Gamasutra: The Art & Business of Making Gamesspacer
View All     RSS
April 16, 2014
arrowPress Releases
April 16, 2014
PR Newswire
View All





If you enjoy reading this site, you might also want to check out these UBM TechWeb sites:


Analyst: GameStop Expects 2009 Console Price Cuts, Slow Digital Sales Adoption
Analyst: GameStop Expects 2009 Console Price Cuts, Slow Digital Sales Adoption Exclusive
June 19, 2009 | By Chris Remo

June 19, 2009 | By Chris Remo
Comments
    12 comments
More: Console/PC, Exclusive



Management of major gaming retailer GameStop expects price cuts to PlayStation 3 and Wii consoles in 2009, while some strong fall and holiday season game releases should help to return the overall industry to positive growth.

Meanwhile, the company downplayed the potential growth in the digital distribution arena, claiming that cost, equipment, and market size issues will keep the segment from significantly threatening retail in the near term.

The projections were reported by analyst Arvind Bhatia of Sterne Agee, in a research note based on a meeting with four key GameStop executives.

GameStop suggests the likelihood of console price cuts has increased due to slowing sales for both Wii and PlayStation 3, although the need is greater for Sony's console.

"Management believes that a meaningful PS3 cut is highly likely in the near-term," Bhatia wrote, further specifying that a $100 cut may be coming in mid-August when EA Tiburon's Madden NFL 10 launches.

That declaration comes the same day Activision CEO Bobby Kotick declared his company could abandon PlayStation platforms if Sony does not reduce the price of its PlayStation 3. Wii may also see a $50 cut this year to maintain its price advantage perception against its competitors.

E3 and its show of games were encouraging to GameStop management, Bhatia noted, with a powerful lineup of late-2009 games -- Modern Warfare 2, Halo 3: ODST, Guitar Hero 5, The Beatles: Rock Band, BioShock 2, Assassin's Creed 2, and more -- combining to "drive strong growth in the back half." In fact, Bhatia said, "August should be the first positive month for software sales growth in a few months."

GameStop is less bullish on near-term digital downloads, however; the company has historically taken a publicly unenthusiastic tack towards digital distribution, and in today's research note the company claims to "have conducted the most thorough study to date."

Management believes an "addressable market" for digital distribution "will not exist until 2014." Even at that point, the company expects only 25 percent of consumers to "have access to the technology required to download full games."

The GameStop executives also pointed out that such digital distribution could cost users $100 per month, and would require a great deal of storage space. Furthermore, they claim consumers are willing to pay only $39 for downloadable games, "so publishers will be less incentivized than some in the industry think."

Bhatia's research note did not indicate whether the executives specified the reason for the projected monthly fee -- it may refer to broadband internet costs -- or the nature of the specific technology required to download games. GameStop currently offers PC games for download at full retail price from its website.


Related Jobs

Linden Lab
Linden Lab — San Francisco, California, United States
[04.16.14]

Sr. Front-end Web Developer
Linden Lab
Linden Lab — San Francisco, California, United States
[04.16.14]

Sr. Software Engineer, Back-end
Turbine Inc.
Turbine Inc. — Needham, Massachusetts, United States
[04.16.14]

VP, Operations
Digital Extremes
Digital Extremes — London, Ontario, Canada
[04.16.14]

Programmers










Comments


Alex Chiang
profile image
Management believes an "addressable market" for digital distribution "will not exist until 2014." Even at that point, the company expects only 25 percent of consumers to "have access to the technology required to download full games."



What does that even mean? I don't buy either of the numbers they put out (100/mo for digital distro or $39 for a downloadable game) either--I'm pretty sure this "study's" numbers are cooked medium well.

Christopher Shell
profile image
I get the vibe that Gamestop is feeling threatened by the idea (and I guess they should be). Their used game business is their life blood.

M. Smith
profile image
The numbers may be to Gamestop's advantage, but they're also correct. Digital distribution is not nearly as big as it seems to be from the view of those in the gaming industry. There really are not any numbers or arguments that suggest it will have even half the market in the next dcade.

Michael Lubker
profile image
The only games I buy non-digitally are those that are "forgotten" older releases by their publishers, or those on consoles which are not yet available through digital means.



Also, they're forgetting that the iPhone (huge market) is completely digital... ;)

Mike Lopez
profile image
==> Management believes an "addressable market" for digital distribution "will not exist until 2014." Even at that point, the company expects only 25 percent of consumers to "have access to the technology required to download full games."



The GameStop executives also pointed out that such digital distribution could cost users $100 per month, and would require a great deal of storage space. Furthermore, they claim consumers are willing to pay only $39 for downloadable games, "so publishers will be less incentivized than some in the industry think."

Mike Lopez
profile image
Ah, sweet, sweet denial and self-serving "research". WTF? 25% capacity in 5 years is total crap. Current capacity is whatever broadband capacity is now - likely 80% or better on PC, 360 and PS3 (not counting Wii). Even with Wii I bet that number is far higher than 25% right now. And $39 is about $9 higher than current wholesale price so I think publishers will be keen to jump on board and to cut retail and used games out of the equation. Even at $30 MSRP the lack of manufacturing and operations costs will bring a profit advantage.



