markus “Notch” Persson, he believes Game’s closure “is an unfortunate side effect of digital distribution”. There may be some proof to that. Indeed, Persson & his company, Mojang, has earned $80 million from Minecraft since October 2010. So does that means that digital distribution will evenly lead to the destruction of other brick and mortar companies?
Perhaps if the company does not integrate and effectively execute digital distribution into their business structure, as Game provides the example. On the other side of the pond, however, GameStop is another story. Even though their sales were down 3% in the fourth quarter of 2011, GameStop’s digital revenues were up 57% year-over-year. GameStop is even in the bidding against OpCapita & The Royal Bank of Scotland to purchase Game as the writing of this article. OpCapita won the bidding war but what if GameStop emerged victorious from this war, then integrate their business strategy with the fallen retailer & flourish? This may proved that brick and mortar concepts & digital distribution can coexist. Let’s see if OpCapita takes this route. At least, for the moment, the distribution side of the Video Game Industry would be okay.
But can the same be said about the industry as a whole?
The GameStop model may seem a godsend to many gamers who purchase games preowned and save a couple of bucks or to others who want to get rid of games they do not want and sell them for cash or trade-ins for other games. Good for us, not for game makers. Just ask Silicon Knights founder Dennis Dyack. Just as Frontier Development’s David Braben argued that “pre-owned has really killed core games”, Dennis Dyack chimes in at GamesIndustry International starting:
“If used games continue the way that they are, it’s going to cannibalize, there’s not going to be an industry.”
As a customer, this may sound a bit dramatic especially when you consider that the price of a new game & a pre-owned game isn’t too significant (perhaps a $3 difference). But from a developers and publishers point of view, the pre-owned sales of their titles which usually becomes the sole revenue of the store in which the developer or publisher does not get a cut may be a bit unfair considering the time, money, and effort spend creating, developing, marketing, and publishing the game. Assuming this mindset is true, could this be one of the causes of video games’ rising prices?
“I would argue that used games actually increase the cost of games,” says Dyack to GamesIndustry International.
Objectively, understanding that the “cost” a game constitutes a greater spectrum of the game’s creation other than its price setting to consumers, the setting still plays a major factor in the a game’s pricing. But from a subjective perspective, one can empathize with David Dyack after having to cut 45 members of his staff last year. Dyack may have a point.
So what will save the Video Game Industry? Many studios, after witnessing Mojang’s success with Minecraft, believe that mobile gaming and digital distribution as their salvation (if they like it or not).
Indeed, David Braben of Frontier Development has confirmed his studio’s work on a mobile project and even applauded Apple, Google, and others for their efforts. As noted in a GamesIndustry International article “Braben Says Used Games Has ‘Really Killed Core Games”:
“I think the problem was that the market then was very confused, whereas nowadays it’s far clearer. Of course, a lot of that is hats off to Apple, but also the principle of the App Store, which is fantastic,” he remarked. “And that applies to a lot of platforms — it applies to Android, and it now applies to Mac OS, and it’s been announced for Windows 8 and I think that is a very interesting realignment of the stars.”
But wait…didn’t digital distribution help cause Game’s demise?
And the cycle begins yet again. One thing is sure though…there has to be at least one pissed UK gamer out there at the moment.