Downloaded happiness…
In a recent article from Reuters, Digital downloads spell end for videogame stores?, John Gaudiosi writes about the push towards digital download for video games. There are some interesting statistics that I’d like to summarize:
- 17% of PC video games were downloaded during 2008
- An estimated 2% of overall sales (about $400 million) this year were digital
- NPD estimates 18% of XBox 360 Gold members regularly download from XBox Live Arcade
- NPD also estimates that 10% of PS3 users regularly buy from Sony’s PlayStation Network
- Valve’s Steam service has 21 million users and 700 games
So, for 2008, at least, digital downloads are still pretty small. But the quote from the article that really got me was from Wedbush Morgan Securities analyst Michael Pachter:
“Downloads will become 20 percent of the market within five years, and probably peak at around 50 percent of the overall market in 10 years,” said Pachter. This assumes an overall market growth of 5 to 10 percent annually, he added.
So, that all got me thinking… how well does the current situation parallel to digital music? After all, from a maturity perspective, music is first, followed by video, followed by gaming, followed by book publishing.
According to another Reuter’s article, a report by the trade group IFPI indicated that digital sales of music represented about $3.7 billion in value – about 20% of total music sales. I was actually surprised to find that so low – I had expected music sales to be majority downloaded. But, I think you could also account for that by the fact that music piracy doesn’t count among the 20% since it represents ‘downloads’ but it doesn’t represent revenue.
Back to the video gaming market, does that mean that 50% of sales is a good prediction, too high or too low? Today, there are a few reasons why physical sales are valuable: 1) a physical copy of a game (or movie or album) is its own backup, 2) there is no download time needed for a purchase, 3) you can browse through a variety of titles and even discuss games with other people and sales reps, 4) you can get printed materials that come with the game and 5) you can buy / sell used games easily. But, in 10 years time, #2 and #3 will have completely melted away. #4 is already on the cusp of extinction – there just aren’t that many printed manuals anymore. #1 can be solved with some work-arounds, but eventually the platform vendors will help solve this issue. But, #5 isn’t so easy to deal with – eventually, retailers will have to help with the value proposition for downloaded titles. And, I expect that to be the potential biggest obstacle to overcome.
Since I have 10 years to make my own prediction, I’m going to go ahead and do it. By the end of the year 2019, 80% of all video games will be digitally downloaded.