Also, anyone that thinks the next gen of consoles will have any HD disc drive in lieu of 100% digital distribution is fooling themselves.

Hayden Dawson
profile image
@ Mike



But perhaps you are misrepresenting numbers if you are claiming 80% of users currently have access to broadband. You don't need to go far outside any metro area to find at best DSL and rural areas are even worse off. And to claim 'could' cost $100 a month is not that far off, as in most areas once promotions end, comcast charges $50-70/mo for service that caps around 3, which still is not fast enough to make full AAA distro really possible. Plus, the whole bandwith cap from the providers is working it's way back.

Mike Lopez
profile image
@ Hayden: 80% was just a guesstimate but this article says "In the United States, the percentage of Internet users who use broadband at home is about 70 percent, while another 23 percent use dial-up access, according to Pew Internet and American Life Project researchers." so I am not all that far off.

http://www.ipbusinessmag.com/departments/article/id/399/us-broadb
and-penetration-higher-than-ec



My point is that 100% of PC, 360 and PS3 consoles today are download distribution ready if coupled with broadband and factoring in Wii and 70% broadband is not likely to bring that number down to less than 25% today. To say 25% will be the capacity in 2014 is a ridiculous under statement, not to mention self serving; they have every incentive to convince the public that DD is not ready for prime time and in fact their current life depends upon it.



Also GameStop did not say or imply anything about including the cost of ISP access in their $100/mo. estimate of digital distribution. By that measure retail distribution costs $60/game plus as you say $60 per month (ISP).



And who is to say that 3Mbps is not fast enough for DD? Even 1Mbps works adequately for many users on Steam although faster is always going to be preferable if not considering added costs. Download speeds could also be made even more efficient if the next gen of consoles include built in peer-to-peer technology and I would not be at all surprised to see that.

Victor Perez
profile image
Changing the argument, I believe the adoption of Digital Download is not a “tech” problem, or Price issue. It is cultural, up to now people prefer hard support, because historical reason and it is a physical asset, something more positive than a digital asset. But, I remember once we had PC games on stores… New download contents will fight for gamer’s time and budget, and that is what will change everything. Probably in the next future to pay 60$ for a game will be so obsolete and absurd than now pay for reading a newspaper…

Joshua Sterns
profile image
This article makes sense for my particular situation. I don't have a PC that can play new games. I own a Xbox360 with only 4gb of memory available. The only things that I will download are arcade games and dlc packs. I will not buy a new hard drive or computer for at least three years. The only exception would be if something broke. So this fall I will probably be going to a retail store for my copy of Bioshock2, Halo:ODST, COD:MW2, etc. etc.



There is also the idea of having a physical item of value that can be traded in later for a new game. I don't like selling my old games, but I know plenty of people who do.



Digital distribution will be the next big change in entertainment technology, but it will take time.

Hayden Dawson
profile image
The "It will take time" really is my sticking point with this and other similar articles that have popped up here over the past few weeks. If those inside the industry really are convinced that the day of no retail game prescence, everything download is as soon as the coming generation (2-4 years) they will be in for disappointment.



Being able to today download some farting baby app on your iPhone does not mean the market or the technology (as owned/used by your mass consumer) is ready for GoWIII to go DL next year. I and others have mentioned network capacity, memory and simple customer desires/inaction as battles which will not be won overnight. And don't think the bricks and mortars won't find a way to play a part, even if it is as a central location for someone to go and access the extreme high end of internet speeds (for a price of course).



While not to the extent that swag exists in JP, the sales of CEs with no more than a nice case and perhaps an in-game bonus or two shows many consumers still want something tangible for their collection. And Atlus with their "spoils" program shows that there is a US niche that wants the coolest special stuff as well.

Amir Sharar
profile image
From my perspective the biggest issue is storage space. MS and Sony went with expensive solutions (2.5 vs. 3.5 inch form factors) because they valued aesthetics, but I think they sacrificed cost and convenience. A good solution would be a daisy chaining external storage solution so consumers can expand storage (cheaply) with their library.



I agree with the notion of it being a cultural issue, and I agree with the idea of owning something physical that can be traded or sold...BUT...



...while typing out the paragraph about storage (I was thinking about how cheaply I upgraded storage on my PC) I just realized that I have over 20 Steam games, nearly 40 Gb worth, that I bought. I didn't realize the collection I've amassed and come to think of it there's one good reason why my digital download library has gotten so large. Price. I bought L4D for $19.99. I bought UT3 for $9.99. I bought Bioshock for $4.99. I bought an entire iD Software collection for $60 (all games; from Commander Keen to DOOM 3). Of course Orange Box...I got for $39.99.



So I guess I'm a hypocrite when I claim I'd rather have a CD/DVD/Bluray in my hands...I really would rather have them for my consoles. But I suppose if the price is right and end up being 2/3 or half of retail prices, I would take the plunge.


none
 
Comment: